Incorporate in the US: Critical Steps When Jumping Across the Pond

Gas versus petrol. Sneakers versus trainers. Cotton candy versus candy floss. There are a lot of differences between the U.S. and the U.K. 

Outside the realm of language and into the world of business, how you incorporate your business also vastly differs between the two countries as well. 

If you’re looking to expand into the U.S.,  you have to make sure you follow the right steps to avoid getting in trouble with Uncle Sam. We’re here to help you make a smooth entrance across the pond.

Keep reading to learn everything you need to know about incorporating in the U.S. and what surprise road bumps you’ll need to watch out for.

Why Incorporate in the U.S.?

You’re looking to expand your business abroad and considering all your options for where to break ground. What makes the United States such a good place to land? In a word? Opportunity.

Setting up shop in the U.S. gives your business incredible access to:

• The Market –The sheer size of the country, with over 330 million people, gives you plenty of chances to reach a broader customer base and grow within the country’s entrepreneurial mindset. 
• The Talent –With such a diverse talent pool of highly educated people,  you can recruit the best employees for your business. 
• The Funding Opportunities – With one of the largest Foreign Direct Investment initiatives in the world and the VC capital of the world on the West Coast, there’s a lot of money to go around in The States. You can only access it if you’re a properly established business.

Sold? Great! Now, let’s make sure you’re setting up your foreign business the right way.

Four key considerations for incorporating in the U.S.

When it comes to expanding in the United States, you have to follow the right steps — and keep to certain timelines — to ensure everything goes smoothly.

1. Choose your business structure

The first thing you’ll do when you move to incorporate in the U.S. is decide which business structure best suits your organization and file accordingly. 

You have four options to choose from:

• Sole proprietor — One person owns your business. They’re responsible for the business’s debts and liabilities and file profits on their personal tax returns.
• Partnership — Two or more people own the business and share any debts, liabilities, and profits, which are reported on their personal tax returns.
• Corporation —  Shareholders own a separate legal entity that has its own debts, liabilities, and profits that are entirely separate from the stakeholders’ personal finances. 
• LLC — A combination of a partnership and corporation, a Limited Liability Company offers more flexibility in how you file taxes and handle legal liabilities.

While not necessary for sole proprietorship or partnership, you’ll file to receive your U.S. Articles of Incorporation at the same time you file to establish a corporation or LLC. The requirements for filing will typically differ depending on the state you file in (more on that later).

2. Apply for your EIN

Once you’ve chosen your business structure, you’ll get your EIN. Yes, we know, another acronym to remember. 

What is an EIN?

Your EIN is your employer identification number, a federal tax ID number for businesses, tax-exempt organizations, and other entities. You’ll need this number for tax, banking, and other financial purposes, so you need to request it as soon as you incorporate in the U.S.

Introverts and impatient folks, brace yourself. When your principal place of business is outside the U.S., you, tragically, can’t apply online. You have to apply by…*shudders*... phone or mail.

3. Open a business bank account

After you’ve received your EIN, you’re ready to open up a bank account. You’ll want to (read: need to) have a separate account from your personal one to get the legal protections and credibility that come with establishing a business account.

There are a lot of different banking institutions to choose from, so do your due diligence in picking one that offers you the best services and fees that suit your business.

When you’ve checked those three boxes, you’re ready to begin operations. But exactly how long should you expect to wait before you can get the ball rolling?

4. Set up your financial infrastructure 

You have your business structure locked in, that shiny new EIN, and a bank account ready to roll. Now comes the fun part (and by fun, we mean slightly complicated but totally manageable): setting up your financial operations in the U.S.

Let's talk accounting first –– While the U.K. follows IFRS standards, the U.S. does its own thing with GAAP. It's like switching from driving on the left side of the road to the right – same destination, different rules. Make sure to set up user-friendly accounting software like QuickBooks, which can handle both systems, especially if you're keeping one foot in each country.

On to payroll! – The U.S. payroll system is its own special beast, with a mix of federal income tax, Social Security, Medicare, and state-specific requirements thrown in for good measure. It's enough to make your head spin. This is where many businesses tap out and call in the cavalry – aka a Professional Employer Organization (PEO) or payroll service provider. 

Set a financial reporting game plan – Financial reporting requirements will vary based on your chosen business structure. For example, corporations face more stringent reporting requirements than LLCs or partnerships. You'll need to establish clear processes for maintaining financial records, tracking expenses, and preparing regular financial statements. 

Pro tip: Find yourself a good CPA (Certified Public Accountant) who knows their way around international business. They'll help you stay on Uncle Sam's good side while making

How long does it take to expand in the U.S.?

So…this isn’t the fastest process. Even just the first few steps of  U.S. business expansion can take some time. 

While your timeline can vary based on a number of different factors, you’re typically looking at:

• A few days to weeks to incorporate your business
• A couple of weeks for your EIN
• Four to six weeks to step up a business bank account

We know, we know. How can it take that long?! 

Well, the U.S. government and any banking institutions you work with have to make sure you provide the proper documentation that establishes you’re a legitimate business running in good faith. 

The good news is you can use that time wisely. Once you have your EIN, you can begin setting up payroll and your accounting books. 

Remember how we mentioned the state you file your articles of incorporation in affects the filing requirements? It also impacts a few other things.

Does the state matter?

That would be a big, bold YES.

Every state has its own compliance, HR, and payroll laws. Some don’t collect income tax or have more defined corporate business laws, making them the ideal places for some businesses to set up shop. Others have higher franchise taxes and incorporation fees, so business owners look for another state to call home.

The state you choose to incorporate in will affect how you operate and how you file taxes. Especially if you have remote employees or are subject to sales taxes from other states, you’ll have to make sure you’re satisfying every liability.

Speaking of taxes…

How does my tax liability differ in the U.S.?

The terms are different in the U.K. and U.S. Things like 1099s and 401Ks are going to sound foreign to you. When you’re used to municipal taxes and VAT rates, you’ll now have to worry about state and sales taxes. There are also specific tax forms you’ll need to file as a foreign business.

It’s a lot to wrap your head around on top of everything else you have going on during your expansion. (If it’s any consolation, there are plenty of U.S.-born or naturalized folks who also struggle to understand tax items.)

If you don’t file your taxes correctly, you’ll be looking at heavy financial and even legal penalties. We’re talking $25,000 on top of whatever you owe. 

There’s also some compliance reporting you need to be extremely diligent about.

What is BOI Reporting?

As a foreign company registered to do business in the U.S., you are required to report information about your beneficial owners to the U.S. Financial Crimes Enforcement Network (FinCEN). 

While filing this information is free and only necessary one time (unless you need to update information), you must do so within 90 days of your incorporation. If you’re late, you face huge penalties that only get worse the longer you wait to file:

• Civil penalties of up to $591 per day (adjusted for inflation)
• Criminal penalties of a $10,000 fine and up to two years in prison

Current BOI Reporting Status: 

You can put those BOI reports on hold for now! A recent court decision (as of December 2024) has temporarily suspended all reporting requirements, so you don't need to worry about submissions or penalties at the moment. Just keep in mind that things might shift since the Department of Justice is appealing the decision. We'll make sure to give you a heads up if anything changes.

Hiline is your U.S. expansion partner

It can be stressful enough just moving offices. Setting up shop in an entirely new country? Downright terrifying. We’re to make your expansion as stress-free as possible.

At Hiline, we meet you right where you are when you're starting out in the U.S. and grow with you. With a growth-focused mindset, our U.S. expansion and specialist teams focus on the right priorities now while still planning for your future.

Let’s work together as you take this new step in your business journey.

‍