Guest Blog by Jessica Foreman.
If you’re thinking about setting up a subsidiary in America, you’ll have a figure out a few things first. America is substantial country to break into, featuring the world’s largest private sector, swathes of venture capitalists and unrivalled access to global trade. No wonder so many businesses set up overseas.
However, it’s critical that you choose the right location for your business’ needs, as it could be the difference of success and failure. Here are some things to consider when choosing a US state to incorporate in.
Market research The first thing you’ll need to consider when choosing a US state to incorporate in is the result of your market research. Careful analysis of your target market and your competitors will give you a good indication of which states are worth considering, and which ought to be discounted right from the start.
Where will you be doing business? You don’t necessarily have to incorporate in the same state that you’ll be doing business in, but it can certainly make the administrative work a little more straightforward if you establish your US entity in the same place you expect to be running it from. Again, draw on the findings of your market research and discuss your plans with a US attorney and a specialist tax consultant – they’ll be able to help you choose the right state based on where you think you’ll be making sales. Differing systems Litigation is a hot topic in the US, which makes choosing the correct state all the more important. In Delaware, business disputes are resolved by a separate ‘business’ court where a judge decides the outcome instead of a jury. This can be advantageous, as cases are often resolved quickly and fairly. It could be the reason why many businesses tend to favour Delaware as their business law is the most tried and tested. With any luck, you won’t find your business embroiled in a legal dispute, but you should consider it nonetheless. Corporate income tax Different states charge differing levels of tax. Only six states – Nevada, Ohio, South Dakota, Texas, Washington and Wyoming – have abandoned corporate income tax altogether. However, these states offer gross receipts taxes, or a tax on total gross company revenues instead. So, don’t be mislead by corporate income tax rates. You’ll need to pay attention to filing fees, annual renewal fees, incorporation fees and other ‘surprise’ charges, as well as considering the fact that you’ll be taxed in the states you’re operating in, even if you’re registered in another. Rates of employment
When considering a state, it can be a good idea to check the state’s unemployment rate. You may find that the correlation between good employment rates and potential candidates for employment are similar. This is because, among a lot of things, the rate will indicate the sustainability of business in the area. Investor opportunity Finally, if you’re seeking financing for your US endeavour, you should think carefully about the kind of investment you want to attract, and what you’ll need to be able to demonstrate in order to win them over. Numerous investors will be familiar with Delaware Corporate Law, so don’t be surprised if many ask that you incorporate your US subsidiary in Delaware before approaching them for a cash injection.