6 Steps to Setting up a Business in the USA From the UK
The United States often ranks as one of the best countries to start a business in, it is known as the land of opportunity... so it makes sense.
Over the past 23+ years helping businesses set up in the USA, we’ve had our fair share of questions, both the common and the ridiculous – and well, that's why this blog exists. To simplify setting up a business in the USA from the UK.
Before we jump into the 6 steps to setting up a business in the USA from the UK, it’s important we tell you why the USA is an attractive destination for ambitious business leaders aiming to be industry leaders.
Is Setting up a Business in the USA From the UK Worth it?
Accelerate global growth in the USA
Home to the most venture capitalists in the world, with a GDP worth 26.24 trillion U.S dollars there is lots of profit to be made from setting up a business in the USA. As the number one export market for UK companies, it’s fair to say, the United States are a fan of British produce and service, so if you’re already exporting products into the USA, there’s a good chance you will be victorious when you expand there. Businesses that are successful in the USA can accelerate global growth dramatically, which can increase their valuation and lead to more investment opportunities.
The global leader for nearly all industries in business
The USA is a global leader in almost every industry. If you own a financial business – to make it to the top, you are likely to dream of occupying an office in the financial capital of the world, New York. Likewise, if you operate within the tech sector, Silicon Valley, California is the ultimate tech hub for innovative startups. You get the point... if you want to take your operations to the next level, setting up a business in the USA can elevate your chances of global domination.
Global industry influence attracts top talent
Finding the right talent to accelerate and enhance the services you offer can often be a struggle when restricted to one geographical location. Whether you specialize in IT, creative industries, or manufacturing you’ll be sure to find a state that encapsulates the best talent for your chosen industry.
The influence the USA has on all global industries, and the amount of Fortune 500 companies, attracts the brightest talent, readily available for work. World leading colleges and universities help fuel highly skilled graduates into the local community.
Whether you’re seeking leading business minds Harvard University if you choose Boston as your business location, or Silicon Valley to gain talented tech graduates from the local Stanford University. No matter what location you locate in when setting up a business in the USA, you’re sure to find ambitious talent to propel your goals forward.
Ok, by now we know you get it, the USA is great for business – Let’s stop talking about the reasons to do business there, and get straight into the how....
1. Conduct Market Research
We’re guessing you are not currently located in the US. This will mean you have quite a few additional steps to go through when setting up a business in the USA. The political and economic climate in the USA is ever changing, consequently so are the laws and other regulations you must follow when setting up a business in the USA.
The first and biggest step to setting up a business in the USA is conducting market research to form your USA business plan. Here are a few items you should research before setting up a business in the USA:
Is there a demand for your product or service in the USA? (Drill down to states/cities)
USA GDP Per Capita
Taxes per state and city
Common trends for business like yours operating in the USA
The cost of living
Main USA competitors
Survival rate of companies like yours
Is there suitable talent within your niche, where are they located? What are their salary expectations?
Office costs in states you are interested in
Marketing and sales plans to promote your business in the USA
Plans for transferring you or your employees to the USA – visas, areas to live, etc.
Yes, there’s a lot, but luckily, we’ve put together the ultimate checklist to conducting USA Market Research that you can download for free, so you don’t miss a thing.
2. Pick a State That Has High Demand for Your Business
Did you know the location you choose when setting up your business in the USA will determine the taxes, laws, and regulations you will be subject to.
Choosing the right state for your business should be influenced by where the demand for your product or service is highest. For example, should you wish to source high quality IT talent or want to be engulfed in a tech hub - California might be for you. Similarly, if you’re selling products within the tourism industry, a holiday hotspot like Florida may be a no brainer.
IBISWorld hosts a comprehensive catalog library of research on each consumer goods and service sector in the USA, breaking down business demand per location, demographics, barriers to entry and much more, to assist with your research.
At PGC, we believe you should choose a state where your business will flourish in the most cost-effective way. There are a few considerations when picking your favorite out of the 50.
Demographics – Of your potential USA customers and/or employees.
Requirements of your supply chain – Do you need to be close to an airport or coastal shipping routes?
Competition – Reserarch competitor businesses operating in that state and city.
Overhead Costs - Will you purchase a property or rent office space, what are employee salaries in your chosen state, utilities, corporation taxes, living costs, are a few of the many costs to consider.
Taxes – Research state and local taxes you need to pay.
Quality considerations - Employee skill levels in the state/city, connectivity, the infrastructure, risks, the quality of life in your chosen area.
Finding it difficult to choose the best state for your business? We've rated the Top 10 Best States for Business in 2023, to make it a little easier for you!
3. Register Your Business in the USA
Before setting up a business in the USA, you will need to choose a unique name for your business. One that hasn’t been used before, and trademark it. To check if your business name is credible, check out the USA Patent and Trademark Office's trademark database.
After that, you’ll need to decide what type of company you’re going to operate as. As a non-resident setting up a business in the USA, there are only two types of entities recognized.
Partnerships and Sole Proprieties aren't as popular in the USA as they do not limit owners from liability.
There are two common structures people typically register as when setting up a business in the USA:
General Corporation – This requires you to pay federal and state income tax on your profits
Limited Liability Company (LLC) - This does not require you to pay federal or state income tax on your profits
Once you have chosen the best structure for your business, you will need to get into the nitty gritty legal side of things. But you should designate a specific individual for that.
As a non-resident, it is advised to appoint the following positions when registering your USA business:
A representative as the owner – The owner can be a non–resident.
An individual as your officer – Can be a non-resident, but they also will be taking on the responsibility of overseeing your company's operations.
A registered expert - Regarding the legal nitty gritty, a representative outside your business will hold responsibility for that. As the registered expert they will receive and send legal documents on your businesses behalf.
What state is the best to register your business in?
When setting up a business in the USA, one of your main concerns may be venture capital. Many of our clients that do business in the USA from the UK choose Delaware when registering in the US.
Due to Delaware’s business-friendly legal system, corporations registered in the state do not have to pay income tax. The ability to hold shares in Delaware without having to pay taxes or reside there is a huge selling point to investors, along with the fact that many have a lot of experience doing business in Delaware,
To emphasize Delaware’s popularity, 67.8% of Fortune 500 companies are incorporated in Delaware, and 1.5 million corporations have registered in the state. Regarding legal concerns when setting up a business in the USA from the UK, filings are processed very quickly in Delaware. There is also the presence of a corporation court, where only corporation cases are handled.
To learn more about the pros and cons of incorporating in Delaware, check out our infographic.
4. Complete Tax Registrations in the USA
Planning to do business in the USA from the UK but unsure how you’re going to manage paying your USA citizens? That’s why for step 4 of setting up a business in the USA, we’re covering USA tax registrations requirements.
Employer Identification Number (EIN)
When paying USA employees, you'll need a USA tax identification number filed on a federal level. Otherwise known as an Employer Identification Number (EIN), or your business to pay state and federal taxes.
This connection can also be referred to as a nexus (presence), essentially meaning a form of connection between your business and the state. If you choose to set up in multiple states, you will then need to file within each state you are doing business in.
What is a tax nexus?
A tax nexus is created if a business derives income within a state, owns capital assets there, has employees there, and more. Businesses must have a nexus in a state before they’re obligated to pay income tax or collect sales taxes there.
Be aware of the complex tax system in the USA
Federal, state, and local taxes make the USA tax system more complex than many of its Western contemporaries. Employment taxes differ from state to state and can even vary by city within each state.
When operating in a state, you’ll need to register with the department of revenue (tax authority) as well as ancillary labor agencies to open accounts to manage state unemployment tax and any other relevant aspects to your employer burden.
So, if you plan on setting up a business in the USA and employing US citizens, you must apply for an Employer Taxpayer Identification Number.
5. Create a virtual USA shop Front When Setting up a Business in the USA from UK
Before setting up your business in the USA, it is always worth testing out the market with a little less risk, Reap the rewards of doing business in the USA from the UK, without stepping foot on US soil – sounds good right?
Many of our UK-based clients test setting up a business in the USA from the UK first to see if there is demand for their services, before committing to the financial risks that come with relocation costs and visas. Some tips when setting up a business in the USA from the UK, include:
1) Get a localized US phone number
Easiest way to get ghosted by a US client? Call them with a UK number they don’t recognize or trust. There are lots of great businesses that can set you up with a US number, and even better they can give a number with the area code of your chosen target market.
So, as we said in step 2, starting small and picking only one state to do business in is a vital step to your success. It will help you laser focus on your target demographic, and drill right down to the small details such as the area code to use for your sales call to build trust.
Think about it, calling Austin-based prospective clients with a London or New York phone number is an easy way to put up a roadblock for yourself when it comes to winning business.
2) Change your LinkedIn location
Make sure to change your location on LinkedIn. A small step, but one that makes all the difference. If you are contacting a prospective client in your state of choice, should your location still be within the UK or elsewhere... it will affect the likelihood of making a sale to your target customer, and could lead them to question how genuine your services are.
Having a localized LinkedIn location and tailored content to that area will help build trust and your reputation within that area.
3) Apply for an Employer Identification Number (EIN)
We spoke about this earlier in step 4 of setting up a business in the USA from the UK. However, even though you may not physically be in your chosen state yet, if you operate in an area in the USA, you need to pay required taxes.
The process to applying for an EIN will differ depending on the state, so make sure you check with your state government for specifics.
4) Open a USA bank account
Opening a US bank account virtually is a simple step when setting up a business in the USA from the UK. It can be quick and easy with very little cost. You need the following documentation when beginning the process of opening a company USA bank account:
Photo ID of the business director
Proof of your USA business incorporation
Your USA business license
Your EIN number
Proof of a USA business address
Many of our clients doing business in the USA from the UK use Wise, an online digital front, that allows you to set up a local account in the USAand beyond. USA bank accounts typically can be opened the same day.
Some of the more popular banks in the USA include Bank of America, Chase (JP Morgan Chase), and Citibank.
4) Set up a USA dedicated webpage
You get the idea by now...if you're pushing a USA product or service, it should be marketed and targeted specifically at the USA. This is why when you're setting up a business in the USA from the UK, a dedicated USA webpage should be on your to do list.
A US webpage will be targeted towards a different USA based audience, and therefore should be tailored to appeal to them and build trust.
5) Register for a virtual USA address/PO boxes
Coworking spaces like WeWork and Regus often have the option to buy a virtual address to add to your website to give the appearance of a footprint in your target location. Even better, a PO box in your target location will allow your USA clients to mail you checks as payment (which wildly is still very popular in America vs online payments).
6) Hire USA Employees to Build Out Your Business
So, now you know how to set up a business in the USA from the UK. but no business starts without people first. There are a number of considerations to be aware of when hiring in the states. We’ll list them below for the sixth and final step of setting up a business in the USA.
1) Hire a USA Salesperson to build out your brand presence
When beginning to hire employees, it's difficult to know where to start. It is common practice when setting up a business in the USA from the UK to hire a USA-based sales representative as your first employee. This way, you’ll be able to build out your business in that particular state and test the market with very little risk. Need a way to pay your first USA employee? Our employer of record service has got you covered.
2) Know the basics of USA employment before hiring employees
Educate Yourself on USA work culture vs UK
We might speak the same language; but when setting up a business in the USA from the UK, you must understand the USA employment landscape and culture differ considerably.
First off is employment contracts, in the USA there is at-will employment meaning that employees and employers can terminate the employment contract at any given time.
Another important USA vs UK work culture difference is annual leave is referred to as ‘Paid Time Off’ (PTO). In the USA there is no legal requirement on a federal or state level for employers to provide PTO, unlike the generous holiday entitlements in the UK.
Maternity leave in the USA, is not a requirement either. Federally women are not entitled to any paid maternity leave in less otherwise provided by applicable state law. There are eight states in which maternity leave will fall under state paid family leave laws.
This emphasizes the importance of knowing the employment law in the state you are operating in and the cultural norms before hiring USA employees. Check out our UK vs US work culture differences infographic for more detail.
You have to provide healthcare plans to USA employees
In the USA, healthcare is not provided by the government compared to the UK where it is universally provided via the NHS. In the USA employers must offer health benefits to employees who are contract or permanent and work over 30 hours per week. Typically, it is usually around 50% of the least expensive plan that will need to be covered by the employer.
Social Security Numbers? Heard of them, but don’t know what they are?
Your employees will need to register themselves for Social Security Numbers (SSN) Social Security Numbers (SSN). This is essentially a tax identification number, that is uniquely given by the USA government to keep track of your lifetime earnings and the number of years worked.
It can be used to accurately measure and calculate any benefit payments should you ever need to receive disability income, or it can also be used when applying for credit cards or even opening a bank account.
Prepare to pay larger salaries in USA
When hiring in the USA vs the UK, you will need to be prepared to pay larger salaries. Although each state differs, you can be guaranteed no matter where you relocate to the salaries will be higher. Here are a few examples below from …... of average hourly pay rates for roles in New York vs London.
Payroll USA Employees
It's common when setting up a business in the USA from the UK to use an Employer of record for your payroll, especially when you have less than 50 employees. By using an Employer of Record, it will allow you to payroll employees in any state.
Whilst also removing all the barriers and complications legal and employment requirements can bring about, we can ensure that you are withholding properly. Essentially by using an Employer of record it takes away all the nitty gritty so you can focus on expanding your business.
Setting up a Business in the USA Doesn’t Have to be a Dream, Make it a Reality
Setting up a business in the USA can at first seem intimidating, but with the help of USA Expansion experts like PGC, it can be a walk in the park.
As a specialized US employer of record, we help you when setting up a business in the USA from the UK by removing the complexities associated with USA employment.
We become the legal employer of your US employees, taking care of payroll, USA healthcare benefit plans, employment compliance per state, HR queries, and back-office processes. This empowers you with freedom to focus on building your dream USA business. Ready to get started?
Disclaimer: The information provided here does not, and is not intended to, constitute legal advice. Instead, the information and content available are for general informational purposes only.