This page is the second part of How to Start a Business in the United States, focusing on US laws for foreign companies expanding operations in the US. (Read Part 1 of How to Start a Business in the US.)
Expanding business operation
Issues involved in this stage mainly include corporate taxation, real estate and environmental law.
- Corporate Tax
US corporate tax will depend on the net income of the US subsidiary. Generally speaking, the cost of goods supplied by the parent company to the independent US subsidiary will be the largest tax deduction. Note that when the parent company is paid for the goods, the cost will reduce the US subsidiary’s tax return, but no tax will be incurred. Therefore, the U.S. government closely monitors transactions between companies to ensure that they are two separate and unrelated entities when doing transactions. The US government has very strict requirements for tax declaration and accounting to ensure the implementation of arm’s-length rules. In addition, the parent company must decide how to finance the operations of the US subsidiary. A parent company can finance a U.S. subsidiary with a loan. However, if the loan-to-equity ratio is too high, the U.S. government can reclassify inter-corporate loans as equity, or use “earnings stripping” provisions to limit corporate tax deductions. If the US subsidiary sells products to various states, it may also have to pay taxes in other states. With proper planning, this can be avoided so that only one state’s taxes are paid.
- Real Estate Law
Since the company needs offices and warehouses, real estate laws will have an impact on the company’s operations. Companies can rent or buy. Since the demand is not clear at the beginning, you should choose to rent, and the primary considerations for renting a place are location, size, time and rent. When negotiating a commercial lease, the company should cooperate with a lawyer to negotiate with the landlord to formulate the most favorable terms, and carefully read the lease language to determine the reasonable responsibilities and obligations of the tenant and the landlord.
- Environmental Law
When a company plans to buy or lease real estate in the United States, relevant environmental laws must be considered. Federal law generally holds the current owner accountable for past and present releases of hazardous substances, regardless of whether they participated in the release. When leasing offices and warehouses, care should be taken to make the landlord explicitly responsible for complying with all environmental laws. If you are buying commercial land, you should ask the seller to provide extensive environmental warranties. Due to the huge cost of cleaning up the environment, it is necessary to pay attention to the relevant provisions of environmental laws.
In addition to the issues listed above, the operation of a US subsidiary may also involve various issues such as intellectual property law, civil litigation, tariffs, anti-counterfeiting, antitrust, and franchising. Therefore, the assistance of lawyers will be very important to the healthy operation of the company. Lei Jiang Law Firm provides relevant legal services for foreign companies to conduct business in the United States. If you need detailed legal advice and assistance, please contact us.