Expanding to the US: Top Legal Tips for a Successful Expansion (Clayton & McKervey)

Business Opportunities
August 5, 2021 - Clayton & McKervey PC

This is a thought leadership article from PrimeGlobal member firm Clayton & McKervey on their top legal tips for a successful US expansion.

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As part of our Expanding to the U.S. series, we have already introduced the importance of using the right U.S. legal advisor when planning and executing your U.S. expansion. However, beyond the incorporation, immigration and contract needs one usually expects when expanding to the U.S., the U.S. legal landscape warrants a closer look at the compliance and operational requirements for your U.S. business operations.

It is important to understand and address U.S. legal requirements during the planning stage of expansion to avoid surprises or mistakes. While we do not provide legal advice, our accounting and tax expertise is tied closely to the legal aspects of operating a business in the U.S. Proper planning with U.S. legal advisors experienced in working with foreign investors in the U.S. is recommended. Some U.S. laws are applicable to all businesses and others are limited to specific industries or circumstances. Here are some important U.S. legal considerations which may impact your U.S. business operation.

Important U.S. Legal Considerations

  • The U.S. litigation system may cause concern for foreign investors, but a U.S. attorney can support strategies to mitigate risks, especially regarding choice of legal entity, contractual relationships and arbitration clauses.
  • U.S. patent, trademark and copyright laws govern intellectual property (IP) rights in the U.S. A foreign investor in the U.S. needs to understand the applicability of U.S. IP law regardless of where the IP was developed.
  • The U.S. Department of Labor (DOL) administers and enforces more than 180 federal labor laws, many which apply to all U.S. employers and some of which only apply to certain industries. Employers must also meet federal and state requirements to withhold tax and remit tax from employees.
  • Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation (DFAR), among others, are important to understand if your U.S. business plan includes selling products or services to the U.S. government.
  • Food and Drug Administration (FDA) is a federal agency responsible for outlining and enforcing regulations related to consumable products sold in the U.S. Foreign-based food and pharmaceutical companies need to be aware of all FDA regulations that apply to their products before they can be sold in the U.S.
  • Health Insurance Portability and Accountability Act (HIPAA) is a federal law to protect patient health information. The HIPAA Privacy Rule applicability is far reaching, and it is important for foreign companies looking to provide products or services in the medical industry to understand their designation under HIPAA.
  • The Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions for U.S. national security. OFAC requirements are applicable to U.S. and foreign parties trading in the U.S. and compliance best practices are recommended.

As you can see from the short list above, if you are planning to expand your business into the U.S., you should be prepared for regulation by multiple governing bodies. Because there is a separation between state and federal legislation and enforcement in the U.S., you will need to be prepared to comply with both federal and state laws where applicable, especially for tax and employment requirements. Your expansion plan should include legal consultation that accurately determines when and where you’re vulnerable and to which regulations.

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Clayton & McKervey PC

Headquartered near the international border of the U.S. and Canada, Clayton & McKervey is a Detroit-based, full-service accounting and business advisory firm focused on global business. The firm’s clientele includes closely held, middle-market, growth-oriented companies. Since 1953, Clayton & McKervey has created a strong reputation, both domestically and internationally, with four types of clients, U.S. entities with operations in other countries, foreign entities expanding to the U.S., businesses with international growth plans and clients in need of transfer pricing service.

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