Why European Businesses are Expanding to the US and How to Do it Right

At least 33 unicorn companies and 275 other large entities from Europe have expanded their operation to the United States in the past decade. Much of it can be attributed to the restrictions and limitations that are imposed by the European governments, which is a stark contrast to the flexibility and opportunities provided by the west. Furthermore, the US is the largest consumer market in the world, making it easier to raise venture capital when compared to the European market. In this article, we will discuss a few other reasons why it is so lucrative for European companies to expand in the US and some of the ways to make this transition as seamless as possible. 

What makes the USA so lucrative for businesses?

Size of the economy: In 2020, the US economy accounted for over 16% of global gross domestic product (GDP), making it by far the biggest economy in the world. This means that companies who are willing to expand in the country can significantly benefit from a pool of customers who have the financial means to try out new products. Companies can also leverage the adequate supply of resources to increase profits significantly.

Economic zone: Different economic zones like silicon valley have been set up throughout the country, attracting the brightest and most like-minded people from around the world. These zones make team collaboration possible as different companies can group together to solve a particular business problem. Hiring also becomes easy as you have a high density of experienced people in a specific area, thus increasing efficiency and profitability.

Technological advancement: As of March 2022, there are a total of 1000 unicorn companies in the entire world, of which 524 belongs to the US. There is no denying the United States has been at the forefront of technology for the greater part of the last century and has a huge bragging right when compared to companies in Europe. 

Things to consider when expanding to the US

Choosing the right state: Each state has its own set of rules that govern how a business owner must organize and operate their firm. So, when determining which state in the US to base a business, there are several factors to consider:

• Access to the target market 
• Workforce talent 
• Access to suppliers 
• Adequate resources 
• Legal environment 

Delaware, Nevada, and Wyoming are three states in the United States that are well-known, particularly among international corporations, for their exceptionally tax-friendly policies. This may be a top goal for some organizations when choosing the right state to start their business, but other factors like access to suppliers and workforce talents should also be considered. We also discussed economic hubs, so if your business can benefit from them, it may be an excellent option to consider them as well. 

Choose the right business structure 

Companies willing to expand their operation in the US have three business structures to choose from; this includes C corporations, S corporations, and LLCs. While all of them have their pros and cons, most businesses will benefit from LLCs as they come with several perks. 

For starters, there is no requirement to be a US citizen (or even a permanent resident) to operate in the US. This allows many owners to benefit from limited liability protection for their personal assets and take tax advantages. LLCs also benefit from management flexibility and minimal recordkeeping and reporting requirements. 

Paperwork to complete

The documentation necessary varies by state, but you may expect to fill out four sorts of documents: formation, governance and ownership, tax, and due diligence. You’ll need to fill out an Article of Organization in order to start a firm. 

Owners must also provide details of shareholder agreements as well as member information for each shareholder. For tax purposes, an EIN must be obtained, as well as due diligence procedures to ensure that foreign personals owning assets are permitted to do so in the United States.

Bottomline 

Expanding your business in a new, unfamiliar country can be daunting, and you have to go through different hoops to gather all the necessary paperwork. Furthermore, the uncertainty of success makes it a tough decision to make. But with proper research and the right strategy, European businesses can significantly benefit by expanding in the US and truly enhance the company’s global outreach.