Publication date: February 23, 2023
Last Tuesday, 21st February 2023 our law firm attended a Black Country Chamber of Commerce https://www.blackcountrychamber.co.uk/ webinar. The main theme of the conference was the principal consideration of European companies entering the U.S. market. The webinar was focused on British companies, yet it is easy to extrapolate to companies from other European countries such as Polish companies.
The Seminar counted on great figures of the commercial and legal sector in United States and United Kingdom like Dr. Frank Levene, Principal in Blue Link Worldwide; Ms. Sarah Davies from Avalara Europe; Mr. Rob McNeil, DIT Regional Director in Mid-West region; Ms. Magda Lowisz, Interim Regional Director in South-East region; Mr. Tom Thorelli, Senior Partner in Thorelli & associates; Mr. Simon Bradbury, Partner in Appleyard Lees; and Mr. Graham Groom from the Black Country Chamber of Commerce.
During the webinar they presented two major regions from the United States as potential markets for European companies: Mid-West and South East, as well as related tax and legal topics.
Mid-West region usually went unnoticed in comparison with other US regions regardless of its extraordinary statistics. This territory covers 12 states, such as Illinois, Indiana and both Dakotas. The principal metropolitan areas are Chicago, Detroit, Minneapolis-St. Paul, Columbus among others. These characteristics give the Midwest a population and GDP close to that of Germany, 4th major economy in the globe. The experts suggested that most favourable opportunities of investments are located in the automotive industry, infrastructure, healthcare & life sciences, technology, clean growth & energy and financial services. This is of particular importance for the clients of KIELTYKA GLADKOWSKI since they operate in vast majority in such sectors ad intersections of these fields.
On the other hand, South-East region is normally more remembered than its northern compatriot. For its part, depending on the states are considered into this region, it has more or less same territory but 30 millions inhabitants more. Its GDP is similar to countries such as Canada, Nigeria or Texas state. During the webinar they lead to believe that the investment opportunities are focused on banking & fintech; life sciences & healthcare; film and TV industry, they call it “the Hollywood of East”; and electric vehicles industry. In this sense, they highlight the recent agreement between UK and North Carolina for the development of clean energy.
Inside this region, they also emphasise Florida in particular. The state has equivalent GDP of the Netherlands and its privileged geographical position allows to be a bond between North and South America. In addition of the high level of life and good climate, it also has a great support from governmental organizations to improve investments. The major opportunities in Florida are located in infrastructure resiliency, the old one was very damaged by environmental disasters; fintech; tourism; and space sector, main NASA’s infrastructure is located in Florida as well as SpaceX and other private space-focused companies.
But not only location is important when entering the U.S. market. A whole range of financial and legal factors must be taken into account. This is recommended by Ms. Sarah Davies, who explained a few notes on the tax system. Firstly, one has to assume that the respective states in the US work very independently from each other in a full range of ways, tax included. Secondly, it is important to define Nexus Thresholds to trade within US. There are two types, physical nexus and economic nexus. Physical nexus is in simple words if you have employees, estate and offices in the US. So, when you have a physical nexus, you need to register for sales tax. Economic nexus is based on transactional basics on a twelve months period.
Furthermore, it is quite important to have in mind that there are multiple jurisdictions, depending on the localization of the business and form of taxation. Moreover, it is a very dynamic system, rates frequently change. There are different rules for marketplace sellers and for digital services. As well as tax, filing returns depends on states. The advisors also recommended to take advantage of early repayment discounts.
As same importance as tax are, legal services are a must to operate in United States. It is really necessary, especially when US market is not your origin market, to have a lawyer or legal team to provide you with advice that adds value to your business. As mentioned above, in the United States the states work very independently of each other and also have a very high dynamism. Furthermore, judicial proceedings and lawyers work in a quite different ways in the US common law. For these purposes, KIEŁTYKA GŁADKOWSKI set out office in New York to be able to assist directly in business development in such cross border dealings and cross-border operations.
It is also important when entering the American market to keep in mind the commitment of doing business in the USA, that it is an operation that requires effort and cannot be left adrift. Sales conditions must be adapted to U.S. consumers and the company’s credibility must be protected. Another possibility suggested to us is to work with an American partner company, as it can facilitate the introduction of our products or services in the country and make our operations easier.
Finally, much of the focus for doing business in the Americas is on intellectual property. It is much more efficient if IP is organized before doing everything else. For that reason you have to ask yourself what sort of business you are offering. You have to designate your service provider, consider whether you are going to be self-provider or other company is going to take that job. The product can be manufactured in-house, that is, you manufacture the product in your home country by yourself and then send it to the US; or the product can be manufactured under contract by a company in the US for you.
The way of the IP of work also depends on the type of technology or product that you are offering. It is important to know the markets where the services or products are going to sell-out; how far the product is developed and if it can be modified; if it can be easily copied.
The main types of intellectual property in the US are:
Freedom to Operate: Filing a patent application does not give you the right to do anything, it gives you the right to stop others from doing something. For this reason there must be undertaken patent searches for 3rd party patents prior to product launch; design around any problem patents; take a licence to any problem patents or invalidate; watch any patent application which may be an issue if granted; avoid giving any warranties to licensees regarding FTO position.
In resume, US market is one of the biggest markets in the world and with a major purchasing power. It has a full range of opportunities of investments. However, it is necessary to have a proper legal comprehensive advice on the functionality of it. KIEŁTYKA GŁADKOWSKI is specialised in this type of services. A decade of experience in cross-border business guarantee our labour in the matter. We are honoured to help Clients in this enterprise to facilitate all the process and help with any inconveniences. The technology, life sciences & health care, and fintech are sectors that need to be carefully considered for future investments because they are highly dynamic and very profitable. The aging of the population and the increasing introduction of online commerce of technological goods and services are proof of the growing importance of these markets in the near and medium to long term.