Looking to break into the US market? Many foreign startups, including those from Czechia and Slovakia, opt for Delaware's business-friendly environment. But this path has its challenges. This guide explains these hurdles and how to overcome them with the right legal expertise.
Understanding the US legal framework
Navigating the US legal system is often the first challenge for foreign startups. It's crucial to grasp the different legal structures, compliance needs and business norms. Legal missteps can be costly, affecting your success in the US market.
Every startup should focus on two areas:
1. Choice of legal structure and entity
First, you need to select the right corporate entity (C-Corps or LLCs). This choice will affect taxes, ownership and liability. To make the right decision for a solid and long-term strategy, you need to understand the differences.
- (+) The "standard" entity for startups, particularly favored by investors
- (+)Transparent tax regime irrespective of owners' residency
- (-) Ongoing regulatory requirements, but we can assist with these
- (-) Double taxation: Both Corporate income and distributions are taxed
- (+) Fewer regulatory requirements
- (+) Pass-through taxation: Income taxed as personal income, avoiding double taxation
- (-) For non-resident owners conducting business in the U.S., a 30% quarterly withholding tax is applicable
- (-) Generally not preferred by startups seeking investment due to structural considerations
2. Compliance with federal and state law
Once you know which structure works best for your company, you need to make sure to be compliant. The first thing to remember is that the US legal system involves both federal and state laws (and county and city laws!). You need to make sure to comply with both federal laws and those of your incorporation state (Delaware) and base state (California, New York, etc.). Note, that registration is required not only in the state of incorporation but also in each state of operation as well.
Corporate governance in the US
Adapting to US corporate governance standards is essential for foreign startups. It's not just about legalities; it's about ethical, sustainable business practices.
Setting up responsible board governance:
- First, you need to understand that the US has different practices compared to your home country (board and appointed officers vs executive directors or a simple board in other countries).
- Second, familiarize yourself with various legislations that should be managed and controlled (e.g., annual reports or franchise taxes in each State where the company is registered to do business).
- Then, implement board policies that align with US standards, focusing on oversight, compliance, and ethical governance. This includes implementing policies for conflict of interest, setting up effective internal controls, and ensuring management accountability.
Cost management & financial planning
Incorporating your startup in the US involves extra expenses you should budget for. This can be anything from state filing fees, legal expenses and the costs of maintaining a legal presence in the US. These expenses can add up, making effective cost management a crucial part of the incorporation process. Startups need to plan their finances wisely, ensuring that the costs of incorporation don’t delay their operational and growth objectives.
Expected costs can be:
- State-specific incorporation fees
- Annual state fees or taxes
- Legal expenses for drafting bylaws, shareholder agreements and other legal docs
- Business licenses and permits
- Ongoing legal and accounting fees to maintain compliance
- Annual reports, tax filings and potential audits
How to start
In today’s digital world, online incorporation services offer a convenient solution for startups looking to establish their presence in the US. These platforms simplify the process of handling paperwork and ensuring compliance with state-specific requirements. While they offer efficiency, they typically lack personalized legal advice and include this in their disclaimers.
Unlike online filing service tools, we give you licensed legal advice and don't hide any disclaimers in our Terms of service. The full package is for a fixed price of $1,000 and we’ll make sure your Delaware incorporation aligns with US law and your business goals. With us, you can expect your company to be set up in two business days and get comprehensive legal support, not just paperwork. Schedule your call here.
Ready to start your US incorporation journey?
Incorporating in the US is a big step, but manageable with the right support. If you're ready to start, our team is here to help you not just be compliant in the US, but also be strategically and growth-oriented.
Complete our form in under 5 minutes for a tailored, legally robust incorporation process at a fixed price, designed for foreign startups.