Coming to America Part II: Legal & Cultural Challenges for Emerging Companies
In our last post “Coming to America Part I,” we discussed why emerging companies would choose enter the US market to do business. In this post, we will discuss the many interrelated legal and cultural factors non-US companies must consider in order to establish a successful US presence.
What You Need in the United States
Tax structure. The interrelationship between the system of taxation in the home jurisdiction and the US (both at the federal and state levels) requires sophisticated and coordinated analysis and strategic planning between the tax professionals of both the company’s home country and the US. For emerging companies, proper tax planning will result in minimizing the overall tax expenditure of the business, and enables the business to deploy its financial resources in the most efficient manner. Tax planning is a balancing of interrelated short and long term business practices and strategies that must be undertaken in a comprehensive manner that involves financial, marketing and operational executives, business, intellectual property and employment lawyers, economists and other professionals. What may work for Apple could be highly inefficient for a company with total revenues below $100m.
Contacts. Key executive recruiting, the establishment of important vendor and partner relationships, marketing and sales opportunities, among others, relies heavily on personal contacts. The importance of contacts when entering the US market should not be overlooked, yet many foreign businesses fail to appreciate the significance of the network of connections required to successfully penetrate a new market. It’s of critical important to find the right individuals that mesh with your company culture. Cultural differences in this area play a subtle, but important, part.
Logistics. While the US market is relatively easy to navigate, simple steps—such as obtaining an Employer Identification Number, setting up a bank account, or finding the right location for operations – require a deep and sophisticated understanding of the local market. Legal, business and cultural considerations play an important role.
Immigration. US immigration laws dealing with non-US personnel are highly complex. Using the wrong immigration attorney or saving money by filling out immigration forms without legal assistance could be highly detrimental. Once the wrong steps are taken, remedial efforts will be much less likely to be successful, and will definitely cost far more in time and legal fees.
Employment and human relations. Recruiting US personnel for a non-US company’s American operations is a critical requirement for success. A US business must understand the local HR market for stock options and other equity compensation plans, health insurance benefits, retirement plans, severance expectations, and so on. Providing an attractive and competitive compensation package requires the collaboration of a number of US professionals who are thoroughly familiar with the specific market and offer a balanced package that is neither inadequate to attract key employees nor too rich for the particular business.
Cultural and business perspectives. Many lawyers and other professionals in the US may well be experts in their field, yet they may be unaware of the cultural and business subtleties that must be mastered by their non-US clients who are seeking to establish a US presence. Knowledgeable advisers can help a foreign emerging company not only find suitable real estate agents, head hunters and accountants but also provide ideas about the appropriate neighborhoods where the foreign executive in charge of establishing US operations should live, where the most suitable schools for their children are located, and even what car and what kind of clothing is appropriate for their position.
Quite often, the lack of understanding of these legal and cultural differences, and the absence of friends or advisers who can offer suggestions, can mean the difference between success and failure for a non-US company trying to establish a presence in the United States. Emerging companies undertaking this huge move need an overall strategic plan that addresses each of the areas mentioned above. Only by understanding and integrating the diversity of considerations that a foreign company must evaluate, using savvy and well ‘plugged-in’ professionals working together as a team, can a foreign firm expect to create a successful US business.
For more information on the legal and cultural challenges facing emerging companies, visit Financier Worldwide.
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