For foreign companies looking to develop a presence and operate in the U.S., the payoff could be well worth the effort.
Regardless of the product/service (from durable goods like washer and dryers, to online newsletter subscriptions), Americans are known for their insatiable appetite to purchase goods and services. Their resilience in the midst of economic downturns is also something that appeals to foreign-based businesses. This is particularly true if domestic economic uncertainty threatens to tighten the purse strings of consumers in the home country, or if the market in the home country is already fully saturated.
With the American consumer comprising roughly two thirds of U.S. Gross Domestic Product (the world’s largest economy), foreign-based companies are positioned well to capitalize on U.S. consumption demand.
However, diving into the U.S. market takes more than a solid offer. It requires painstaking research, planning, the development of key professionals and contacts, and the ability to implement the business plan in a way that minimizes associated risks.
In other words: homework.
Even when everything seems to be in line, there is no guarantee of success. Large U.S. companies (Target, Home Depot, Starbucks, Best Buy and others) have tried to tap foreign markets, only to be denied by the consumer.
If these corporate behemoths couldn’t break into certain foreign markets, think of how much more care is required when a smaller, less known company takes on the task.
Any foreign-based company thinking of expanding its reach into the U.S. should take the time to understand:
- The U.S. Legal System. This includes the basics about incorporation, immigration (particularly business immigration visas), intellectual property laws i.e. patents, trademarks, copyrights, trade secrets, and employment laws).
- The U.S. Tax System. How the new company will be taxed is a major consideration as to whether or not global expansion is worth the effort. Tax treaties, forms, credits, exclusions, reporting requirements, and other considerations will have to be taken into account, in order to develop effective tax minimization strategies. Make sure to enlist the help of a qualified tax expert who has experience with inbound businesses.
- U.S. Culture. Culture influences how we interact with one another. Therefore it is important to understand American culture before attempting to do business in the U.S. Skipping this step and relying on arbitrary assumptions is a mistake. Assess how U.S. consumers think. Learn what they value. They will tell you exactly what they want, if you do the work. This will have a profound affect on customer-facing operations of the company like marketing, advertising, and customer service. It will also provide fresh insights and new ideas for product development.
- U.S. Trade Agreements. Any foreign-based company looking to expand its presence in the U.S. (especially a company involved in the export or import of goods or services) needs to understand how trade agreements work. An expanded market allows companies to expand their product lines and develop new technologies to meet increased demand.
These are by no means considered to be a comprehensive guide for the foreign-based company pursuing expansion the U.S. But understanding U.S. laws, taxes, culture, and trade agreements, should serve as a strong foundation.
Of course, having the right professionals to aid in the research and planning process will help ensure things go smoothly and correctly the first time around.
If you have questions about expanding the presence and operations of your foreign-based company in the U.S., contact Yana Weaver at [email protected] today.
Click here to read more about Yana.
With over twenty years of experience in private and public accounting, Yana has extensive knowledge in many areas of taxation. She is serving clients in manufacturing, healthcare and real estate industries providing them with entity planning support, transaction structuring, practice entry and exit strategies, cross-border transactions and other important financial matters.
You can reach Yana at 714-569-1000