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Doing business in the US

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Just as when pioneering Europeans first flocked across the Atlantic, success in America is attainable if you have a good idea and a positive frame of mind.

If you're willing to work hard, then this really can be the land of opportunity.

The United States, as we all know, has the world's biggest economy. It accounts for a quarter of global GDP and spends more on international trade and investment, and research and development, than any other country.

The US accounts for a quarter of global GDP and spends more on international trade and investment, and research and development, than any other country

 

With a population of over 300 million, it also has a huge market of consumers. Home to around 4.5% of the world's population, the US has welcomed countless waves of immigrants during its 200-year history and constitutes a broad social and ethnic mix.

Remarkably, the average wage in the world's richest country is actually £7k lower than in the UK. A contributory factor is the relatively low minimum wage, which at $5.85 is about half the UK rate.

Though bad news for people in low-skilled jobs, it means employment costs are lower for US entrepreneurs than for their UK counterparts. In the Doing Business 2008 report, which assesses how easy it is to do business in 178 countries, the US is adjudged to be the best place in the world for easiness of hiring and firing workers, labour costs and the rigidity of working hours.

Vistas of opportunity

Overall the US is the third best place to do business in the world, according to the report, for anyone thinking of starting or buying a business in the US. On other measures, it was deemed the fourth best place to start a business, the fifth best for protecting investors, seventh for getting credit and eighth for enforcing contracts.

But, somewhat surprisingly for a country that considers itself business-friendly, it comes a middling 76th for the financial and administrative burden of taxation - 64 places lower than the UK and lower than many European countries that adhere to a more social democratic economic model. In the Tax Foundation's report on the comparative tax-friendliness of US states for 2008, Wyoming came top, followed by South Dakota, Nevada, Alaska and Florida.

Business is America's forte, and the US boasts many of the best-known entrepreneurs in history. Even the best-known foreign-born entrepreneurs often moved to the US because of its many vistas of opportunity (Sony founder Akio Morita, Yahoo co-founder Jerry Yang and Google co-founder Sergey Brin to name a few).

Entrepreneurialism has become more fashionable in the UK partly because of TV shows such as Dragon's Den and The Apprentice, but we still have a long way to go before emulating the Americans' vaunted entrepreneurial culture. A third fewer people say they are considering starting a business in the UK than in the US, and the interests of business always feature prominently in US political discourse.

For a Brit, doing business in the US is made easier by the common language, common culture (to a degree), and historical ties that go back to the founding of the country. The so-called 'special relationship' is sometimes overstated, but the UK has long been seen in a positive light by US consumers and UK goods have traditionally enjoyed a reputation for high quality in the US.

It's no surprise, then, that the US is the UK's number one destination for investment and exports. In 2006 the UK's biggest exports to the US were medicinal, dental and pharmaceutical preparations, followed by new and used passenger cars, petroleum products, crude oil and civilian aircraft engines.

 

Nevertheless, at the time of writing the dollar is still weak against the pound, so UK imports are very expensive in the US. British investors and entrepreneurs, on the other hand, are finding that their money goes a long way when they spend it in the US or on American goods and assets.

There are no limitations on foreign business interests in the US, aside from a handful of import quotas and industry ownership restrictions. Foreign investors and domestic business people are generally treated as equals.

As you would expect for a country that is twice the size of the EU, the US contains a huge range of geographies, climates and cultures. In business, the country should be regarded as a series of regional markets, each with their own characteristics, so you may need to do some research as to which market is suitable for your product or service.

The wider market access that can be gained through the North American Free Trade Agreement (NAFTA) should not be overlooked either.

The agreement, which came into effect in 1994, created the world's largest free trade area and enables businesses in the US to trade with Canadian and Mexican businesses almost tariff-free. The agreement gives US businesses easy access to low-cost Mexican labour and Canadian resources.

Some companies set up their own trading companies or American corporate subsidiaries to market their products in the US.

If you have no experience or knowledge of the US market then you might consider recruiting a US marketing agency and distributor to help lever you in. Europeans can get advice from the Council of American States in Europe (CASE) about setting up a business in the US or help establishing a joint venture or alliance with an American company.

UK tourists and property owners can only stay in the US for six months of the year, although it is possible to gain full residency by setting up in business.

You need to invest more than $100k (about £50k) to have a good chance of obtaining an E2 visa, which allows you to stay for up to five years, a term which can be renewed and which can lead to permanent residence in the form of a Green Card. If you can prove you have invested or are actively investing at least $1m (£500k) - or $500k (£250k) in a targeted employment area (a rural area or area of high unemployment) - in a business which will benefit the US and create full-time employment for no less than 10 US or immigrant workers, you are eligible for a Green Card.

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