Podcast — 27 min
Should you expand your business to the US?
The United States has long been considered a land of opportunity for businesses and entrepreneurs worldwide. With its diverse and thriving business landscape, it offers a unique environment for innovation, growth, and success.
Whether you’re a small business owner, a startup founder, or the leader of a global enterprise, expanding into the US market may give you a fast-track to significant revenue growth.
In this comprehensive guide, we’ll explore the reasons, benefits, and challenges of expanding to the US, along with the necessary steps to set up a business there.
We’ll also address the expenses related to scaling and look at a cost-effective alternative that can help you expand to the United States without a lot of friction.
America is an attractive destination for companies and entrepreneurs looking to expand internationally. Here’s why:
With a GDP of over $23 trillion, the US has the largest economy in the world. It’s also situated strategically in the middle of North America, giving your business access to other large regional markets, including Canada and Mexico.
The US boasts a population of close to 335 million people. Even more important, Americans have a high standard of living compared to many other parts of the world, giving them more spending power than people in a lot of other countries.
This enormous consumer market makes the US inviting for businesses. When you expand to the US, you can tap into new customer segments and scale up your company’s operations.
The United States has historically welcomed international trade. As such, US businesses tend to have access to global supply chains and form partnerships with organizations around the world. All of this can translate to more opportunities for your business.
The United States is also known for its innovative spirit. Exposing your team to American business culture can help your company develop unique products and services that cater to a wide variety of consumer interests.
Establishing a presence in the US carries a certain prestige that can enhance your brand’s credibility and recognition in the global market.
The US is home to numerous multinational corporations and innovative startups, which opens the door to strategic partnerships, collaborations, and global networking. This, in turn, can attract new customers, partners, and investors.
The US has a large pool of talented, well-educated workers to tap into. Having local expertise and support team members on the ground in the US can make expansion into the region more effective.
Expanding your business operations to the US is not without potential challenges. Here are some important ones to be aware of:
Competitive environment. The US has a very competitive market environment, especially for small businesses.
The vast majority (99.9%) of American companies are small businesses. There are well over 33 million in the US, which together employ almost 62 million people.
To give you an idea of the sheer number of businesses in the US, consider this: in April 2023 alone, there were 433,894 new business applications. Now multiply that number by 12, and you can see what you’re up against as a new entrant to the American market.
Labor costs. The US has a high cost of living and rising wages, so the total costs of employment can be quite high.
While cultural challenges may be more subtle than market and labor challenges, they can be significant and should not be overlooked.
Communication styles. The US favors a to-the-point communication style, which may differ from the more indirect communication style other countries value.
Decision-making. Companies in the US generally prefer a flat or shallow organizational hierarchy and value individual input and contributions, which may be jarring for cultures with a more hierarchical approach to organization.
Diversity. The US is characterized by broad cultural diversity, so a foreign company investing in it may have to adjust its products and go-to-market approach to suit a more diverse target market.
Relationships. Business in the US is often transactional, with less emphasis than other cultures place on building personal relationships.
Customer expectations. Consumers in the US generally have high expectations for customer service and product quality. They expect easy return and money-back policies for consumer goods, which can impact a company’s profit margin.
Marketing and branding. American consumers respond to branding and marketing strategies that may be different from those in other countries, so adaptation may be in order here, too.
All these factors point to the need to carefully research cultural differences and their implications as you expand your business to the US.
The US has a unique legal and regulatory environment that can differ significantly from that of your business’s home country.
Regulations. US regulations can be complex because they’re set at federal, state, and local levels. The same goes for paying taxes and managing payroll: foreign companies must comply with federal, state, and sometimes local tax laws.
Employment laws, including wage and hour laws, anti-discrimination laws, and safety regulations, are challenging as well for the same reasons. Non-compliance can result in heavy penalties, so you’ll want to get everything right from the get-go.
Trademarks and Intellectual property. You’ll have to make sure that your trademarks, patents, and copyrights are protected under US law and that your business operations, products, or services don’t infringe on the intellectual property rights of others in the US market.
Data privacy. The US has specific laws and regulations concerning data privacy and protection that may differ from those in your business’s home country.
Immigration laws. Bringing foreign nationals to the US involves navigating the US visa and immigration system, which can be complicated and time-consuming.
Though challenging, the benefits of expansion to the US can be more than worth the effort.
If you’re considering this move, here are the basic steps for setting up a business in the US:
Begin by studying your target audience, their consumer behavior, and your competitors. This will help you identify potential opportunities and challenges in the US market.
Also, scout out the best geographic locations (state and municipality) in terms of the available labor pools for the type of employment you’ll require.
Outline your objectives, strategies, and financial projections. A well-crafted business plan will serve as a roadmap for your expansion and attract potential investors.
Determine the most suitable US business structure for your company, such as a corporation, LLC, partnership, or sole proprietorship. Consider tax implications and liability protection when making this decision.
Registration begins at the federal government level. Obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).
Then, at the state level, register with the appropriate Secretary of State. The registration process varies by state, so research the specific requirements for your chosen location.
Research federal, state, and local licensing and permit requirements, and make sure your company will be in compliance with them. Industry-specific regulations may also apply.
Research the visa options available for business owners, and ensure your business meets the eligibility criteria for bringing foreign workers to the US.
Establish a US bank account, and set up the necessary financial network to facilitate smooth business operations.
Needless to say, expanding your business to the US comes with serious expenses.
Typical cost categories include the following:
Legal and registration fees
Licensing and permit fees
Office space rental or purchase
Marketing and advertising expenses
Technology and equipment investments
Supply chain and logistics expenses
Expenses vary widely depending on the business’s industry, location, and size, so there’s no standard cost for expanding a business to the US.
However, there are some benchmarks to keep in mind. For example, initial setup costs can be tens — or even hundreds — of thousands of dollars. This figure doesn’t account for ongoing expenses, such as payroll, supply chain, and logistics costs.
For a detailed cost discussion, see the real cost of opening a business entity.
These costs may seem prohibitive, but there’s a cost-effective alternative to explore that’s ideal for startups: working with an employer of record (EOR).
Partnering with an EOR is a practical and cost-effective alternative to managing your expansion to the United States yourself.
EORs are third-party organizations that handle the administrative, legal, and compliance aspects of employing staff in the US on behalf of the foreign company. By collaborating with an EOR, your business can more easily navigate complex US employment laws, tax regulations, payroll, and HR compliance.
Because the US has state-specific statutory requirements and taxation obligations, employers need to understand and comply with employment laws at the state level. This is very difficult for an international organization without localized expertise.
An EOR like Remote can manage these compliance obligations on the company’s behalf, which makes it possible to hire employees in any US state with speed and security.
An EOR partnership can also reduce the cost of expanding to the US by managing payroll and insurance, which removes the need for an in-house HR infrastructure.
Lastly, partnering with an EOR minimizes legal and regulatory risks and reduces administrative burdens — so businesses can focus more time and resources on their core operations.
Expanding to the US market can be a game-changer for international companies and entrepreneurs. Despite the challenges and costs, the potential rewards are immense.
If you’re thinking about expanding to the US, consider partnering with an EOR that can streamline and manage the process for you at a much lower cost.
Remote can help international businesses get set up in the US for a fraction of the cost of undertaking the entire process yourself. If you want to get going internationally with an EOR partnership, talk with us today!
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