Table of Contents
- Understanding the U.S. Legal System
- Choosing a Business Entity
- Obtaining Necessary Licenses and Permits
- Complying with Employment Law
- Navigating Tax Law
- Protecting Intellectual Property
- Conclusion
The United States is a land of opportunity for international startups from around the world.
With a large market, a stable economy, and a favorable business environment, the country offers many advantages to those looking to start a business or expand their operations.
However, for international startups, navigating the complexities of U.S. business law can be a significant challenge.
In this guide, we’ll provide an overview of the legal landscape in the U.S. and offer tips for international startup founders looking to succeed in this market.
Understanding the U.S. Legal System
The U.S. legal system is complex and can be challenging for outsiders to understand.
The system is based on common law, which means that judges rely on previous court decisions to make their rulings.
This can make the law difficult to interpret and follow, as there is often no single, definitive answer to a legal question.
In addition to the common law system, the U.S. also has a federal system of government, which means that there are both federal and state laws that govern business activities.
Federal laws are created by Congress and apply to the entire country, while state laws vary from state to state.
Some of the key federal laws that international founders should be aware of include the Foreign Corrupt Practices Act (FCPA), which prohibits bribes and other corrupt payments to foreign officials, and the Securities Act of 1933, which regulates the sale of securities in the U.S. State laws can also be important, particularly in areas such as employment law, tax law, and environmental law.
Choosing a Business Entity
One of the first decisions that international startup founders must make when starting a business in the U.S. is choosing a business entity. There are several options available, each with its own advantages and disadvantages.
One of the most popular business entities is the limited liability company (LLC), which offers liability protection for the owners while also allowing for flexible management and tax treatment. However, if you are not us taxpayer, you will automatically be converted to a C corporation by the IRS. Another option is the corporation, which provides the strongest liability protection but can be more complex to set up and maintain.
If you are seeking investment, and to build a Silicon Valley startup, you will need a Delaware C corporation.
It’s important to consult with an attorney and a tax advisor when choosing a business entity, as the decision can have significant legal and financial implications.
Obtaining Necessary Licenses and Permits
In order to conduct business in the U.S., international startup founders may need to obtain certain licenses and permits.
The requirements can vary depending on the type of business and the location, so it’s important to research the regulations in advance.
Some common licenses and permits that may be required include a business license, a sales tax permit, and an employer identification number (EIN).
Obtaining an EIN can be very complex for an international startup founder if they do not have a US Social Security Number (SSN). Without an SSN you will need to wait weeks, if not months to obtain your EIN.
Complying with Employment Law
Employment law is another area that international startup founders must navigate carefully when doing business in the U.S. The U.S. has numerous federal and state laws that govern the employer-employee relationship, including laws related to minimum wage, overtime, discrimination, and harassment.
International startup founders should be aware of the specific laws that apply to their businesses and take steps to comply with them.
This may include developing an employee handbook, providing training to managers and employees, and consulting with an employment law attorney.
Navigating Tax Law
Tax law is another area that can be complex for international startup founders.
The U.S. tax system is based on a self-assessment model, which means that businesses are responsible for determining their own tax liability and filing tax returns accordingly.
International startup founders may also be subject to additional taxes, such as withholding taxes on payments made to foreign employees or contractors.
It’s important to work with a tax attorney to ensure compliance with U.S. tax laws and to take advantage of any available tax incentives or exemptions.
Protecting Intellectual Property
Intellectual property (IP) is a critical asset for many businesses, particularly those in technology or creative industries.
In the U.S., there are several types of IP protection available, including patents, trademarks, and copyrights.
International startup founders should take steps to protect their IP when doing business in the U.S. This may include filing for patents or trademarks with the U.S. Patent and Trademark Office, registering copyrights with the U.S. Copyright Office, and including IP protection provisions in contracts and agreements.
Without proper IP protection, you cannot receive Venture Capital Investment, cannot go IP, and will not be acquired through Merger or Acquisition.
Conclusion
Navigating the complexities of U.S. business law can be a challenge for international startup founders. However, with careful planning, research, and the assistance of legal and financial advisors, it is possible to succeed in this market. By understanding the legal landscape, choosing the right business entity, obtaining necessary licenses and permits, complying with employment and tax laws, and protecting intellectual property, international startup founders can position themselves for long-term success in the U.S. market.
