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How to Expand your Business in the USA? Legal Compliances and Financial Requirements
The USA has always been known to be a land of opportunities and, as one of the largest economies in the world, has attracted businesses from all over the globe. The magnitude can be understood by the fact that in 2017, the GDP of the country was at $19.39 trillion, with an annual growth rate of about 2.6%. This by itself is almost 30% of the economic activity of all other countries combined.
However, this large scope and scale can also be a deterrent and pose significant challenges for those not used to working on such a broad canvas. For businesses diversifying in the USA, there is a lot to contend with.
There are 50 different States, with each having their own statutory laws and regulations. Hence, if a State border is crossed, the laws of business may be completely different. Then there are Federal laws to contend with, making compliance a complex process for those expanding into the US market for the first time.
Once you have decided to enter the business scene in the USA, your subsequent strategy for growth and expansion has first to include all the requirements of doing business in the country.
Going through the many aspects and complexities is not easy, and it is always advisable to obtain the services of an established and reputed business service provider and consultant to guide you through the many pitfalls that you would otherwise face. Getting someone on board with local knowledge of the business scenario will be crucial to your success.
Registering your business –
For registering a business name, you will either have to opt for a “Doing Business As” (DBA) or “Fictitious Business Name” (FBN). This will enable the State or Federal authorities to know under what name you will be conducting your business.
You can use this name to create brand awareness for your products and services, even though this name will not have trademark protection.If you do not go through this process, the name of your company will automatically default to your name, that is, the name of the legal owner.
Type of entity –
You have to decide the type of business structure that you want to create as tax and other legal compliances will depend on this aspect.
The first is a Corporation which comes under State laws. It is possible to incorporate a corporation in one State and have the principal place of business in another. The most common option is the C Corporation, which incurs taxation at the corporate tax rate separate from the company’s owners or shareholders.
LLC or Limited Liability Company, where you can opt to be taxed as a corporation or have it passed on and be taxed at the members’ level. Other business structures like partnerships or sole proprietorships have few internal statutory requirements.
Federal and State Taxes –
An Employer Identification Number (EIN) from the IRS is mandatory for any business that is a corporation or a partnership or has hired employees. EIN is crucial since you can use it to file tax returns, open bank accounts, and apply for business permits and licenses. Independent professionals, too, have federal income tax obligations such as self-employment tax, income tax, and excise tax. The structure of your business will determine the federal tax obligations.
In addition to federal taxes, there is the liability of State and local taxes. These include self-employment tax, payroll tax, income tax, property tax, and sales tax. The rates of these taxes vary between States.
Permits and Licenses –
All businesses and independent contractors must obtain statutory permits and licenses, which depend largely on the business’s location. In certain cases, both federal and State levels require licenses. Federal licenses are necessary whenever Federal authorities monitor the business activity.
Financial Requirements for Doing Business in the USA
There are a number of ways that you can meet your financial requirements.
Getting an SBA loan is one option. Often banks are not willing to lend funds to small businesses and start-ups, especially after the credit crisis not so long ago. Under such circumstances, loans that are guaranteed by the U.S. Small Business Administration are in high demand. However, loans from SBA have a number of restrictive clauses.
First, you have to meet the official definition of a small business.
Next, you should have first attempted to raise funds on your own, and only when you have faced rejection, the SBA will step in. SBA does not directly sanction loans. You have to meet the stipulations of a commercial lender that processes SBA loans.
You can try other ways to meet your financial requirements. Getting an angel investor on board, crowdfunding, factoring, which is a method that sells receivables to get cash, and using your credit card are some methods that you can opt for.
Once you get the required funding for your business and comply with all legalities, there is no better place to expand your business than the United States of America.
If you are looking for legal support and accounting outsourcing while expanding your business in the USA, then get in touch with Cogneesol- a leading business process outsourcing service provider serving businesses across the world since 2008.
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