10 Steps to Nail Your US Expansion

Expanding your business to the US is a significant opportunity, but it comes with its own set of challenges. To help you navigate this complex process, we’ve compiled a list of 10 essential steps you should take before making the leap. This guide will provide you with a clear roadmap to ensure your expansion is successful.

Evaluate the need for a US entity

Before diving into the US market, determine whether you need to set up a US entity. Consider factors like liability, legal recourse, and the preferences of US customers and partners. If your business requires a physical presence or needs to comply with specific regulations, a US entity might be essential.

Choose the right type of entity

Selecting the appropriate legal structure is crucial for tax and operational efficiency. The main types of entities to consider are:

• C-Corporation: Subject to a 21% federal corporate tax, suitable for businesses wanting limited liability.
• Limited Liability Company (LLC): Offers flexibility but may lead to complex tax scenarios.
• Partnership: Tax-transparent, with income taxed at the investor level. Your choice will impact how income is taxed and repatriated, so choose carefully.

Select the best location for your business

The US is a vast country with diverse markets, each with its own regulations and incentives. Consider factors such as:

• Access to key markets and customers.
• Proximity to expertise or supply chains.
• State-specific tax incentives and regulations. Popular choices like Delaware offer business-friendly regulations, but ensure your location aligns with your strategic goals.

Understand state and local tax implications

Each US state has its own tax rules, which can significantly impact your business. Research state-specific tax obligations, including corporate taxes, sales taxes, and filing requirements. States like Delaware have favorable tax environments, but the best choice depends on your business activities and presence.

Build a Solid Business Structure for US Expansion

Decide how your US entity will interact with your non-US operations. Consider whether to establish a parent-subsidiary structure and determine which entity will serve as the parent. The structure you choose will affect tax liabilities and the flow of income between entities.

Plan for US tax and compliance obligations

Be aware of the various tax filings and compliance requirements your business will face in the US. US entities must file a federal tax return annually, and you may also need to file state tax returns. Non-US entities with US activities should be mindful of “effectively connected income” (ECI) rules and double taxation treaties.

Understand Sales Tax Complexities in the US

Unlike corporate tax, sales tax is administered at the state and local levels. Sales tax rules vary widely by state, and many states have adopted economic nexus thresholds that require out-of-state businesses to collect sales tax. Ensure you understand the sales tax obligations in each state where you operate.

Consider transfer pricing and intercompany transactions

If you establish a US entity, you’ll need to carefully manage intercompany transactions. Transfer pricing regulations require that transactions between related entities be conducted at arm’s length, which can impact your tax liabilities. Proper documentation and compliance are essential to avoid penalties.

Personnel Considerations – Relocating Staff to the US

Expanding to the US may involve relocating founders or employees. Be aware that US tax laws are complex, and even temporary stays can trigger tax filing requirements under the Substantial Presence Test. Plan for the personal tax implications of your team’s move to the US.

The Importance of Engaging Expert Advisors for US Expansion

The US market offers tremendous opportunities, but its complexity can be daunting. Engage with legal, tax, and business advisors who specialize in US expansions. They can help you navigate regulatory hurdles, optimize your tax structure, and ensure compliance with all applicable laws.

Expanding to the US is a major step that requires careful planning and execution. By following these ten steps, you’ll be better prepared to enter the US market confidently and successfully. Remember, the key to a smooth expansion is preparation—take the time to plan, consult with experts, and execute your strategy carefully.

For more detailed guidance, don’t hesitate to reach out to professionals who can tailor advice to your specific business needs.