Doing Business in the US as a Foreign Company (Z162)

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This article gives you some tips on doing business in the United States if you are new to the country. It is written by Derek Devgun, a United States lawyer.

As the largest national marketplace in the world, the United States is attractive for many overseas businesses.  However, it is always a good idea to do your homework first.  Use this article as a checklist to become aware of some major considerations that apply when you are considering doing business in the United States.

Know the (Sources of) Law

In the United States, the laws of the 50 states govern many aspects of commercial relationships. All states other than Louisiana follow some distant variation of English common law, so a lot of broad concepts will be familiar to British business people.  Among the 50 states, commercial laws tend to be substantially similar though they do vary from state to state. Federal law is uniform in application, and governs in areas in which national consistency is seen as more important (e.g., federal taxation, patent law and copyright law).

Get it in Writing

In the United States, “freedom of contract” is a very important legal principle, and in the absence of a strong public policy to the contrary, courts will usually enforce written agreements.  Accordingly, you should document your commercial relationships in writing, even if using “boilerplate” contracts such as standard terms and conditions of sale.  Be warned, though, that US lawyers tend to be more verbose than other lawyers and frequently produce long and comprehensive contracts.  “Plain English” in legal documents has gained popularity over time.

Think About Legal Structures

Possibilities for direct investment include making a direct investment – for example, by establishing a branch office, forming a partnership, setting up a corporation or setting up a limited liability company.  Direct entry into the US market by way of acquisition is also common, and the methods for doing this – mergers, purchase of assets and purchase of shares – will also be familiar to British business people.  Alternatively, it may be more appropriate in your situation to sell into the US market indirectly, by establishing a relationship with a distributor or independent sales representative or agent.  This takes less investment, but laws in some states can present problems when it comes to terminating such arrangements.

The choice of legal structure ultimately is dictated by a number of complex tax, legal/liability and business factors, a full discussion of which is beyond the scope of this article.  However, it is important to remember that the variety of possibilities means that it is almost certain that you will find a legal structure that works for the way in which you wish to structure your US business.

Direct investments also potentially trigger a variety of pre-approval, filing and/or periodic reporting requirements, which – if applicable – should be discussed with your legal advisers.

Be Mindful of the Law

The United States is well deserving of its reputation as a leader among free markets, but that does not mean that it is free from regulation.  Some of the laws that you will want to keep in mind as you develop your business plan include the following:

  • Import/export – how to get your products into and out of the United States, and what it may cost in the form of customs duties.
  • Employment – hiring and firing employees.  Employment laws in the United States tend to be more flexible than those in other countries.
  • Immigration – how to get your employees into the United States.
  • Antitrust – laws against market allocation and price-fixing are strict, and frequently vigorously enforced.
  • Product liability – the litigious culture in the United States is legendary, but clear instructions for use and warnings on products sold in the United States can go a long way towards protecting against unlimited product liability exposure.  Business insurance is also strongly advised.
  • Taxes – these include state and federal income and state sales taxes (but as yet no value-added tax), as well as employment taxes (for funding unemployment and social security programs).

Protect Your Intellectual Property

Any inventions should be protected with appropriate patent filings if protection is available.  Trademarks can also be federally registered for national protection.  Disclosure of confidential information should always be protected with an appropriate confidentiality and nondisclosure agreement.  Technology that is provided to other companies may be protected with a license agreement.  In short, a little planning can offer significant protection in the long-term.

If in Doubt, Get Advice

The complex and highly-developed nature of US commercial laws makes it imperative to get good legal and accounting advice.  This is true even if you use commercially available forms to prepare initial versions of documents – which can save money when used in collaboration with effective legal and financial advice.  Because of variations in state laws, it is also important to make sure that your legal advisers are familiar with the laws of all states in which you are engaging in business.

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