Events Feb 09, 2018

As part of a cycle of Entrepreneurs' Talks on how to successfully conquer the US market, Marc Trost, chartered accountant and US CPA with Jade Fiducial, focused this first session on the key legal, tax, accounting and social aspects to consider when opening an office in the USA.

The key steps of your implantation in the US
1- Project definition: this is the starting point for any entrepreneur wanting to establish a foothold in the US. When considering your local implantation, remember that the US is a huge, fabulous and amazing country with 50 States, each of them with different regulations. Silicon Valley, Los Angeles, Boston, and New York are the hot spots, but they are also very expensive in terms of cost of living, salary and tax (New York for example is subject to a third tax level in addition to federal and state taxes). You need to find the right balance between company visibility and cost. Do you need an office on 5th avenue in New York or you could be based in Dallas? In terms of timing, most of our clients come to Jade Fiducial when they already have a base in the US. Generally, it is better to be onsite if you want to develop your US business, as it is difficult to run your business from France, due to the time difference (9 hours with the East Coast) and cultural differences.

2- Business plan: defining your provisional budget is key. A Certified Public Accountant such as Jade can help you and will also be able to provide you with a benchmark.

3- Visa: to obtain a visa, you need to present your Business Plan to the US authorities and demonstrate that you are ready to invest a decent amount in the country. The E2 visa is very popular amongst the French. Be sure that you have obtained a visa before you start billing your clients.

4- Legal form choice: if you decide to create a US subsidiary from France, you can opt for Corporation (SARL, SAS) or if you plan to live in the US, a Partnership (société civile).

C. Corporation recommended for French companies with a US subsidiary and start-ups with funding.
+ shareholders’ liability is limited to the contribution / only the company makes a tax return /choice of closing dates
- double taxation at the company and dividend distribution levels

LLC (Limited Liability Company), recommended for small structures with only one person based in the US
+ easy to create / a single tax
- one employee maximum

LLC / Partnerships:
+ no tax at company level (no double tax)
- high legal costs / complex tax return

5 – Incorporation and registration
After creation, you need to register your company in a US State. The Incorporation State is the State of the company’s “rattachement” and the Registration State is where you actually do your business (physical presence). The Delaware State is a good option, lawyers know it well.

 

General information about accountancy
Accountancy in the US is a lot more flexible and less complex than in France: no general chart of accounts, no annual registration of accounts and no need to have your accounts certified by auditors. But, it is important to regularly monitor your activity with a monthly update of your accounts and quarterly reporting. Keep in mind that if you have investors, your accounts need to be certified. We recommend that you regularly do your accounts and keep your accountancy documents for at least 3 years. There is lot more tax control in the US than in France. You can choose to manage your accountancy internally (not complicated but time consuming) or through an external accounting firm.
Example of accountancy software: Wero, ZohoBooks, QuickBooks, QuickBooks online (approximately 500 USD per/month).

Different types of crowdfunding
Rewards crowdfunding / donation crowdfunding / lending crowdfunding / equity funding
Keep in mind that since the financial crisis, relationships with banks in the US have become quite complex. Banks are highly demanding and won’t lend you any funds unless you have built solid relationships.

 

US employees or French expats: who should you hire?
A US employee knows the US market and local business practices well. He doesn’t need a visa which is another advantage but on the other hand, his salary will be higher, and he is likely to be less committed to his job as there is no work contract required. You can fire him with no prior notice.
A French expat will have a better knowledge of your company and be more loyal and committed as he will struggle to find a job somewhere else in the US if he gets fired. You need to apply for a Visa for him (E2 up to 5 years / L1 from 1 to 5 years). An Esta Visa is fine when you are looking for a job but not once you begin working.
In terms of financial packages for US employees, you need to pay for his social contribution and benefits (health insurance + retirement funding). Benefits play a key part in retaining your employees. Social contribution accounts for around 8 % of the total salary costs.

Sales Tax (VAT)
Each State applies its own specific rules when it comes to sales tax and there are no national sales tax regulations. If you are selling a service or a product with no physical presence, there is no sales tax. Keep in mind that in the US, unlike France, deductible VAT does not exist (only collected).

 

Tax reform impact
The Trump tax reform was signed on the 22/12/2017 and has been effective since 1/1/2018. The key objective is to lower tax rates. There are 7 tax brackets ranging from 10 % to 37 %.

 

Jade Fiducial is an accounting and tax consulting firm that has been present in the USA since 2003. They have a perfect knowledge of French and American tax systems and they offer accounting and tax services to companies and individuals wishing to settle in the US.

 

 

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