With nearly $15,586.67 billion in consumer spending in Q4 2023, the US leads as one of the world’s largest consumer markets. This offers a promising chance for businesses keen to grow their reach and access a sizeable market for their products or services.

It comes as no surprise that many UK businesses choose to expand their operations in the US. The country’s market is undeniably an appealing expansion target, given its robust economy, skilled workforce, and diverse customer base.

Moreover, both countries speak the same primary language. This helps businesses operate more easily without language barriers or misunderstandings. However, while the benefits of expanding your UK business in America are manifold, the process can be complex.

Before setting up a shop in the US market, learn the legal considerations necessary to ensure the expansion is compliant and successful. This article will explore the legal intricacies affecting your UK business’s success in the US.

Select the Appropriate Legal Entity

The legal entity you choose will influence your compliance and tax obligations. Your choice will also affect your legal protections and how you organize your business’s management.

Common types of entities relevant for expanding to the US are C-Corporations (C-Corps) and limited liability companies (LLCs). Each structure has different tax treatments under US law, affecting how you repatriate money from the US business.

C-Corps

Consider the benefits of a C-Corp for extensive asset protection. This legal structure is taxable at the corporate level. That means there are no classification elections for tax purposes, eliminating the need for foreign owners to file US taxes.

LLCs

You can set up an LLC for your US operations. One or more foreign or domestic members can have ownership of the LLC. Most businesses consider it for its simplicity, legal protection, and tax transparency. However, each member must file US tax returns to report and pay taxes on their share of the LLC’s taxable income.

From a tax standpoint, the best entity for your business expansion depends on whether you want the net income taxable at the corporate or investor level. When you want it taxed is another essential factor to consider.

Moreover, deciding where to establish an entity in the US is a critical consideration that can have significant ramifications. It must adhere to the laws of the state where it is formed. Delaware is particularly popular due to its well-defined corporate laws and favourable business environment.

As proof of its popularity, 67.8 per cent of Fortune 500 companies are set up in Delaware. You can also consider other states depending on your business finances and US expansion goals.

Secure Licenses and Permits

You must register your US entity with the appropriate state authorities before it can begin operations. This process involves securing the necessary licenses and permits to ensure your business operates safely and legally.

Remember, each state and local jurisdiction may have different regulations. Thus, take the time to research the specific requirements of the state and local area where you want to operate. Besides the location, the nature of your business operations will determine what licenses you’ll need.

Submit the necessary documents according to your business structure and the state where you register. Articles of incorporation, ownership reports, and management plans are standard documents business owners must file when launching a business in the US.

You might also be required to assign a registered agent for legal and compliance matters. As the primary contact for the company with the state, the agent will receive court papers, IRS letters, and other materials for the company.

Failure to acquire the appropriate licenses and permits upfront can result in expensive delays or legal issues later. It’s best to consult qualified advisors to ensure compliance with all applicable laws. This step is particularly crucial if your business involves importing and exporting.

Protect Your Intellectual Property

Intellectual property (IP) is often the most essential and valuable intangible asset of any business.

Protecting it must be fundamental when considering business expansion in the US. Doing so will safeguard the company name, unique work, and competitive advantage. This legal protection will further pave the way for your business’s long-term success in the American market.

Even cautious and honest entrepreneurs can face legal issues while conducting business because of the unauthorized use of intellectual property. It’s enforceable by federal law, and companies can incur serious consequences for violations.

Knowing how to use, protect, and enforce your IP rights is crucial if you expand in the US. You’ll find that local IP laws and enforcement in the US may share similarities with those in the UK. Still, they can be complex and territorial, so protections of your IP rights can vary.

The US has a solid legal framework for IP protection, encompassing trademarks, copyrights, and patents. Some types of IP rights in the US, such as copyright in original works, are automatic upon creation.

Despite that, it’s advisable to register them with the United States Patent and Trademark Office (USPTO) to protect yourself and maximize your IP rights. It will provide legal proof of ownership, more robust options to enforce your rights, and access to further remedies in case of infringement.

Comply With US Employment Laws

Federal, state, and local laws govern the employment sector in the US. These legislations cover different areas of employment, such as recruitment, minimum wage, termination, workplace safety, employee benefits, and anti-discrimination.

Understanding them is paramount to ensuring compliance and maintaining positive relations with employees. Always adhere to the Fair Labor Standards Act (FLSA) and other federal and state labour laws to prevent expensive legal repercussions.

Ensure Compliance With Tax Requirements

Compliance with tax requirements is critical to avoid fines and legal penalties. Preparing to comply with tax obligations is also imperative to make your business run smoothly and minimize potential financial setbacks.

Those seeking to expand UK businesses in the US may be subject to federal, state, local, and international tax laws. Keep the following in mind for planning your taxes:

• Income tax responsibilities
• Taxes on employment and payroll
• Property taxes
• Sales tax on goods and services you sold in certain states
• Import and export taxes, customs duties, and other fees
• Taxes and withholdings on dividends and payments to the foreign parent company
• Franchise tax or gross receipts tax in some states

Working with a tax professional specializing in international taxation can help you navigate these intricacies legally and efficiently. They can assist you in reporting your taxes accurately and reducing tax liabilities. Considering the US/UK tax treaty, a tax expert can help you avoid double taxation.

Successful Expansion Requires Legal Compliance

Expanding your UK business in America can open doors for growth and success. However, ensuring compliance with laws and regulations is crucial for determining whether your expansion will succeed or become a costly debacle.

The key to doing it right is to seek proper guidance from legal and tax professionals who understand the US legal system. They can help you avoid financial penalties and minimize the risks of potential lawsuits. With their assistance, you can confidently enter the US market, knowing that the legal side is adequately handled.