How to expand your business to the US

Anthony Rose: Hello, everyone welcome. So this is about expanding to the US. And one of the problems with expanding to the US is, there’s unbelievable numbers of choices you need to make. When do you start, what should you do? How should you hire people? What are the legal risks? So over the past months at SeedLegals as we’ve been looking to expand to the US, we’ve need to figure out all of these ourselves. And I thought, rather than us just figuring out, and you spending all the time figuring it out. Why don’t we get on a call with experts? Make a checklist of all the things you need to do, so that when you’re looking to expand to the US. Either to launch sales or to do a Delaware flip.

This simple playbook of Do this, do this, do this. The cost of it will be dramatically lower than before, and you’ll know exactly what to do. And importantly, for the US. It seems the things not to do, because if you do some things in the wrong order, it creates problems for you, so I don’t know where our co-host is. It looks like I might be harassed myself.

Joanne Farquharson: I’m here.

Anthony Rose: Oh, you’re here. Excellent, all right. Hello. Okay.

Joanne Farquharson: Hello!

Anthony Rose: Now whereabouts. Let me just get you are right. Can you talk there, Joanne?

Joanne Farquharson: Hello, hello, all right.

Anthony Rose: Okay, good. Okay, excellent. Cool. So now please meet Joanne, who is the expert on this. Joanne. Introduce yourself.

Joanne Farquharson: Hello, everyone! Apparently I was on the wrong link, so I I don’t know what took you long so long to get there. But anyway. So now I’m on the right link, and I’m here now. My name’s Joanne Farquharson. I’m President and CEO of Foothold America. We have offices in the US. In the UK. I’m here in the south of France. We have an entity here. And my passion is helping the world expand into the U.S.A. So I look forward to hearing your questions because Anthony and I can can do a lot of generalised talking. But it’s really very specific to your situation. So I I look forward to interacting with you.

Anthony Rose: Okay, so any questions pop them on the chat we’ll get to them. We’ve got, of course, our set of topics. You’ve got some water. There, I’ve got some tea. We are good to go, all right. So let’s start with some common misconceptions. You’ve got a bunch that you’d like to go through which might be the set of things to think about, including. I’m sure, the US. Is not one country. It’s 50 States. But take it away.

Joanne Farquharson: You’ve you’ve that’s 1 of the best ones. Yeah. And it’s it’s funny, because oftentimes the US. Is made up compared to Europe. In that there’s a whole bunch of different countries, and all the rules are different. And so in in some ways that is true. Another misconception about the space of the United States is that you should just pick one that you’ve heard of. You ought to go to New York or LA, or if you’re biotech, you ought to go to Boston, and there are many more options for that. And so it will change from our 1st conversations with someone. After you kind of you dig down into what are some of the things that they’re interested in?

Another one that may seem obvious. But it’s whatever we’re doing in the UK. That’s working will absolutely work in the US. And of course you wouldn’t say that to yourself. However, you may be sort of heading in the direction of thinking through your expansion based on the experience you had in your growth in the UK. And they can be dramatically different. You know how you’re marketing your product, etc.

I think post covid. I see less of this. But pre covid, for sure, people thought I need to have an office, even if it’s just a hot desk or something, I should have a physical location, and for sure, that has changed to a virtual office is fine. I just need an address, and and that’s true. So that’s changed a bit.

And the other thing is in order for me to be successful in the US. We have to send either the founder or some key people, because otherwise it’ll never be the same. We won’t be able to import our culture into the US. So unless we send one of these key folks, and I’ve seen that happen over and over again. Sometimes the visa process is very confusing or lengthy, and they go. You know what we found the right person, and we don’t even need to go there except for, you know, some trips back and forth. So I’d say those are the the assumptions that people come into our conversations with.

Anthony Rose: Alright cool, and I’m guilty of some of those. So let’s see if I’m still need to change the end of this. All right. Certainly the founder getting on a plane and going to New York is one of them. So before we dive in. So that’s a great set of things. So before we dive in, tell me why people come to foothold how you help them, what sort of the services you do? And then from that expertise we’ll dive into all of those, so that everyone knows the game plan.

Joanne Farquharson: Sure, sure. So the things that we actually do are help. Businesses set up their US. Entities and we help businesses hire their US. Employees and stay compliant, compliant on everything related to people operations. However, that work can touch many other specialties like legal, like tax, like visas like IP protection, and those are some of the things that you want to consider. Sometimes in coordination. So even if we don’t provide those services, we have a robust ecosystem of partners who will be the right fit for this company, but not so much for this, and we have made our business on SMBs. So we will not be referring you to the Big 4 accounting firms. We have relationships, for example, with a firm that does just U.S.A. and us and UK tax, for example. So and yeah, same thing with immigration attorneys. Some of them are you know, are very, very extensive firms, and others are one or 2 people who are experts. So we’ll connect you with our resources in a way that makes sense for your budget and your you know your company culture.

Anthony Rose: Okay? All right. So that’s great. So if you want to sort of wing it yourself with articles in the Internet, go for it. If you’re looking for somebody to help with every step, you know. Call 1 800 foothold America. All right. So now we’re going to dive in, and we’re going to talk about the things that I’m doing at SeedLegals, not to say that they successful, that you’ve heard of building in public. Maybe there’s some calling, expanding in public. So we’re going to look at starting from the top of the funnel. Should I expand to the US. And then we’re also going to talk about raising investment in the US. And maybe flipping to the US. Because for the biggest issue I see is people wanting to expand and particularly raise investments in the US. And flip to a Delaware company for the wrong reasons. So let’s start with the expansion. So expansion is, you know, it said, there’s some nice advice from octopus ventures, which is, go early or go late, but don’t go in the middle, so if you are, you know a couple of founders get on a plane, go to Silicon Valley, get a garage work from there, or if you have multi-million pound a year revenue and you can afford to spend and potentially lose a million or 2 on a US. Adventure then. And you’ve productized your UK offering. Then that’s a good time to grow the business the less good time is you still trying to find product market fit in the UK. You don’t have a great deal of revenue, and now you are expanding. Now, one of the things I’ve discovered at SeedLegals which might also help on your decision making is, we are blessed to get a great number of incomings from particularly US VCs. They want to know about SeedLegals and investing.

and as soon as we mention we’re expanding to the US. It’s always oh, that sounds amazing. Call us back when you’ve got a foothold in the US. And you’ve got traction there. So there seem to be 2 stable hypotheses for raising investment. One of them is, it’s a successful UK company. Don’t talk about the rest of the world. You’re showing your growth. You super focused there. And the second one is you’re a now US. And UK and US. Company. You’ve got traction and will invest in the business based on the US. Size of market, the US. Growth and at a US. Valuation.

And then it doesn’t really matter, for the most part that your company is a UK company or a Delaware company. And the reason I’m mentioning all of this is, it was a mild surprise to me that when I spoke to VCs. I thought about, you know, tantalizing with the US. As an interesting upsell. Hey? The growth is great here, great revenue! It could be more here, but as soon as I mentioned that it was a come back later moment. So for me, I was actually quite happy with that. I wasn’t desperate. They called me, but if you are looking to fundraise, you might think carefully about the stable position. It’s nothing to do with the US. Or I’m already in the US. But be careful about fundraising when you’re in the middle.

The other thing to note on the fundraising side, and then we’ll get back to the expansion piece is that I find often when I see founders posting in chat groups about wanting to fundraise in the US. The reasons they doing it are probably not going to lead to success, and it’s often the reason is, I was unable to find investment from UK investors. So I’m going to go to the US. and I see Joanne nodding there. And so I think you know, if you know the 5 whys for those who don’t know it, 5 wise is, if something doesn’t work, you ask the question, why? 5 levels deep to get to the answer and the origin came from, I think Boeing, maybe they need to call it someone else. Now.

Joanne Farquharson: But the wind.

Anthony Rose: Shell fell out of the plane. They thought it was metal fatigue, or something on the screws. They asked, why did the screws fall out. It’s because the wrong screws were put in. Why were the wrong screws put in? Because the operator, the mechanic, picked the wrong ones? Why did they pick the wrong ones because they were tired. Why did they not notice? Because the labeling on the box was wrong. So the the problem is completely separate to where you think. And so when I see UK founders talking about raising from US investors, I like to think about the 5 whys, and it’s often people couldn’t understand the pitch deck, or they didn’t see signs of traction, or they weren’t sure that you would execute and changing that to US. Investors isn’t really going to change anything sometimes, of course, it’s possible that the risk reward you’re doing a social network. UK, investors don’t like that. Maybe US ones do that often swapping one problem. Space for another means you now might be more difficult finding US investors because you don’t know them.

Time zones are different. They mostly want to invest in US companies. You’re going to go to a lot of work trying to persuade them that you’ll be in the US. And instead, you’re better off trying to focus on fixing the core problem. So, Joanne, any thoughts on that.

Joanne Farquharson: Yeah, yeah. For sure. The the way you’ve described go early, go late makes so much sense. And I would say, the folks that we, the the majority of people that we work with, are the go late. So they they have proof of concept. They have a stable structure. Revenue stream in the UK or the other places where they’ve expanded. And then they’re looking at the US. And they almost always have some sales in the US. Now that’s not true when they’re pre-revenue and have funding, and they’re using some of that funding to expand, to get more funding those kinds of scenarios, but mostly there’s stability in the UK. There’s evidence of the market in the US. And generally because many, many of our tech clients are Sas clients they’ve sold it, and and they can see that it’s working. That’s not to say that they shouldn’t still do go to market research things like that. But it’s it. They’re getting pretty strong evidence that they that they can go there. And I mean, there’s lots of statistics out there. So about 25% of all US UK, tech companies expand to the US. So if you’re a tech founder out there, there may be some you know, depending on what your product is. If it’s specific to a UK need, then then maybe not.

But people are going all the time. And so this is not pioneering and sure there’s, you know you have to get some things right. But there’s there’s no reason that you can’t do it. You’re an entrepreneur if you’re on this call, and you’ve found it and grown something, you can do this. It’s a matter of it’s doing some of the pieces beforehand.

Anthony Rose: Got it. And and that’s exactly what this call is about, which is about, you know, explaining the the desires, of course, but also taking huge numbers of months and decision making out of okay, actually, it’s really simple. You need to do A, B and C don’t do D at all. And definitely. Don’t do E. Before you’ve done that. Well, they’ll never let you in the country again. So now let’s go through it. So you’ve decided you want to expand in the US, let’s put this in a few levels. So level one, we’ll call it is, you know, you’ve got essentially a global product. So all you need to do is make sure your website looks good in the US. Make sure that dollar symbols instead of pound symbols set set stripe to charge in dollars. Nobody needs to get on a plane. Your risk is minimal, but you may find that of course, you just turn it on, and nobody comes.

So now comes, how do you develop the market? And this is where it gets more complicated, of course, because that might mean boots on the ground. So your business might be B2B enterprise sales, it might be, you know, SMEs, smaller business sales, which is really SeedLegal’s case, it might be to consumers. So the question, then, is, do you need people on the ground, and where on the ground to develop that? Or could you do it remotely.

And in our case, you know, we found that, you know, if you know the terms, product led growth and community led growth product led growth. And I’m saying everything. Here is a general use for everyone. Product led growth is, build it and they will come. Community led. Growth is be part of communities where your customers hang out and be prominent in those communities. If you sell tea, where do tea lovers hang out online or magazines, whatever in the case of startups, they look for the same resource. So if you want to hang out there, and in our case we think community led, growth is important. So we want to be part of the communities in the US. Otherwise we think we’ll just open the door and no one will come.

So now let’s get to getting people on the ground in the US. So one of the things I’ve heard is that one of the common mistakes companies make is they hire senior people in the US too early and the 1st hire is usually a marketing person, and then it turns out, the only thing they could market was themselves. Because they’re Americans. They’re dialled up to 11, the 1st one you meet. You think they’re awesome, but it turns out they all talk like that. And actually, there’s often little substance. And now you’ve maybe spending $200,000 a year on someone’s New York, you know, marketing’s salary, and you’ve got a little to show for it. So tell me what you see in the space, and do you have any recommendations? And then I’ll dive in.

Joanne Farquharson: Sure. Sure. So in general, if you are, if you’re Enterprise sales, you’re likely putting boots on the ground a little bit earlier than if you’re if you’re SMB, you’re absolutely on the mark for product versus community led or sales led. I. I have seen different different scenarios play out very successfully in regard to the level of the the employees you 1st hire. So, for example, when a company say the founder is moving to the US. And you go. Okay. This person built it before is now living here and is owning the expansion. Sure you can bring in mid level sales folks, and or community builders. Things like that, too to support you. That makes a lot of sense.

And what’s super critical. If the founder isn’t going is to say, Okay, we are going to. We’re focused on community building, or maybe some paid advertising things like that bringing our brand to the US and we’re not sending anyone. But we have a chief commercial officer who has capacity to really focus on the US. Even if you know they’re not physically going to be there except for maybe a couple of trips a year. Then you can get, you know, have a mid mid to upper level business development person who’s there because they can take the initiative. They can make things happen without a a c-suite country manager, you know, right next to them, and that is super important. I think, especially post Covid. When I mean, actually, even before Covid, probably 95% of our the employees that we hired on behalf of our clients. And our clients hired were working remotely. Because they were at the time getting on a plane, or, you know meeting locally.

So you need that self starter. And that self starter doesn’t need to be in the US. At the C-suite. So you can you can avoid that. However, I would at least half of our clients will choose a very senior person. And might not be the CEO. It might be a VP or a C-suite who is in charge of commercial growth but the key there is, I think, Americans are very enamoured with titles, and so they, you know, may have a a chief title or a director. Title. Directors are very different sounding in the, you know, in the US. Then they mean something very different in the UK.

So so then they may want that title. But what’s going to be critical is, are you the strategic thinker, or are you able to pound the street and make the sales come in? And that’s ultimately what you want, whether it’s you know, Anthony, in New York hires a junior team or the commercial C-suite in the UK. Hires a a fairly senior Senior level

Anthony Rose: Okay, great great Intel. And, by the way, about job, title, inflation and reliance, that’s 1 of the things that I’ve noticed. So if I look at pitch decks in the UK. Or talk to founders. They’re mostly talking about the product, the problem you’re solving the product in the US. It’s about the credentials of the team, the senior lead at Tesla Spacex and Facebook Slash Meta. Whatever you barely get it. There was a criticism of one of the last YC, Y Combinator demo days where people spend so much talking about themselves. They didn’t even explain what they were doing. So you may find that you are feeling quite insecure when you start talking to US people, and they tell you about their amazing achievements and zillions they’ve raised. I think.

Joanne Farquharson: It’s true there is, and I didn’t realise this. I lived in the US. Born there lived there till I was almost 50 years old before I lived in the UK for 5 years, and now here in France, and you don’t even realise it until you meet very polite British people who are quite humble and downplay. You know their their own expertise or their you. You are taught. I see this now. You’re taught to promote yourself. You’re taught to be an individual, and there’s, you know, look out for Number one, that’s all. You know. You’re number one. You’ve got to always look out for yourself. So there is that mentality. And you know there are obviously downsides to that. As you said, Anthony, people can, you know, kind of inflate their their competencies, their experience, things like that the upside to that is that Americans can often believe I can do it. They have the can do attitude, growth, mindset and are very optimistic in general. So you know, you’ve got a a little bit of a little bit of both, but they absolutely were used to promoting ourselves, and that when you describe the pitch decks that makes a lot of sense. And when your UK VCs are looking, they’re like, okay, product, that’s product. But who’s behind it? What are they about? They will want to know more about the people? And it just coming culturally from a different place.

Anthony Rose: Got it. Okay? So takeaway point for everyone is, you got to dial it up to 11. Don’t be British modest. If everything’s not awesome people assume it’s terrible. So all right. Now, let’s talk very quickly about the rate at which you scale up in the US. Because I think this is where if you do it too modestly great, you’re not betting the future of the company on it, but you may not see much growth. Get too ambitious, and you may be setting yourself up for failure. And I was talking to a UK company. They’ve raised 10 million plus 100 plus people, and they set up their New York office with fancy offices and 10 people on day one. And they’ve realised this was on B2B Enterprise sales that actually, it’s taking longer to localise the product sales cycle times for their B2B enterprise customers are really long and they’re kind of bleeding. Quite a lot of money on those 10 people.

Joanne Farquharson: Yeah.

Anthony Rose: New York salaries and a New York office, and they’re probably looking to shrink a little bit. So the takeaway there was they made because they’d raised quite a lot. They’d made quite a lavish bet, and maybe they should have done it at half the size and some coworking hot desk space instead of a fancy office. Any thoughts on what you see from your customers who, you say, are series A, you know what is their land in US. Scale proposition initially.

Joanne Farquharson: Sure. Sure. So. There are lots of scenarios. But just the way you describe that absolutely like immediately I cringed a bit, you know. Fancy New York and a a couple of decades ago. That may have been a good bet, but you really don’t. You just don’t need it.

So I’ll tell you a story about one of our clients, which is one of my favourites. So they’re a UK biotech gene discovery firm, and they had one employee in the US. C-suite and that they were using our employer of record service. So employer of record means that they don’t have a US entity, and we hire that person on their behalf. So they were primarily building in the UK. This one senior person was very much connected with the C-suite in the UK and had a powerful impact in terms of getting the the product out there and it was probably after 5 years, 7 years they went public on the New York Stock Exchange after having just one employee there and and this is, I’m just gonna tell you the story because it makes me so happy. But of of course this person got a a small bit of equity when they they started, and they had a tremendous IPO and as you can think about it, this person had equity in a UK company. They didn’t have a US. Company. They were our employee, and here they are getting their payout after all those years when it goes IPO. And so we were involved only because the due diligence says you must when you pay out this amount. You have to make sure that that person pays their taxes. So we were the conduit to pay those taxes. So 3 million dollars came through foothold America on behalf of one employee. That was the tax they had to pay on their shares. And so what a beautiful example of a tiny tiny footprint and a wonderful expansion after their IPO. They did set up a US. Entity, and they they grew their team from there. But it can be done in a very lean, mean way.

Anthony Rose: Okay? All right. So that’s a great segue to the exciting thing of employment and taxes. So if you want to, so let’s go through the scenarios. And then let’s guide everyone, because this can take months of decision making. And I think for most startups, the answer is going to be remarkably the same. It’s probably going to be one of 2 or 3 scenarios, and if you everyone can understand that it’s going to save you a lot of wasted time.

So, scenario one is, you’ve got a few folks in the US. All working for your UK company, and we’re going to discuss how to do that scenario 2 is you create a US. Subsidiary, and you have everyone employed through the US. Subsidiary, and we’ll look at that. And maybe the scenario. 3 is there this employee of record, and so on, which is a slight hybrid thing. So the way we are going is one of the the key things that I understand is you want to create a US. Subsidiary that will shield taxes and liability from the UK top code. So you might have a vibrant UK topcoat. We’ve all heard that Americans very litigious. If you establish a tax presence or your liability presence from your UK company in the US. You open the door to more problems than you might have wanted, particularly when you’re exploring a new market.

If you create a US. Company, you can shield that within the US. Company. So when I’ve interviewed US founders for setting up their companies, many of them have made elementary mistakes, like setting up a Wyoming LLC. Instead of a Delaware C Corp. So very quickly, just on company types broadly, there are 2 options LLC. Limited Liability Corporation is a tax pass through so any profits made by the company are taxed from the shareholders of the company. A Delaware C corporation is like a UK Limited company. The profits of the company are kept by the company and paid as taxes, or, you know, paid as things. So if you’re ever planning to fundraise in the US. You want to create a Delaware C corporation.

If you’re an Etsy jeweller and you’re wanting a trading entity for liability or for Amazon, you know, or whatever it is, then you can create an LLC. But otherwise an LLC. May cause you endless numbers of problems with taxation, and so on, and inability to raise investment. If it’s your top code. So now with those scenarios. Joanne, over to you on you’re a UK company looking to expand in the US. Which of these scenarios should you go for? Maybe you start with one and then graduate to the other, and once everyone understands that, then they’ll know exactly what to do.

Joanne Farquharson: Right? Right? Okay? So yes, in terms of the structure. I completely agree with you. Because we exclusively work with international companies expanding to the US. Many of those countries have tax treaties with the US.

Anthony Rose: So.

Joanne Farquharson: And so most of the time, and I would say nearly a hundred percent of the time for UK clients. They set up the C. Corp. And they set it up in Delaware. And for just the for just the reasons you said. Now, in terms of which is topco it doesn’t, I mean. Say, you know, if you’ve got your UK company and it’s been set up well in advance of your US just because you set up a Delaware Corp doesn’t mean that it’s a subsidiary you’ll be registering in the State, and you’ll say these are the people who own this corporation, and you’re thinking to yourself. Well, the UK Limited Company owns it but Delaware doesn’t want that information. They don’t want to know what entity. Ultimately they want to know the people. So the people are going to be the names that go down there. And what determines what’s top Co and what’s not is how you do your taxes and how you do your transfer pricing. So it’s not so much the actual setup. It’s what you do with it. Tax wise. So when you report your taxes, how you are. How you’re reporting them with your transfer pricing. So when that comes to, I’ll switch over to employees. We don’t let me get too far into the into the tax conversation.

So when you decide to set up a US entity you, and and you do want boots on the ground. You have a couple of options for hiring employees when for the most part, you know, you’re not hiring 40 people at once, I mean, some people are but for the most part it’s gonna be 1, 2, 3, 4, maybe 20, after a year and a half. and the PEO is a concept that’s very common in the US. And is not something that a lot of non. US folks know about PEO stands for professional employer organisation. It’s considered a co-employment model. So the PEO, the organization is taking on a portion of the employer risks for you. So it’s a bundled service. Essentially, so, payroll benefits compliance taxes, both your corporate withholding taxes from salaries and the employees taxes and they manage those pieces of it. You’re responsible for things like making sure the person is allowed to work in the US. Managing them all of that. And it’s a great it’s a great way to protect your entity by saying, All right, all of this difficult stuff with people in different states and different rules we are going to work with a PEO partner to make sure that they do the really hard stuff. And we do the you know, the actual people management stuff.

Anthony Rose: Okay, so let me dive in. So as a UK company, you’re completely used to, you employ people directly. It’s very unlikely. Use any of these outside things. Just have people on your payroll every month you pay pay and NI to the government, and you pay your employee. And you might you, I mean, at some point you’re going to use payroll, software or teams. HR, software like Bob or others in the US. The issue is that it’s not one country. There are 50 States, and each of the States where you employ people have got slightly different laws. So when you’re a large company, you might insource all of this.

But when you’re a small company, particularly if you don’t know US, it’s way too much effort. And so you outsource the entire HR function to the this professional employment organisation, and they essentially mask everything. So there’s just your team and they sort out things at a state level. And of course they’re going to charge you something for that. And is that something? That’s the service that foothold provides.

Joanne Farquharson: It is, it is it? It is a service that we provide. But I’d say, you know, for anywhere from honestly, maybe 5 employees on up. And this could be 200. You can use a PEO, and you can also gotta fly in my office. And you can also hire directly in terms of scaling. That is, a a great scaling from a people perspective. That’s a wonderful tool to use. And you know, also scaling from a revenue perspective. It’s a

Anthony Rose: That’s it.

Joanne Farquharson: Cost, effective tool.

Anthony Rose: So let me talk about one thing, which is, I’ve done some webinars with Daniel Glazer from Wilson Sansini, who focuses a lot on US expansion. One of the things he gives is probably his key. Bit of advice is never, ever hire somebody as an employee in the US. From your UK. Company because it’s going to create a US. Tax presence and a liability presence. So does doing it as A, so. So there then seem to be 2 possibilities. You’ve got your team. They’re moving to the US as soon as I mean, if they’re they’re on holiday on an ESTA or something, they’re still your employee but as soon as it becomes something permanent, you, you know, as I understand it, and I’m going to look to you for the answer. You at some point very quickly. Don’t want them as an employee of your UK. Company. It means either a PEO employee of the UK. Company, or a PEO employee of the US. Company, or an EOR, an employee of record. So tell us what each of those are, and then.

Joanne Farquharson: Sure.

Anthony Rose: Is the solution because endless amounts of thinking goes into this. But actually, you know, there’s a simple rule book of, If you’re doing this this is the answer.

Joanne Farquharson: Yeah, absolutely. So I would say, for those that are tiptoeing in. And you go. We just we’re we’re building community there. We can afford to pay one person. We’re not sending a team over and you think to yourself, well, we can manage the liability of of our UK business, our IP and taxes and things like that. And we simply want to test the waters. It’s very common to use employer of record. So no, US entity. It’s a UK company signing a contract with an employer of record company. That person hires your employee that you’ve chosen, or you’ve used a recruiter to find. And then that employee works for the employer of record as sort of that’s the behind the scenes. Get all these compliance things done. But this person feels like they’re working for your UK company. So it’s a super inexpensive no long term contract. Get out in 30 days. If you decide this isn’t working, or the employee isn’t working, or you focus elsewhere in your company. And it’s a great place to start if you are immediately seeking funding, or you’ve got some IP concerns and you. For whatever reason, you might have a huge contract with Google. And they say you must have a US entity.

You may start with your US. Entity. And then, in that case, because you do have a US entity, you can choose to use a PEO. You have to have a US. Entity and a US. Bank account. In order to do that, the employer of record you don’t need entity, or US bank account, so you can go either way. The employer of record is a slight is more expensive because you’re taking no risk. So once you do have that entity, it probably makes sense to shift over to your EIN your US. Employer, identification number, and and bringing bringing that employee under your umbrella in the UK.

We gosh like, I said, that one example. That person was on the employer of record service. No, US entity for 5 years. Now you want to talk to your tax folks because that’s not to say they didn’t owe tax from their UK company for sales in the US. So you know, you have to kind of gather your information from the lawyer, from the tax advisor, from the people, professional and kind of make your decision, based on all of those, all of those factors.

But employer of record is a absolutely reasonable place to go. Especially if you are thinking. I need to get a bit more traction to justify putting bigger money in or to to have to position ourselves for the VC, so yeah, super easy to do, employer of record. And then again, once the entity is in place it may make sense to move over, and we transition companies from EOR to PEO every month. So.

Anthony Rose: Right great. Thank you. Let’s switch to bank accounts. You mentioned bank accounts. So you know that one of the things that I’m now discovering is you want to rent an apartment in New York. They ask all sorts of stuff about what your salaries in the US. And the bank account, and.

Joanne Farquharson: A bunch of.

Anthony Rose: Other things. So bank accounts. Do you need to set up a High Street, or they call it a bricks and mortar? I think.

Joanne Farquharson: Right?

Anthony Rose: Or is a wise bank account sufficient.

Joanne Farquharson: Great question. So, yeah. Pre Covid, it’s funny how much of this really has changed with Covid Pre Covid. We would talk to people and say, you’re gonna need to come to the States bring all your IDs and your you know your company registration and go into a bank and open your account. That no longer is the case. Because the bricks and mortar banks now realise, hey, we we there’s lots of business to be done here, and we can know our customers with documents that are going back and forth. You may have to mail some documents, but you know you you can’t get a business bank account that’s associated with a US. Company, unless you open that. US. Company. However, you can do lots of things with US dollars through companies likewise, or.

Anthony Rose: You you’ve gone on mute.

Joanne Farquharson: Oh, sorry. No, it was a okay. It was a call coming in. So sorry, so so. But there’s plenty of options now, using a USD account through wise is an example, and you’ll be able to use the 2 critical numbers as in the UK. It’s the source code and account number in the UK. In the US. It’s a routing number you would say, UK would say, routing number, but everybody in the US. Says it’s a routing number routing number and an account number. And you can get that through. Many of your online banks, or a foreign exchange kind of company like that. Or even if you’re using HSBC. Or an International bank in the UK. Depending on. If your revenue is high enough, they may offer you a USD account as well. So you can do business, both bringing in revenue or paying an employee without a US. Account.

Anthony Rose: Okay, all right. So thank you. Now, one of the 1st things I discovered with US is they’ve got all this different terminology. So one of the chats with one of the questions was about a 1099, I think, or something. So take us through some of the strange terminology that you may hear what it means and how to get it sorted. Great.

Joanne Farquharson: And I know this is very employment. Heavy people heavy, but a 1099 is the equivalent of an independent contractor in the US. I mean in the UK. A social sole proprietor. It’s someone who works independently and has their own liability insurance and pays taxes on their own, so it can be thought to be an attractive person to hire that way. You don’t have to provide benefits and get into all this employee type stuff. You’ll just use a contractor.

The US. Is much like the UK in that. If you have an employment relationship, I’m gonna say, Anthony, you need to be, you know, working from 9 to 5. And here’s our training, and you need to do it this way. When you are managing people they’re not independent. They’re not independent contractors, and some States will say you can’t hire someone as an independent contractor to do the thing that your business does. For example, if you’re a SaaS company and you and this person is selling your SaaS product for you, you can’t hire them as an independent contractor, you could hire an independent accountant to help you. You don’t have to employ them. You could hire an independent contractor, but if they’re providing your service, and you are managing them.

You will be misclassifying your employee if you call them an independent contractor, and 1099 refers to the actual tax document that the company has to submit to the IRS, so they’ll say I paid Anthony Rose $200,000. Yes, last year as my independent contractor here it is on this 1099.

If you hire an employee and you go. Actually, you know, Jane is our employee and works for us full time, or even, you know, even part time. But they’re absolutely there’s an employment relationship they are often referred to as A. W. 2 a. W. 2 is the tax document that businesses send to the IRS. My employee, Jane, was paid X amount and has paid this amount. We’ve paid this amount of taxes so that Jane also gets that W. 2, and she reports to the IRS because everybody in the US. Does a tax return every year. She says this company paid me X amount. So the IRS will get the 2 documents. And it. That’s what the will reflect. An employment relationship. But yeah, you’ll hear. Are they a. 1099, or are they a. W. 2? Yes.

Anthony Rose: Sounds like a murder thing on a crime series. But okay, we got a 1099 on highway 4. Okay. Now, the so which site can people go to to understand what applies? In which state I want to hire somebody in California or in Texas? I’m guessing the rules are different. You know. What’s the minefield that how do you resolve that.

Joanne Farquharson: So good question. The the 1099 bit independent contractor is is a Federal law. So in general the Federal laws are the the overarching umbrella, and the State laws can be different as long as they’re not less than the than the Federal laws. So it’s called Federal supremacy. So essentially, if this doesn’t exist. But say, the Federal Government says, all employees have to have 10 days of leave sick leave every year, then none of the States could say, well, we only want to give 3.

Anthony Rose: Got it? Yeah.

Joanne Farquharson: But they can. California, for example, is very employee friendly, they may say, well, we’re gonna give 15, and anyone employed here must give 15. So that’s just an example of the, you know, trying to figure out. Well, I found this incredible talent in LA, and I want to hire them. But what do I have to do? So I don’t get in trouble in California versus this and that. So if you’re a DIY kind of person, you can absolutely go to human resources resources, and and and check these things out and have your HR people build it themselves in general, though much of HR. Is outsourced in the US. So you want someone looking after these ever changing laws for you.

Anthony Rose: Alright cool. So now let’s switch. And then, lastly, and then we’ll go to a few of the questions in the chat. So location, location location. So to me, it seems they fall into kind of 4 categories. One, there’s New York, because it’s close. It’s 5 h time zone difference. Good overlap with UK. Not too far to travel maybe a bit. You know, it’s a big market and maybe closer to European mentality. Number 2 is Bay Area, San Francisco. Anything to do with VC. Funding? It’s the hot place, but it’s further away, and big time zone difference and hard to get everyone on a call at the same time with UK. Number 3 is lifestyle. So maybe Florida, or something like that. You like the sunshine and Number 4 is, you know, some progressive States in terms of company, employment or other law. Maybe you know, you see Texas, and so on. So what do you see? Most companies doing.

Joanne Farquharson: So. It absolutely depends on their their objectives. So, as we said, you might register in Delaware your your corporation. That does not mean.

Anthony Rose: Always exactly.

Joanne Farquharson: Yeah.

Anthony Rose: One actually lives in Delaware.

Joanne Farquharson: Teeny, tiny state. So so that part doesn’t matter. But say, you decide I’m going to have like say for you, I’m going to move to New York because your community, you’re going to grow your community there. That makes a lot of sense. So having you know, if your objective is to be in the concentration of where the clients are, then that may drive it. If your intention is to be. If it’s sales driven then you want to find out where the talent is, and so it could be in a hub. So, for example Boston is a life sciences. Hub. You may not be doing clinical trials there, but you may want someone in enmeshed in the ecosystem, so maybe you’ll go there. But the entire east coast is 5 h from the UK. So you can have you know, you can have people anywhere along there that are going to be able to interact. So the time zone management is fine.

We used to have people. Our our headquarters officially is still in Boston. But most of our team is in Tampa, and the 1st time we hired in Tampa was because we knew we could get a more senior, more capable person for 30% lower cost than we could in in Boston, and our team has has grown there. So well, I mean, we we do have some in New York. And so it depends. Is it talent driven? And you go? Okay? Well, Research Triangle Park in North Carolina is, you know, a lovely hub life, science, biotech and other techs. So maybe we want to go there where the cost of living is good and the talent is great. but well, also, someone will say, I met someone at trade Show. They’re perfect for us and they live in Ohio. Okay, great.

Anthony Rose: Okay. So so it’s it’s gonna vary. And it might be where the customers are, where your 1st hire is what your lifestyle thing all right now, before we go to the questions last one which is cost. So how much should you allow for setting up a US. Entity and the things we’ve discussed so far, you know. If if someone, for example, would come to foothold to do that.
Joanne Farquharson: Right? Right? Okay, so this is kind of crazy set up an entity. It can be a couple of $100. If you do it online. You figured you do. I can figure this out. I’m smart. Those. Generally, those systems are made from the perspective of like, if they ask you questions. The decision tree is going to be thinking that you’re an American. And so they’re gonna respond in that way. On the other hand, if you go to your attorney, probably about 5,000 for the setup. And then there’s there’s the in between, which is where foothold America falls. So again, we’re focused on international companies. And we handhold. But we’re also not a a law firm. So that’s for that when it comes just a couple of quick numbers in general to hire for the same position whatever you’re paying in the UK.

You’ll pay 30 to 50% more in the US. So you get to convert from pounds to dollars. So that’s a little helpful. But you know You know, if you’re paying a hundred 1,000 in the UK, then you’re gonna pay 1, 31 50, depending on where you are in the US. And then on top of that, when you think, well, what are the taxes the taxes in the US. When you go. Okay, there’s social tax and things like that. They do have a little social safety net. It doesn’t seem very high, but when you add health insurance, which is not required by law unless you’re a larger employer, but it is absolutely expected for you to offer health insurance, so that $100,000 will become 135, 140,000. After your taxes, insurance fees, and benefits are paid. So just quick math. You pay someone this much in the in the UK, add 30 to 50%. There’s your salary. Add 35 to 40% on that. And that’s why this can be so daunting to take that 1st step. It’s you know, it’s a bit of sticker shock.

Anthony Rose: Okay, all right. So that was immensely valuable. Thank you. Now, how can people find you.

Joanne Farquharson: Oh, well, I won’t tell you what my email address is, because my last name is Farquharson and some of you, if you’re Scottish out there, you might know how to spell it. But but foothold america.com. That’s our website. And you can connect. And yep, I’m on LinkedIn. So it’s Joanne Farquharson. I’d love to connect with you. I. We follow our entire team, follows every client of ours. We will, you know, promote you, and we do become part of your team. So I invite you to connect with me on LinkedIn. It would be my my pleasure.

Anthony Rose: All right. Thank you very much. Now, quick question. So Katie says, with SaaS folks on enterprise products, we’re looking at state licence agreements. Do you have any experience with license, agreement partnerships.

Joanne Farquharson: What is the what is the type of software.

Anthony Rose: I guess. Then Katie should just follow up with you directly.

Joanne Farquharson: Probably. Yeah, because it’s gonna depend on. If I mean if she’s if she’s speaking about just licensing to do business, then yes, you’d have to register in in the States where you’re doing business. If you have an employee, you absolutely have to register. If you sold your enterprise software to someone in California a business in California. Then it depends on registration. If you hit a tax nexus. So if you’ve hit the tax threshold, then you’d have to register. And that’s so. It’s not an easy answer. But

Anthony Rose: Okay.

Joanne Farquharson: That’s what it will depend upon.

Anthony Rose: All right, then there’s an interesting point, which is, Canada might be a stepping stone to the US. It might be easier, cheaper to, you know, base yourself in Canada, and then, you know, sell from there any thoughts on that.

Joanne Farquharson: Sure, sure and so that I think that one is probably driven more by lifestyle, if that’s you prefer to live there. But also it depending on the industry that you’re in there can be advantages to going to one country or another because of regulatory reasons. So if what you offer is going to be easy to easier to get licensed in Canada, for example. And this year there, I wish I could be very specific about this. But we’ve had so many Canada companies coming for US entities. And I think there’s been a change in some Canadian laws that have somehow made some aspects of doing business more challenging in Canada. And in that case, when someone is wanting to expand to Canada, we would refer to someone in our ecosystem. But absolutely they’re, you know, like brothers and sisters. We’re the we’re the we’re the mean. We’re the mean younger brother.

Anthony Rose: All right. Okay, then cool. And the last question which was about SEIS advance assurance, Delaware flips. That’s my area of expertise. So drop me a note at all on that one, and I’ll point you to an article, and maybe we need to do some more content on that as well. So that’s interesting. All right. Thank you. Everyone. If you’ve got any questions, please, for foothold America. And if you are planning to be in the US. And SeedLegal, should be there to help support you as well with a cap table, one login, and the whole, and that’s my goal to sort all of that and help you.

Joanne Farquharson: Absolutely.

Anthony Rose: Info.

Joanne Farquharson: I have no doubt.

Anthony Rose: Possible.

Joanne Farquharson: Right around the corner.

Anthony Rose: Exactly. All right. Thanks. Everyone. Great talking. Thanks. Joanne.

Joanne Farquharson: Thank you. Thanks very much.