10 REASONS FOR CREATEING AN IT BUSINESS IN THE USA.
Today, most of the largest IT companies have an office in the USA. The reasons for starting a business in this jurisdiction, favorable factors, taxation issues and many other things are told by SBSB partner Vladislav Makarenko.
1. Access to USA investment markets
USA exchanges are one of the best in the world, they are the undisputed leaders in the global market. Since large companies are publicly traded, for them registration in the United States opens up the possibility of entering the investment market.
2. USA as a unique harbor for the registration of an IT company
For companies of any size – from small, to the largest, the United States is a kind of unique harbor. This is a country that can force other countries to comply with their laws, because of a huge resource on influence all over the world. A business registered in the US in case of any conflict situations has every chance to bring the perpetrator to justice, even if he is in another country. For a company from Russia, Ukraine or even from any European country, this is not only difficult, but sometimes unlikely. In the US, there are mechanisms that allow this to be done.
3. The active position of the USA government
As an example, we can consider the activities of the prosecutor's office. If in the USA this authority has even the slightest suspicion about violations, they begin to actively build the position of the country and state. Our situation is completely different – if you make a complaint to the authorities of any post-Soviet country, you can quickly understand that nobody is interested in you and your problems. Lengthy review procedures, courts, and other related processes take a lot of time and may end with nothing. Even for the average taxpayer. Only the largest companies can count on some more or less active position of the state. In the USA, they try to protect their entire business whenever possible. Every subject that brings money to the treasury is for them the “holy cow”, which they will defend from any attack.
4. Reliable protection of intellectual property rights in the United States at the legislative level
In the US there is one of the most convenient, understandable and developed legislation on intellectual property. In particular, the Digital Millennium Copyright Act. Everyone who protects their intellectual rights in the field of IT likes to use it. In fact, any IT company registered in the United States can be calm, since one of the largest markets in the world will protect its rights.
5. Simple registration procedure for an IT company in the USA
One of the reasons for preferring to register IT companies in the United States is the convenient and simple way to create them. In fact, a company can be registered in 2-3 days from anywhere in the world. But do not confuse this with the opening of a bank account, since these are completely different things.
6. Convenience of operations with the US dollar
Another important factor is the national currency, the US dollar. Up to date, worldwide there is a tendency to the complexity of bank transfers. There are additional checks, delays, difficulties, and so on. In particular, it is as well difficult to work with the dollar today. Many switch to payments in Euros, pounds, francs, yen or other currencies. That is why for the companies that plan to work with the US dollar, it is the best option to open an account in one of the US banks. No one will ever block them access to the dollar.
7. The reliability of US banks for opening an account
US banks are among the oldest and most reliable in the world. Yes, there were problems related to the crisis of 2008, when a couple of large banks “fell”. But in general, the system is very reliable, it offers deposit insurance and access to banking. And, what is very important, information from the United States is not transmitted to other countries. And this is another significant advantage.
8. Confidentiality of information on US bank accounts
If you have an account in the United States, someone can find out about it only in a direct trial or a direct court inquiry. Even before a judgment is issued, it is impossible to request information from the United States. Automatic exchange of tax information is one of the components of global deoffshorissation. And the USA became pioneers in this business, forcing all countries of the world with all their banks to transfer them information on accounts of the Americans and the American companies. At the G-20 meeting in Europe, a Common Reporting Standard (CRS) was created and the United States was invited for a general information exchange. But they refused to disclose information about the accounts that are contained in the United States, since all the necessary data is already passed to them. And thus, they became one of the largest harbors in the world where you can keep bills.
9. Payment systems and financial companies in the USA
A large number of banking tools, checks, access to electronic systems: IT-sphere is very extensive and diverse. E-commerce, services such as Software of the Services, which provide online access to any software, sales of various applications, web-store, all require payments. And to do that you need to connect payment systems. And in this respect, there is no country in the world with such a diversity and competition as in the US market. They offer the widest range at the most favorable terms. Moreover, this applies to both high-risk and regular retailers.
10. The specifics of contract law in the United States
Working directly with an American company from the Ukrainian market can be very difficult. For example, Americans have their own understanding of contract law. Very often, the samples of contracts that are sent from the American side are adapted for the USA, but in Ukraine they will not even pass currency control. In the US, they do not understand why it is necessary to write so much extra and unnecessary things, if it is possible to issue a contract in a more simple form. In addition, they are afraid of difficulties with taxes. For example, when paying to another country, it is difficult to determine how it will be classified there, therefore, in the United States they consider that it is easier not to enter into such a contract than to take responsibility for such nuances. Therefore, if you want to work with the North American market, it is better to start through your own company and take on all the technical and reputational difficulties. Of course, this will entail additional costs, however, they will pay off completely due to the trust of local customers.
11. Fee for favorable conditions and opportunities
All of the above is significant amount of factors that turns the United States into a country so interesting to IT business. But there is one drawback, which should be taken as a fee for all benefits. These are taxes. In the US, they are far from the lowest. But it is an integral part of any civilized society. If you want to deal with reliable courts, lack of corruption and well-functioning state machine, you need to pay for it. Therefore, Americans are very calm anout this and, moreover, consider paying taxes as a matter of honor.
12. Types of companies and types of taxation in the United States
We may see the United States as one country, but in reality it is 51 countries, where each state has its own register of companies and registration rules. In addition to different types of legal companies, legal forms, there are also different types of taxation. For example, the same legal form A limited liability company or LLC, may have several types of taxation at once, depending on who is its founder. This may be the so-called Disregarded entity or the principle of Pass through taxation, when a company does not pay taxes and does not submit its tax report, but all this is done by its founder. All revenues are regarded as revenues from the SAP, and this is a kind of hybrid form. As a rule, this applies if the company has one founder. Or, for example, Partnership – it can be both a legal form of a company, and a type of taxation. Such conditions often cause confusion, and they should be thoroughly understood, and the best thing is to contact a licensed specialist for this.
13. States with optimal conditions for creating a business
It cannot be said that one state is good for creating an IT-business, and the other is bad, first of all, the company's activity and business model are important here. For B2P, you need to choose the one in which there is no Sales Tax or the one where the amount of this tax is minimal. For example, in Nevada there is such a tax, but in Delaware it is not. By the way, the Delaware is a very convenient and typical state for IT since the emergence of the industry. But there are already a lot of companies, and it will not be easy to explain that you have a reliable business, and not just another show-company. There are states that have a fairly strong association with IT, although their taxation is not so profitable as, for example, in Nevada. It is the best choice for the B2B model. Here you may not pay state tax, Income Tax, Franchise Tax, you only pay Business license Tax.
In general, any of the 51 states can be an excellent home for an IT company, you only need to evaluate its activities, partners that you will have to work with, and carefully compare all these factors together. And if on the one hand we put a wide range of opportunities offered by access to investment markets, protection of confidentiality and convenience of doing business, and on the other hand high taxes, then the charge for such conditions looks more than fair.