Establishing a new business entity in the United States
Establishing your Business
Establishing a business presence in the United States offers exciting opportunities, but also presents unique challenges. For foreign companies, the process involves navigating complex legal, financial, and regulatory landscapes to ensure smooth operations and compliance. This guide outlines the key steps to incorporate, manage accounting, and establish banking arrangements for your new US entity, providing insights into local services and strategies that can support your journey.
Incorporating your company, setting up a robust accounting system, and securing a bank account are essential steps, each with its own intricacies and considerations. The following sections explore these in detail, offering practical advice and solutions tailored to the needs of businesses entering the US market.
As CEO, you have an intimate understanding of your company, knowing its DNA inside and out. Keep in mind that a tailored solution is what will serve your business best, and by recognizing the challenges ahead, you can simplify the path to success.
Setting Up a Business Entity
To start your business, the first step is to figure out the best type of company (like an LLC, S-Corp, or C-Corp) and where to register it.
For your US business, you'll need to prepare important documents like Articles of Incorporation and Bylaws, and appoint official roles, like officers. You’ll also need to get a Federal Employer Identification Number (FEIN) for tax purposes. Additionally, you must get tax withholding and state unemployment numbers for each state where you have employees.
These are some fundamental services a local partner can provide, allowing you to remain focused on running your business.
CPA (Certified Public Accountant)
Your US operations will need a specific accounting system. Many local partners will recommend hiring a Certified Public Accounting (CPA) firm, claiming it's essential for setting up financial rules between your main company and the US branch and for handling tax filings.
In reality, while a good CPA firm is crucial for tax filings and consultations, it's important to weigh the costs before delegating all daily tasks to them. Small to medium-sized companies entering the US market often find more affordable and suitable solutions after some research. It's not a "one size fits all" situation; your business is unique and may benefit from tailored solutions. Legal aspects like financial rules and bylaws can usually be set by a law firm in your home country, enabling smooth operations without unnecessary expenses for companies new to the market. The focus should remain on generating new revenue.
US Expansion Group provides support with everyday accounting tasks such as managing software, handling accounts, bills, payments, contractor forms (1099), sales operations, shipping quotes, imports, and transfer pricing. Most large CPA firms might not offer these day-to-day services, or if they do, the costs may not be justifiable for medium-sized companies.
Bank Account
Opening a US bank account is an essential step when establishing a subsidiary company in the United States. Your US company will need a bank account. They will provide checks, debit or credit cards, as well as ACH and wire transfer capabilities to transact with US customers. The US banking sector is highly regulated and complex. One major hurdle for foreign companies looking to open US bank accounts is the "Know Your Customer" (KYC) regulation, which aims to prevent money laundering by requiring banks to verify clients' ownership, business operations, and financial conditions. Due to the difficulty of conducting this verification process for foreign companies, many US banks refuse to open accounts for wholly owned US subsidiaries.
As challenging as it might sound, The larger US banks have very specific rules that will allow a bank account based on specific parameters.
Taking care of other essential tasks for your business is pretty straightforward. Nowadays, there's a company out there ready to help with every aspect. Whether it's finding a suitable office space, getting a US phone number, sorting out insurance queries, and more, solutions are readily available. By teaming up with the right partner, you can easily access outsourced solutions. They'll be able to answer all your questions and assist you in completing your business setup hassle-free.
Feel free to contact us with any questions about your US Expansion plans. We will be happy to do your research and answer your questions.
About The Author
Roy Heller
As the Managing Director at US Expansion Group, Roy Heller leads a team dedicated to guiding companies worldwide through the complexities of launching, managing, and scaling their operations in the United States. With a versatile background of over two decades in Tech, Cybersecurity, Retail, and Medical sectors, Roy offers valuable assistance to a wide range of companies across various industries, ensuring their successful expansion in the U.S. market.
Top Reasons Tech Startups Favor Delaware C-Corporations
It all begins with an idea.
When it comes to establishing a US subsidiary, many entrepreneurs and investors are advised to opt for a Delaware C-Corporation. However, the rationale behind this recommendation is often not fully understood. This article aims to demystify the advantages, particularly for venture-backed technology companies of global origin, of choosing a Delaware C-Corporation for their US operations.
Why Delaware C-Corporation is a Preferred Choice for Investors:
Investor Familiarity: For venture capital investors, the familiarity with Delaware's governance rules and laws is a significant advantage. It simplifies the due diligence process, especially if they are more inclined to invest in an international parent company rather than a US subsidiary.
Legal Clarity: The well-established legal framework in Delaware provides a sense of security and clarity for investors, making it a preferred jurisdiction.
Corporate Governance Flexibility:
Stock Class Diversity: Delaware C-Corporations offer the flexibility to create various stock classes, enabling startups to customize their capital structure to suit their unique needs and those of their shareholders.
Board Composition Flexibility: The state’s corporate laws allow for considerable leeway in setting up the board’s composition and ensuring robust protections for directors, a feature particularly beneficial for rapidly evolving startups.
The Advantage of Delaware’s Business-Friendly Judicial System:
Experienced Judiciary: The Delaware judiciary is known for its deep understanding of corporate matters, providing a stable and predictable environment for resolving corporate disputes.
Streamlined Procedures: The absence of jury trials and the existence of streamlined procedures lead to faster and more informed decisions, enhancing the state's appeal to business investors and owners.
Establishing a Delaware C-Corporation: Key Steps
Articles of Incorporation: This foundational document includes crucial details like the company name, purpose, and stock details. It’s the first step towards legal recognition.
Corporate By-Laws: These internal guidelines dictate the corporation's operational protocols, including shareholder rights and board procedures. Tailoring these to align with both Delaware laws and the specific needs of your company is essential.
Designating Corporate Officers: Officers play key roles in managing the corporation. Their responsibilities, defined in the Corporate By-Laws, are crucial for day-to-day decision-making and governance.
Registered Agent Services: In Delaware, corporations must have a registered agent for legal and official correspondences, ensuring compliance and smooth operational continuity.
Disclaimer
At US Expansion Group, we excel in guiding international businesses and organizations as they navigate the multifaceted nature of the US marketplace. Our expertise lies in providing comprehensive support, encompassing every crucial facet of successful market entry. We are committed to facilitating your journey with tailored strategies, ensuring a smooth and prosperous expansion into the US market