|May 22, 2014|
Previously published on May 15, 2014
It seems like every other day, we hear about another internationally based company establishing a footprint in Boston, like Slovakia’s RESCO and Ireland’s Wisetek to Germany’s RapidMiner and Norway’s Cryogenetics. The world has become a much smaller place due to the growth of the global economy.
Governor Deval Patrick did his part by signing an economic development bill which in part encourages international companies to invest in Massachusetts. In 2013, talks began to establish a Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US which aims to drive economic growth and create job opportunities on both sides of the Atlantic.
Internationally-based companies are looking to expand into Boston, because it is “a world-class hub of entrepreneurship”. While international expansion is becoming more common, it is not without risk. Foreign companies face unfamiliar federal and state laws, rules, regulations and business practices. Understanding and analyzing the challenges of establishing an overseas operation will greatly increase its chances for success.
In my time in working with companies looking to create an international footprint in the US through Massachusetts across industries sections from clean energy to real estate to software services and solutions, I have found a few common but critical legal and business considerations that a foreign company should consider when planning to expand into the United States.
Additionally, a review of the proposed US operations, including its structure, financing, ownership, composition and business plans, should be undertaken with knowledgeable US tax advisers, to develop the optimal strategy for the organization and operation of the US business enterprise. In the United States, taxes are levied federally (by the United States Department of Treasury), locally (by the State) and, sometimes, by the municipality (i.e. city or town). Corporations and partnerships (including other business entities like an LLC or limited partnership) are treated as US tax residents if formed in the US and are generally subject to federal and state taxes.
A foreign business entity or individual seeking to do business in the US should assess the applicable immigration laws at its earliest opportunity as can be the process that takes the longest to achieve a satisfactory result. Most individuals will enter the US on temporary visas. There are the four (4) categories of temporary visas which will likely assist you: B-1, H-1B, L-1 and E-2.
A business person seeking to enter the US for the purpose of assessing the market for their business may generally do so as a Business Visitor on the B-1 visa. This visa is suitable for persons who desire to enter the US on behalf of their foreign employer including for the purpose of conducting business meetings with prospective customers. The B-1 visa permits the holder to establish a US business enterprise and can include instructing lawyers to incorporate a US entity and generally attending to most aspects of the start-up phase of the entity.
The H-1B visa is available to specialty occupation workers who will work in a professional field. This visa is available to individuals who seek a position that requires the achievements of a Bachelor’s degree (or higher) in a particular field. The H-1B visa is valid for an initial period of up to three years and can be extended for a maximum of six years, within limited exceptions. Unfortunately, given the way the H-1B program is set-up, there are a limited number of visas available and application for such as led to very inconsistent results.
The L-1 visa is for a company transferee and applies to the transfer of an employee of an overseas branch, affiliate or subsidiary to the US company. To be eligible, the overseas employee must have been employed abroad continuously for one year within the preceding three years by the overseas company and in a capacity that is managerial or executive or involves specialized knowledge.
Finally, a founder or employee may be eligible for an E-2 visa if a substantial amount of at-risk money (typically around $1,000,000 US Dollars) is invested in a new or existing US business. The founder or employee must be from a country that is designated by Congress as eligible for participation in the E-2 nonimmigrant visa program. Initial period of stay in the United States is up to 2 years and may be extended in 2 year increments.
When considering a location for your business, a company cannot underestimate the importance of developing a thoughtful real estate strategy to determine whether leasing office space, construction of a new facility or purchasing is the right business choice. Site selection is the single most crucial element in controlling costs and maximizing profitability. Contact a knowledgeable US legal adviser who will assist in site selection, leasing issues, zoning, land use and environmental laws, viability of development plans and their associated costs.
Help is available for those companies looking to purchase or lease space in Massachusetts through the site finder search of Massachusetts Alliance for Economic Development (MassEcon). MassEcon is an economic development resource for companies seeking a Massachusetts location within which to expand or relocate. The service covers all regions of the states, serves a broad range of industry sectors and helps relocating and growing companies identify commercial or industrial facilities across Massachusetts.
Incubator space is a cost effective way for a company to establish an office in Massachusetts while considering other real estate options. Organizations like CIC, WeWork and Workbar offer office co-working spaces (cubicles or offices) at reduced rates for burgeoning international companies.
Massachusetts is committed to stimulating economic growth through increased international trade and investment, and has laid the groundwork for companies coming to Greater Boston and Massachusetts to thrive. Any company considering global expansion into the US via Massachusetts can develop an effective strategy for success by being aware of these 3 key legal and business considerations outlined above, and by engaging a trusted US legal advisor.