Legal and Business Considerations for Doing Business in the US

 

Introduction

Upon entering the US market, you will find that many different service providers ask you the same questions over and over again. You may speak with a business lawyer, an accountant, an immigration lawyer, an employment lawyer, banking specialist, investment advisors both for yourself and your employees and advisors to help you find investors or other sources of funding for the business.

The questionnaire below is a tool you can use to prepare for questions you will be asked repeatedly in this process. It can serve as a framework for an outline that you can give these third parties. In this way, you can cut down on the repetition and ideally, be more productive and conduct efficient substantive meetings. The questionnaire may also provide some insights into aspects of setting up your business in the US that may not have previously occurred to you.

We suggest you think the answers through thoroughly, but provide a brief, one- or two-sentence answer in writing as a sketch of your business. You do not have to answer all of these. Answers to some of these questions will help third-party advisors to understand your business, and therefore provide you clear and appropriate guidance. Identifying the questions which you do not understand or to which you do not have answers may help you formulate your own questions and serve as a jumping off point for meetings with them.

Preliminary Preparation

The US has not only a different legal system and framework than Europe and other parts of the world but also has a different way of doing business. It is very common for everyone in the US to have at least one lawyer, often more, to work on the most basic of matters. Due to the overlapping federal and state legal systems, legal services are necessary even when you are not doing something wrong.

Another item to note is that in the US lawyers tend to focus on one or two specific areas of the law. In the US, few lawyers are generalists. This is mostly due to the way the US legal system functions (see more information in the basic background section at the end of the questionnaire). So prepare for the concept that one lawyer cannot and will not be able to handle ALL of your legal needs adequately. Instead, one law firm may try to handle all of those needs or, one lawyer may serve as the main point of contact to others who focus on different aspects/areas of the law. This hyper-focus may seem strange to those new to the US, but it is not unusual.

Business Framework

The laws that apply to your business depend to a large degree on what your business does, how and where it operates, and your plans for it in both the short and the long term. Thus, getting good legal advice depends on understanding certain baseline information about your business.

  1. Why do you want to enter the US market?
  2. What does your company do?
  3. What is its product, service or technology?
  4. How does it work?
  5. Is there a prototype, model or demo?
  6. What US market research have you done?
  7. Who is your audience or market in the US?
  8. Have you identified your competition in the US?
  9. Where will the revenue come from?
  10. What are your budget projections over the first six months, the first year, second year?
  11. Is your company private or public?
  12. If private, who owns the company?
  13. How is it regulated at home?
  14. Does it receive government funding?
  15. Will the company be seeking funding or investors in the US? If so, how do you plan or expect to do this?
  16. What are your plans for developing the business?
  17. Do you have a business plan, marketing plan or financial plan?
  18. What type of office/warehouse/manufacturing space do you need, how will you go about finding and securing this space? If you require a commercial space (other than a basic office space) do you have guarantors (individuals or resources) which may be required?

Legal Framework

The following series of questions concern the legal aspects of your business.

  1. Which corporate entity have you chosen for your business and why? Have you obtained legal and tax advice on the best entity for your business and circumstances?
  2. How will the US entity fit into the global corporate entity?
  3. Have you determined in which state to form your US entity? Will your operations or primary place of business be in in another state? If so, have you filed a certificate for the right to do business, or other similar filing, in the “foreign state”?
  4. Have you retained or identified a US accountant to advise you on the tax consequences of the above choices?
  5. Does your business have tax advisor(s) in your home country? If so, will these advisors be able to work with US counterparts?
  6. Which government agencies or entities regulate your business in the US, if any? Have you had legal guidance on your business’ compliance with these regulations?
  7. Are you seeking outside investors? If so, what type of investors are you seeking?
  8. Do you know if those types of entities may invest in your company as it is formed?
  9. If you have a products-based business and are manufacturing outside of the US, have you determined how to import these products, finished or raw materials?
  10. Will you need visas for yourself, employees, and/or family members?
  11. Do you have form agreements that you will need to operate in the US and if so, have these been reviewed by US lawyers to determine applicability and enforceability under US law?
  12. Do you have legal advisors in your home country? If so, will they be able to work with US counterparts?
  13. Is your product or technology protected Intellectual Property in your home country?
  14. Does your Intellectual Property require US protection, in addition to that which you may already have in your home country?
  15. Will your technological needs be addressed in your home country or do you plan on having servers & IT in the US? Will you be transmitting or accessing data between your home country and the US? Is any of the transferred data protected legally in your home country? Do you know its legal status in the US? Are you familiar with the mechanisms to transfer data from the European Union to the United States in a compliant manner? If so, do you have these in place?
  16. How many employees does your company have in your home country?
  17. If already in the US, how many employees does your company have in the US? Will you be using or do you already use contractors or interns? Are you aware of the requirements on employers in the US regarding contractors, interns and overall hiring and firing practices?
  18. Do you have insurance for the business, the location of your business and other liabilities?

Basic Background

The US legal system, which is a common law system similar to those of the UK, Canada, and other Commonwealth countries, is different from the civil law systems in most of Europe. In civil law systems, the law is contained in the statute books. (In the EU, regulations of the EU also affect many aspects of how business is conducted.) In contrast, US law develops in a number of complex and overlapping ways. US law incorporates the following sources of law: the laws passed by the legislatures of the different states and the US Congress; regulations developed by government agencies with formal input from the public; and the interpretations of those statutes and regulations by judges and courts that result from the filing of lawsuits. Under common law, the courts interpret statutes and regulations using the specific facts of each case, and those rulings may establish significant aspects of the law in question, affect subsequent rulings by courts on the subject, and contribute to changes in future legislation. In addition, the US has two systems of laws: federal law, which applies to all states and in certain cases, US territories; and individual states’ laws. In general, the more stringent law (state or federal) is the standard that companies and individuals must meet.

Litigation is more common in the US than in most other countries, for both legal and cultural reasons. Litigation can be expensive and time-consuming, but it can be managed and its risks can be reduced or managed by working with experienced legal counsel regularly, both as part of the business and legal planning process, and before consequential threats arise.

When planning your expansion to the US, it will be necessary to budget for the costs of engaging lawyers. As you are probably aware, the US is one of the most litigious countries in the world and there is a contract for just about every product and service. As you embark on this journey, it will be important to have a legal representative guide you through the labyrinth.

DISCLAIMER: Material in this document does not constitute legal advice under the professional rules applicable to lawyers in the relevant jurisdiction. No attorney-client privilege or confidentiality will attach to any communications without a signed engagement agreement. Prior results do not guarantee a similar outcome.