Doing business in America is easier than in other countries. It can seem like a daunting task, unless you have the right tools and resources to gauge market risk and build confidence in your business endeavors.
“The United States is consistently ranked among the best internationally for its overall competitiveness and ease of doing business. Backed by a regulatory environment that is particularly conducive to starting and operating a business, U.S. business culture encourages free enterprise and competition. As a stable democracy with a transparent and predictable legal system, all companies – regardless of national origin – compete on an even playing field.” – SelectUSA
As the world’s biggest economy, the United States of America is a magnet for foreign companies looking to invest overseas. With a population of over 327 million, it offers a large consumer marketplace for domestic and overseas investments. The annual growth rate of U.S. GDP is 2.6% and with GDP at about $19.39 trillion in 2017, it represents 30% of all global economic activity.
ESTABLISHING A PRESENCE
Careful focus needs to be given to establishing the most suitable business entity. Each state has its own rules for business entity creation as well as specific annual requirements for these entities to maintain their good standing.
The most common types of business entities are corporations, limited liability companies (LLCs), and partnerships. Each type has its own benefits and the choice depends on case-specific legal and business factors. Each type of business entity must be formed according to the laws of the state in which the entity is formed. All entity types other than partnerships require organizing documents to be filed with the state government. US law treats these business entities as legal persons and in case of insolvency, the entity can declare bankruptcy without risking the owners’ personal assets.
TAX
After thirty years, the United States has new income tax legislation. With a complex system of federal, state, and local levels of taxation, understanding business obligations can be overwhelming for newcomers to the system.
US corporations are susceptible to federal income taxes on all their income earned anywhere in the world. Foreign companies doing business in the US can experience ‘transfer pricing’ in which a foreign parent company may charges the US subsidiary high prices for goods or services. This can be investigated by the IRS and significant penalties may be imposed for non-compliance. It’s worth noting that the US has many tax treaties with other countries. If the investor’s home country has a tax treaty with the US, expert guidance is needed.
Foreign individuals or entities conducting business in the US are also subject to the Foreign Investment in Real Property Tax Act (FIRPTA). This applies a tax to the disposition of real property in the country regardless of the taxpayer’s residency or the existence of a ‘permanent establishment’ in the US.
LEGAL REQUIREMENTS
Some areas of law, such as patent and copyright, are governed exclusively by federal law. Many other laws, including ones governing employment relationships, and sales transactions, are primarily set by individual states. Many other areas are governed by both federal and state law. When doing business in the US, foreign companies should understand that they are subject to these parallel systems of laws, which often differ from state to state.
Employment law needs careful clarification. Foreign business coming to the US must comply with US law when hiring employees who will be working in the US. US laws distinguish between “employees” and “independent contractors.” Employees are subject to tax withholding requirements and protected by federal labor laws. Independent contractors, on the other hand, are not subject to tax withholding requirements and are not covered by many labor laws, such as federal minimum wage. Companies doing business in the US need to be aware of these distinctions and accurately classify workers.
OBTAINING FINANCE
It can be difficult for a foreign entity to open a bank account in the US without a US presence. And even when a foreign individual or company has created a US entity, it is not unusual for banks in the US to be more willing to lend money to US businesses than to foreign entities. However, once a foreign business has been successfully doing business in the US for a while, that business often has increased access to capital through US banks.
IMMIGRATION
ll foreigners coming to the US to work must obtain permission to do so in the form of a visa. US visa laws are complicated and strictly federal, issued by the US embassy or consulate abroad. Individual states do not regulate or provide visas. Many types of visas, including most types of work visas, require approval from US Citizenship and Immigration Services.
It is important for foreigners to obtain the correct type of visa for their stay in the US. There are numerous employment categories for admission to the US and there are different categories for investors, for business visitors, and for sponsor-based employment. Many entities bringing a business to the US seek advice from a US attorney to make sure they select the correct visa category and avoid application mistakes. It is vital for foreign business owners and their workers to adhere to the terms of their own visa; violation can result in removal from the US or denial of re-entry into the US.
The United States is the largest consumer market in the world, yet it is significantly different and more challenging than any other marketplace, especially for those who are unfamiliar with American business practices.
There are many steps a company should invest in before embarking on trade and business to ensure their success. It is helpful to have an overview of the U.S. economy, regional and national demographics and cultural dynamics, business customs, framework of the U.S. legal system, marketing strategies, and negotiating tactics.
The US-Africa Trade Commission (USAfriTC) has compiled an extensive set of resources, tools, and contacts to help facilitate that process to increase business between Nigeria and the United States.