Legal Requirements
LEGAL ASPECTS THAT YOU NEED TO KNOW WHEN EXPANDING TO THE U.S
The risks of doing business in the U.S. seem manyfold, but are often overstated and should not deter anyone from entering the market. They are manageable if you know how to tackle them. Our experts are familiar with the applicable corporate law on both sides of the Atlantic. They often form the bridge between the U.S. subsidiary and the European headquarters.
Our seminars will provide you with the necessary insight of key legal requirements and issues involved when entering the U.S. market.
A U.S. company may be formed quickly and inexpensively in most US states, often with less than a day’s notice. The company’s promoters do not need to be physically present in the U.S. However, good tax planning is warranted. Selecting the optimized entity form may result in very significant tax savings.
SITE SELECTION – SUBSTANTIAL INCENTIVES AVAILABLE
Many criteria should be considered when choosing the “best” production site for businesses: local cost parameters, proximity to customers or raw materials, transportation, availability of qualified staff are just a few factors to consider. Important to know: many U.S. states as well as local communities offer significant incentives for manufacturers creating job opportunities, including cash grants, free real estate or buildings, access to utilities, tax abatements and other incentives. Consider that a significant time window will be necessary to evaluate a competitive process on all incentives and offers presented.
US VISAS – CUMBERSOME AND EXPENSIVE
U.S. work permits may be granted in different classes of non-immigrant visas depending on the nationality, educational background, and job description of the employee, investments of the employer, the number of employees hired, and many other factors. Each visa class available (typically E, H, or L) has different prerequisites and applications. Applying for a U.S. work permit can be time-consuming and expensive.
Many social benefits offered to employees in Europe are not available in the U.S. – However, foreign employers should take note of the very stringent anti-discrimination provisions prevailing in the United State. Also often overlooked: Overtime generally has to be paid out and cannot be managed through an “overtime account” as practiced in Europe. There are overlapping federal and state employment laws as well as to a lesser degree municipal employment regulations.
ASSEMBLY OF MACHINERY – COMMON PITFALLS FREQUENTLY OVERLOOKED
• Immigration questions (does the foreign technician need a work authorization?)
• Tax issues (does the service work constitute a permanent establishment?)
• Professional requirements (is a Contractor’s License required?)
Dealing with Contractor’s Licenses may be a tricky area for the unwary since each US state has its own different set of rules and non-compliance may result in costly penalties and very unfavorable legal consequences, including forfeiture of payment for the work performed.
Whoever supplies a defective product to the U.S. market may be liable for the resulting personal injury and property damage.
While potentially dangerous on its face, many precautions and mitigating circumstances may be introduced to limit potential liability for a manufacturer, particularly for non-consumer products. Selling through a U.S. subsidiary may limit liability – a good liability insurance package is a must.
BREACH OF CONTRACT – DANGEROUS SMALL PRINT
Damages from breach of a contract is a common cause for losses incurred by foreign entities doing business in the United States. Frequently cited mistakes are “business on a handshake”, failure to review extensive contracts that are overly favorable toward the opposing US party, as well as insufficient terms of sale based on foreign legal concepts and used for US application.
Pursuing litigation in the US is exceedingly time consuming and costly. The expense of litigation is primarily caused by the US concept of “discovery” whereby prior to appearing in front of a court, each party, through its attorneys, meticulously researches and investigates the factual circumstances of the action. Further, unlike in many other jurisdictions, each party is typically responsible for its own legal fees and expenses regardless of the outcome of litigation. The cost of litigation can quickly accelerate into the five or six figure dollar range. Since US civil judgments are typically enforceable abroad, any lawsuit has to be taken very seriously.
“Many entrepreneurs shy away from the US market because of horror reports about claims for damages. Our advice: exercise caution and your company will benefit from the world’s largest single market.”