By Mark Feldstein and Mary Vasilescu
When international businesses are considering doing business in the U.S., the first question is usually, “Where do we start?”
Whether the company is considering an acquisition or opening a facility in this country, there are a number of things to know before stepping foot on U.S. soil.
Here are some things to consider.
Type of Entity
Will the company be a Corporation, an LLC or something else? Each class of entity has its advantages and disadvantages, and you’ll need to determine which best meets your needs. Consult with your U.S.-based accounting firm to learn about the benefits and downsides of each classification.
Commitment of Capital
What are the characteristics of your start-up funding? Will it be in the form of a loan from the offshore affiliate or investment capital? There could be tax implications, both in the U.S. and offshore, depending on your answer. Such treatment is based upon tax treaties between countries where the investor, lender or borrower are located.
If you plan to sell goods or services between related entities within your enterprise, consult with your accountant to make sure you are in compliance with U.S. law. Transfer pricing regulations were established to prevent inappropriate pricing to create a competitive or tax advantage, so discuss this issue with your accounting advisor before establishing price points for the products you sell in the U.S.
In addition to federal and state corporate tax, your company may also be subject to state and local sales tax, payroll taxes and other types of tax. It is critical to address taxation in your first conversations with an experienced U.S.-based tax advisor, not only to understand your compliance needs, but also to properly budget costs.
While businesses based in countries with government-paid health care systems don’t have to worry about health insurance costs, in the U.S., it’s a significant employer burden. In addition, the length of the workday, vacation pay and sick pay, along with other competitive benefits may be different than those you are used to operating under, so ask. These costs will again effect your budgeting and costs expected to do business in the U.S.
As a New York City-based CPA and business advisor with Wiss & Company LLP, Mark Feldstein has helped entities and their advisors from the United Kingdom, Spain, Israel, the Netherlands and elsewhere navigate the complexities of establishing business operations in the United States.
Mary Vasilescu is Wiss’ international tax expert and advises clients on the formation, structure and taxation of business ventures, start-up enterprises and joint ventures in the U.S. and abroad, including mergers and acquisitions, restructuring, and international tax planning.