Top Ten Tips for US Expansion

By Daniel Glazer

Daniel Glazer will be speaking about US Expansion Strategies at the Global Expansion Summit in 2017. 

If you intend to do business in the US, whether remotely from the UK or by establishing a presence on the ground in the US, there are a number of steps you should take.  These are generally straightforward, and, with a few exceptions, shouldn’t be very expensive.  Preparation and research are critical to successful US expansion: get it wrong at the beginning and it can cost you a lot more down the road.

To help support those thinking of making a move into the US market, we’ve identified 10 key actions to take on board before you set off.

INTELLECTUAL PROPERTY (IP)

Our first three tips relate to intellectual property (IP) and apply whether or not you set up a US company:

1. Get advice on your trademarks.  Trademark users can establish US rights simply through using a mark in the US (i.e., without a registration), so it is not enough to just check the online US trademark register for potential conflicts.  Also, pre-existing marks that are similar but not identical to your mark can present significant obstacles.  Even though no one may be selling beverages in the US using the mark KOKA-KOLA, we’re pretty sure a large company in Atlanta, Georgia would object if you tried to.  Accordingly, a proper clearance search should be conducted by a professional.

If the search is clear, you should strongly consider applying for a US         registration. You don’t have to have a US company or do business in the US to apply.  Such a filing will help establish priority over others who might     want to use or register your mark in the future.

Finally, ensure your key trademarks are protected in the EU and any other key markets.  It makes no sense to spend a lot of money developing a brand, only to find you can’t use it where you want to.

2. Understand your US IP/patent risk – from competitors and from non-practicing entities known as “patent trolls” – and decide whether to seek your own US patents.  This doesn’t require a full patent search, and indeed such a search may be inadvisable.  But you do need to understand the general landscape.

3. Protect your trade secrets and other key IP through appropriate confidentiality agreements, contractor arrangements (that assign developed IP to you), and the like. 

LOOKING TO EXPAND YOUR BUSINESS TO THE US?

Our next four tips apply whether or not you actually put people on the ground in the US:

4. Understand your liability exposure in respect of both commercial risk and government enforcement risk, and get some cross-border insurance advice.  The US is a more litigious market, and the threat of litigation is commonly used to negotiate favorable business outcomes.  Don’t go in blind.  Make sure your contracts are unambiguous and properly protect you, and that you have appropriate compliance systems in place.  If you’re in a business that is regulated in the US, be sure you understand how those regulations apply

5. Obtain basic US and UK tax advice.  This is the case no matter where you are located.  Tax matters are complicated, especially in a cross-border context, and very much depend on the specific facts and circumstances of the particular situation.  For example, providing a software as a service (SaaS) offering through the cloud could give rise to US tax issues.

6. Understand your US immigration position if you’re going to be travelling back and forth to the US frequently.  Visa waiver (ESTA) is great for occasional business visits to the US, but at some point you will get hassled at the border if it looks like you may be working there.

7. Convert your terms and conditions and commercial contract forms to US law (this is the law of a particular state, like New York).  Some counterparties are not going to sign up to English law forms, but may be more willing to work from your US law form.  Large counterparties often will insist on their forms in any case, but you will still need your own form US provisions for the points that really matter to you.

US OPERATIONS ON THE GROUND?

Additionally, if you intend to set up operations on the ground in the US:

8. Sort out your corporate and tax structure.  Operate through a US subsidiary (probably a Delaware corporation that is qualified to do business in the states where you have offices or employees), and put in place arm’s length intra-group agreements between the US subsidiary and the UK parent that work for tax purposes.  Operating through a branch of your UK company is generally inadvisable from a tax and liability perspective.

9. Get outsourced back office support.  Sort out your corporate tax returns, annual corporate filings, payroll, employee withholding and employment-related charges and benefits, etc.

10. Consider what agreements to put in place with your employees.  Unlike the UK, you aren’t legally required to have employment agreements with your US employees.  However, you will want to have confidentiality and IP assignment agreements with all employees, and more comprehensive employment agreements with senior individuals.

Be careful not to treat workers as contractors when they are really employees.  If you intend to transfer founders or employees from the UK to work in the US, get immigration advice early – it is likely to be the aspect of US expansion that requires the longest lead time.

This blog was originally published here.