Expanding a business is never an easy undertaking, whether you’re branching out to reach a new customer base or opening a new location. But expanding into another country can be daunting, especially if you are not familiar with how things work here. Foreign companies looking to invest in the U.S., by opening a new location or getting established in a new area, face a whole host of challenges and requirements. There’s an added complexity that requires expert guidance to properly establish U.S. operations and achieve a smooth start.
At APN Group, we have helped a wide set of clients from Germany, Belgium, Denmark, Poland, and the U.K. untangle the details of setting up a business here in the United States. From setting up to carrying out daily processes, there are many complex decisions to make before opening a business in the U.S., including the following:
Choosing an entity type: The business faces a variety of options for its entity type—examples include C-corporation, limited liability partnership (LLP), limited partnership (LP), and limited liability corporation (LLC). Each option has its pros and cons and should be weighed carefully.
Establishing banking relationships: If the business owner doesn’t already have a U.S. representative, setting up a U.S. bank account can be a drawn-out, time-consuming challenge. In addition to its articles of incorporation, the entity also needs a Federal Employer Identification Number (EIN) confirmation letter, as well as other information related to the business. It may have trouble establishing credit for carrying customer accounts receivable or for expanding and growing. Having experts local to the new U.S. office who are familiar with the processes and requirements involved can make connections to amenable, suitable financial institutions easier and get the company fully prepared for doing business here.
Reporting in U.S. GAAP: There will need to be a decision regarding how the entity will report its financial statements. The answer can depend on applicable requirements—the entity may only need to report in the U.S. for tax purposes and report otherwise in their home country GAAP or IFRS, or they may need to report U.S. GAAP for capitalization requirements and then convert. Either way, this is a decision that needs to be determined upfront. To truly understand how the new entity is performing, the parent company will need to have its financial statements translated into home-country GAAP, IFRS, or internal management reporting.
Selecting financial systems: There are many aspects to consider when deciding on which systems to use, including the need to meet U.S. tax and financial reporting requirements and integrate with the parent company’s software, while still being able to meet the financial reporting needs of the U.S. entity and the company as a whole.
Understanding U.S. business practices: Companies setting up a foothold here are often surprised that the U.S. sales tax varies by state. They also often don’t initially know about HR and tax issues we deal with constantly, such as payroll tax, FICA, social security, and Medicare. There are also various business insurance policies they need to acquire. We get them up to speed quickly.
Accounting for foreign currency gains and losses: An added complexity for any company making transactions in a different currency other than their country involves factoring in currency changes between the time payments are made and received. Accounting experts well-versed in this area can help the company strategize and properly record and report any realized and unrealized gains and losses.
Making connections: It can be a challenge to know who to turn to when issues arise and questions are raised. An on-the-ground expert who has helped other companies like yours can make recommendations and refer you to business partners who would be a good match for your situation, including tax accountants, attorneys, and insurance brokers.
The U.S. offers many benefits to companies looking to expand here, but all the complexities involved in investing here are rarely realized when they begin. For our many clients who are headquartered overseas, we become their go-to finance and HR team on the ground here. We fulfill their day-to-day CFO, controller, and accounting needs, as well as HR needs, and set them up for success.