This article will provide an overview of how foreign companies can establish and expand in the United States, and how federal, state, and local laws affect their business decisions and employees. There are many legal issues in introducing products into the U.S. market, and this article will focus on two main stages of foreign companies doing business in the U.S.: entering the U.S. market and expanding operations. Both phases involve many areas of US law. Some questions are common to both stages, but others are specific to a particular stage. Therefore, it is very important to have close consultation and discussions with lawyers at every stage of the company’s development.
This page is the first part of How to Start a Business in the US and will discuss the US laws involved in entering the US market.
Enter the US market
Issues involved in this stage mainly include company organizational form, immigration and labor issues.
As the saying goes, a good start is half the battle. In the early stage of establishing a subsidiary in the United States, choosing the most favorable form of corporate organization will have a profound impact on the company’s future business operations. In the United States, corporate forms include Sole Proprietor, General Partnership, Limited Partnership, Corporation, and Limited Liability Company (LLC). Each organizational form has its own advantages and disadvantages, which should be carefully weighed. Among these corporate organizational forms, Corporation and LLC are the most common corporate organizational forms. The advantage of a corporation is that shareholders enjoy limited liability, free transfer of equity, and the convenience of accepting foreign investors. One of its disadvantages is double taxation. Although it can be avoided through some operations, it is more complicated. The advantage of LLC is that it enjoys limited liability without double taxation, flexible management, and no restrictions on foreign owners, etc. However, care must be taken in terms of taxation to avoid adverse effects on foreign owners. In addition, choosing the place of incorporation is also very important because state laws control the internal affairs of the company. A corporation may choose to incorporate in any state, even if it does not conduct business in the state of incorporation. Currently, Delaware and New York are the most popular states for incorporation. For foreign companies, how to choose the director and officer is also very important, because this will involve the limited liability of the US subsidiary and the joint liability of the parent company. Therefore, it is very important to carefully write the relevant clauses in the Certification of Incorporation of the subsidiary.
- Immigration Issues
In the preparatory stage before the establishment of the US subsidiary, the B-1 visa is the first choice for employees to go to the US. The B-1 business visa is for those who come to the United States for a short period of time to conduct business activities on behalf of foreign companies. They cannot work in the United States, and they cannot be immigrant. The B-1 visa can be initially valid for up to 1 year and can be extended for up to an additional 6 months depending on circumstances. After the U.S. subsidiary is established, it may be necessary to send employees to conduct business operations and maintain ties with the parent company. At this stage, the employee’s visa to the United States depends on the length of time the parent company plans to send the employee to work in the United States. In the United States, the most common non-immigrant work visas are L-1 and H1-B. The L-1 visa requires the employee to have worked for the parent company for at least one of the three years prior to applying for the visa. For newly established U.S. subsidiaries, the initial validity period of the L-1 visa is one year. The visa can be extended for up to seven years (manager level) or five years (technician) if the subsidiary’s business activities are sufficiently expanded.
The H-1B visa does not require the employee to work in the company before, but the employer must provide the employee with a wage equal to or higher than prevailing wage (popular wage). The H-1B is initially valid for three years and can be extended up to six years. If the employer applies for a green card for the employee during the H-1B period, then the H-1B can continue to be extended to wait for the green card approval result. The annual H-1B application start date is April 1st. The general quota is 65,000, and the US master’s or doctoral quota is 20,000.
In addition to non-immigrant work visas, common immigrant visas include EB-1C multinational manager, EB-2 highly educated, and EB-5 investment immigrants. Among them, investment immigration requires an investment of US$1 million (US$500,000 if it is a low-employment area) and the creation of 10 American jobs.
- Labor Issues
In the United States, various federal, state, and local laws govern labor employment, including minimum wages, discrimination and harassment, family leave, smoking policies, employee posting rights, disability accommodation, and other issues. Even if some regulations do not apply to small-scale companies, for the future expansion of the company’s business, related issues must be prepared in advance. For foreign companies, due to the inevitable need to hire American employees after establishing a U.S. subsidiary, labor issues must be taken seriously, because American employees have a strong sense of rights and interests, and this issue has a very high probability of triggering lawsuits. Labor litigation is costly, time-consuming, and generally detrimental to companies. Therefore, whether it is formulating the company’s bylaw or signing a labor contract with employees, it is necessary to seek legal advice to avoid unnecessary losses.