Expanding to the U.S.? How to Choose the Right Business Entity
The U.S. market is a lucrative, high-growth environment for UK businesses looking to expand internationally. But before you start selling to American customers or setting up a New York or California office, one critical decision needs to be made: choosing the right business entity.
Your choice of legal structure will affect everything from taxation and liability to your ability to raise investment and expand operations. Getting it right at the outset saves time, money, and headaches down the road. So, let’s break down the key entity types and what they mean for UK entrepreneurs looking to establish a presence in the U.S.
Limited Liability Company (LLC): The Flexible Favorite
A Limited Liability Company (LLC) is one of the most popular choices for foreign entrepreneurs entering the U.S. market. Why? Because it offers liability protection while keeping things relatively simple.
Pros:
Limited liability – Your personal assets remain protected if the business incurs debts or lawsuits.
Pass-through taxation – Profits and losses pass through to the owners’ personal tax returns, avoiding double taxation (though foreign owners may have different tax obligations).
Less administrative burden – Compared to corporations, LLCs require less paperwork and ongoing compliance.
Cons:
Tax complexity for non-U.S. members – If you're a UK-based owner, you may be subject to U.S. withholding tax and must file additional IRS forms.
Limited access to investment – Many investors prefer corporations over LLCs.
Best for: UK businesses that want a flexible, relatively simple structure with liability protection and aren’t seeking venture capital funding.
C Corporation: Ideal for High-Growth Businesses
If you’re aiming for rapid U.S. expansion or seeking outside investors, a C Corporation (C-Corp) might be the best choice.
Pros:
No ownership restrictions – Unlike an S-Corp, a C-Corp can have unlimited foreign shareholders.
Preferred by investors – If you're planning to raise venture capital, investors will likely require a C-Corp structure.
Separate legal entity – The business itself pays taxes, reducing personal tax liability.
Cons:
Double taxation – The corporation pays tax on profits, and shareholders also pay tax on dividends.
Ongoing compliance requirements – C-Corps require annual filings, board meetings, and stricter record-keeping.
Best for: UK entrepreneurs planning a U.S. startup that may raise investment or go public.
S Corporation: Tax Benefits but Not for Foreign Owners
An S Corporation (S-Corp) offers tax advantages similar to an LLC, but with the structure of a corporation. However, non-U.S. residents cannot be shareholders of an S-Corp, making this entity type less relevant for UK business owners.
Branch Office or Subsidiary: Establishing a U.S. Presence
If you already have a UK company, you might consider opening a branch office or subsidiary in the U.S.
Branch Office:
Your UK company remains directly responsible for U.S. operations.
Subject to U.S. taxes and compliance as a foreign entity.
Can expose the UK parent company to liability risks.
Subsidiary (LLC or C-Corp owned by your UK company):
Provides liability protection, as the U.S. entity operates separately from the UK parent.
Allows flexibility in taxation and structuring.
Preferred by companies wanting to build a solid, independent U.S. presence.
Best for: Established UK companies looking to expand operations without starting an entirely new entity.
What About Taxation?
Choosing the right business entity isn’t just about liability and structure—it has significant tax implications. Here are a few key considerations:
U.S. Tax Obligations: The U.S. taxes businesses at both federal and state levels, so where you incorporate matters.
UK-U.S. Tax Treaty: The UK and U.S. have a tax treaty that helps prevent double taxation, but tax planning is still essential.
Sales Tax vs. VAT: Unlike the UK’s VAT system, the U.S. has state-based sales tax requirements that vary by location.
To avoid costly mistakes, it’s crucial to work with an experienced legal and tax advisor familiar with U.S. and UK tax laws.
How to Register Your U.S. Entity
Once you decide on a structure, setting up a business in the U.S. involves several steps:
Choose a state for incorporation – Popular choices include Delaware (business-friendly laws), New York (if you plan to operate there), or California (if your market is tech or entertainment).
Register with the Secretary of State – This includes filing Articles of Organization (LLC) or Articles of Incorporation (C-Corp).
Obtain an EIN (Employer Identification Number) – Required for tax purposes, banking, and hiring employees.
Open a U.S. business bank account – Most banks require an in-person visit and proper documentation.
Comply with state and federal regulations – Depending on your business, you may need licenses, sales tax permits, or additional filings.
Final Thoughts: Choose Wisely & Plan Ahead
Expanding to the U.S. is an exciting opportunity, but selecting the right business structure is critical to your success. Whether you opt for an LLC, C-Corp, or a subsidiary, careful planning will ensure smooth operations and compliance from day one.
If you’re a UK entrepreneur thinking about entering the U.S. market, working with a legal expert who understands both jurisdictions can make all the difference. With strategic planning, you can position your business for long-term growth and success in the world’s largest economy.
Ready to expand? Let’s discuss the best entity type for your business and ensure you make the right legal and tax decisions from the start.
