TB

We’re grateful to Robert Mollen of law firm Fried, Frank, Harris, Shriver  & Jacobson for this excellent guest post: advice to startups looking to expand into the US.

If you intend to do business in the US, whether remotely from the UK or by establishing a presence on the ground in the US, there are a number of steps that you need to take.   None of these is rocket science, and with a few exceptions they shouldn’t be very expensive.  However, getting this wrong at the beginning can cost a lot more to fix.

Intellectual Property (IP)

My first three key tips relate to intellectual property, and apply whether or not you set up a US subsidiary:

1. Get advice on your trademarks, and get your key trademarks registered in the US. Keep in mind that trademark users can get rights in the US through unregistered use in the US, so it is not enough to check the trademark register and file a registration – a search is required. And get your key trademarks protected in the EU and any other key markets as well. It makes no sense to spend a lot developing a brand and then find that you can’t use it in all of your key markets.

2. Understand your US IP/patent risk (from non-practicing entities, known as patent trolls, as well as from competitors), and decide whether to seek your own US patents. This doesn’t require a full patent search, and indeed that may not be advisable. But you do need to understand the general landscape.

3. Protect your trade secrets and other key IP through appropriate confidentiality agreements, contractor arrangements (that assign the IP to you) and the like.

My next four tips also apply whether or not you actually put people on the ground in the US:

4. Understand your liability exposure, in respect of both commercial risk and government enforcement risk, and get some cross-border insurance advice. The US is a more litigious market, and the threat of litigation is commonly used as a means of negotiation – don’t go in blind. Make sure your contracts properly protect you, and that you have appropriate compliance systems in place. If you are in a business that is regulated in the US, be sure you understand how those regulations apply to your business.

5. Get some basic US as well as UK tax advice – especially important if you are setting up operations in the US, but you should also understand your tax position if you are, e.g., providing software as a service (SAAS) through the cloud (which may give rise to tax issues in the US).

6. Immigration. If you are going to be travelling back and forth a lot to the US, make sure you understand your US immigration position – visa waiver (ESTA) is great for occasional business visits, but at some point you will get hassled at the border if they think you may be working there.

7. Convert your terms and conditions and commercial contract forms to US law (this is the law of a particular state, like New York), and understand which provisions really matter. Some counterparties are not going to sign up to English law forms. Large counterparties will insist on their forms in any case, but you will still need US provisions for the points that really matter to you.

Additionally, if you do intend to set up operations on the ground:

8. Sort out your corporate and tax structure – operate through a US subsidiary (probably a Delaware corporation that is qualified to do business in the states where you have offices or employees), not a branch of the UK company, and put in place arm’s length intra-group agreements between the US sub and the UK parent that work for tax purposes.

9. Get outsourced back office support – sort out your corporate tax returns, annual corporate filings, other compliance, payroll, employee withholding and employment-related charges, benefits etc.

10. Consider what kinds of agreements to put in place with your employees – unlike the UK, you aren’t required to have employment agreements with your employees, but you will have offer letters with all employees and will want to have confidentiality and IP agreements with all employees (which can include restrictive covenants – but not in California). Be careful not to treat workers as contractors when they are really employees. If you intend to transfer founders or employees from the UK to work in the US, get immigration advice early – it is likely to be your long lead-time item.

Our Coming to America booklet covers these points in more detail – it is available as a pdf and an e-book. I am happy to do free 1-2-1 reviews in person or by phone.

Robert Mollen, Fried Frank Technology

 

Advertisements