Expanding Your UK-Based Business to the United States

January 3, 2024

Expanding Your UK-Based Business to the United States

If you’re a UK business owner looking to expand your company, the United States is an attractive option. But how do you navigate the unfamiliar waters of doing business in a foreign country?

Understanding the core steps to take in creating a US-based business can help with developing a roadmap for your company’s expansion.

Key Takeaways on Expanding UK Companies in the US

  1. Attractiveness of US Expansion: The US offers an attractive market for UK businesses due to similarities in economies, stable banking systems, government support, private investors, and a large consumer base with significant disposable income.
  2. Choosing the Right Business Structure: Opt for a suitable business structure when registering in the US. Consider the advantages of a C-Corporation (C-Corp) for extensive asset protection or a Limited Liability Company (LLC) for simplicity, legal liability protection, and tax benefits.
  3. Understanding the US Market: Thoroughly research and understand your target audience, market characteristics, and competition in the US. Be aware of regional differences, consumer behaviours, and the competitive landscape to tailor your strategies effectively.
  4. Financial Considerations and Planning: Factor in costs like taxes, office space, and talent acquisition. Understand state-specific taxes, fees, and regulations. Develop a comprehensive marketing plan and include associated costs in your financial planning.
  5. Compliance with US Tax Obligations: Obtain an Employer Identification Number (EIN) for US tax purposes. Determine your tax nexus and register with state authorities if required. Open a US bank account to facilitate financial transactions and compliance with global business standards.
  6. State and Local Permits and Licences: Comply with state and local regulations by securing the necessary permits and licences. File required documents based on your business structure and appoint a registered agent for legal and compliance matters.
  7. Resource Utilisation for Expansion: Leverage resources such as the Small Business Administration, Internal Revenue Service, US Chamber of Commerce, and local agencies for guidance. Engage professionals like attorneys, accountants, and financial planners to ensure compliance and informed decision-making.

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Why Expand Your Business to the US

Many UK owners choose to grow their businesses with expansion to the US for good reason. For one, the economies are similar, based on capitalism models and driven by stable banking systems, government support and private investors.

English is the predominant language in both nations, making it easier to conduct business without things getting lost in translation.

Another reason why UK businesses often look to the US for growth is the larger potential market share. The US has a population of more than 331 million people from diverse backgrounds and experiences, many with lots of disposable income. The US has a gross domestic product of $23.3 trillion with an active investor community looking to make smart investments in compelling companies.

The economy is robust, with new distribution channels and industry-leading businesses in many sectors. There’s an extensive talent pool available to staff your company in the US.

Register Your Business in the US

Choosing a business structure – the legal, formal organisation of your business, is an important first step. While there are many options for your business structure, most UK-based companies opt for either a C-Corporation (C-Corp) or Limited Liability Company (LLC) format.

A C-Corp provides you with extensive asset protection and protects you from legal liability. The C-Corp is a separate legal entity, meaning the company, not the owners or shareholders, are liable for any debt or legal liabilities that may be levied against the company.

One key consideration for C-Corp formation is taxation. As an owner of a US-based C-Corp, you will have to pay US taxes on any US-sourced income. In addition, you may also have to pay taxes in the UK.

An LLC offers an excellent option for business owners. An LLC provides legal liability protection from debt and legal liabilities to its owners (called members). In addition, taxes are simpler, with taxes passed on to owners on individual income tax forms. LLCs are often simpler to form and maintain, with less paperwork and legal formalities required.

The state you register your LLC at matters as well. LLC business owners often choose to select Delaware to register their company. Delaware has some of the most business-friendly laws in the United States and legal cases are resolved by judges, not juries, in the Court of Chancery.

There is strong liability protection in Delaware and you can maintain your privacy in public filings.

Know Your Target Audience and Markets

Understanding your market makes smart business sense no matter where you operate. When moving your business into the United States, it’s wise to understand the markets, regions and potential customers you’re looking to target.

For your audiences, be sure you understand the characteristics, needs and interests of your targets, especially how they consume media (e.g., which social media platforms they use most). Understand the cost of living in the areas where you will be looking for customers.

Also be sure you know who the main competitors are for the products or services you plan to offer in the US. What are the price points they offer and can you do better? What’s the survival rate of companies like yours?

Be sure that you know the taxes that each state levies on businesses (these vary greatly from state to state). In some cases, municipalities also levy taxes and fees on businesses. Understand what the costs of office space or storefronts are, too.

Is there adequate talent with the skills you need in US employees? Will you need to transfer employees from the UK to the US and pay for visas, moving expenses and competitive US salaries and wages?

Finally, consider developing a marketing plan for the US, both to introduce your company and position your products and services as different from your competitors. Be sure to factor in marketing costs in the US as part of your financial plans.

Maintain Your Tax Compliance

Managing your US tax obligations is important for any UK business looking to expand. Here are the steps to take to ensure you maintain compliance with tax regulations.

Obtain Employer Identification Number

If you’re paying US employees, you’ll need an Employer Identification Number (EIN), which is analogous to an individual’s Social Security number. The EIN, issued by the federal government, is a unique identifier that is used on both federal and state tax returns.

Determine Your Tax Nexus

A tax nexus occurs when several conditions are met: you obtain business income from a state, you own capital assets within the state and have employees there. When a nexus is established, your business will likely need to pay income taxes and collect sales taxes.

Register with State

If you operate within a state, you will need to register with that state’s department of revenue and any labour authorities to open accounts and pay state unemployment taxes, if required.

Open a US Bank Account

Having a US bank account is a smart move. It allows you to deposit checks and cash earned in the US and to write checks to suppliers that require payment in US currency. In many cases, it’s a requirement to have a US bank account to conduct financial transactions and a US account can help you conduct business globally beyond the United States.

There’s a great deal of variety when it comes to US checking accounts. It’s smart to research the terms, fees and perks to various banks before choosing a provider. Plus, having a financial relationship with a bank can be beneficial when you need additional financing.

Secure State and Local Permits and Licences

There are many details to consider when launching your business in the US. Once you’ve established your business structure, there are certain documents you’ll be required to file, depending on the state. Articles of incorporation, ownership reports and management structures may be required, based on the structure and the state in which you file.

You’ll also want to establish a formal business name. In many states, you can create a “doing business as (DBA)” name, which is different from your legal name and is used in marketing and signage. States have online registries that allow you to check potential DBAs to ensure yours is unique.

If you choose an LLC or C-Corp business structure, you will need to appoint a registered agent. This position is an entity or individual that meets the following criteria:

●     Has a physical address within the state in which they are registered (PO Boxes are not allowed)

●     Can receive official and legal documents from Monday to Friday from 9am to 5pm

●     Maintains company information

●     Is aware of state filing obligations and notifies the company of impending deadlines

The registered agent is the main point of contact for the company with the state, and can receive court documents, IRS correspondence and other compliance materials on the company’s behalf.

Many states and local communities have their own rules and guidelines for operating a business. There may be permits and licences to be obtained, especially if your company has a physical location.

Conclusion

While expanding your UK business to the United States may seem complex, the opportunities for growth and profit are significant.

Fortunately, there are many resources to assist business owners with the expansion, including the Small Business Administration, Internal Revenue Service, US Chamber of Commerce and state and local agencies and business organisations. These resources are usually free and can provide invaluable guidance to plan and launch a US business.

Agencies and local experts are also an important resource. Having a US attorney, accountant and financial planner is a smart approach to ensure that you are compliant and making smart financial and planning choices.

By determining the right business structure, developing a strong marketing plan, complying with tax regulations, opening a US bank account and completing the required state and local mandates, you’ll be well positioned to tap into the US marketplace.

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