Home to many of the world’s most successful and recognizable brands and buoyed by the strength of the dollar, infrastructure, and business-friendly laws, America’s consumer-driven economy is unparalleled. It is no wonder, then, that foreign companies want a piece of the American pie by offering products and services that appeal to U.S. consumers. The volume of foreign brands entering the U.S. market has been rising steadily since the COVID-19 pandemic began, so there is more competition than ever for consumer interest. Whether you want to reach customers through an e-commerce platform or set up a traditional brick-and-mortar business, this blog outlines everything you need to know as a foreign brand seeking to enter the U.S. market and succeed.
Do I need to form a company, or can I do business as a freelancer?
There are many advantages to forming a legal entity, such as a corporation (e.g., S. Corp or C. Corp.) or a limited liability company (LLC). For one, they shield their owners from many types of liability. For instance, if you own a store in the name of a corporation or LLC and someone slips and falls, they’ll have to sue the company, not you personally. Doing business under your company name, rather than your individual name, is a great way to reduce personal legal and financial risk and avoid having to file for bankruptcy if something goes wrong potentially. Another benefit is that doing business as a company gives consumers confidence that you are legitimate. It shows that you have taken the time and spent the money to do things the proper, legal way. Consumers are more likely to do business with a brand they trust. As a company, you can also obtain a federal employer identification number or EIN, which can enable you to get a checking account, apply for loans, and acquire property. There may also be tax advantages, collaboration opportunities, and other benefits exclusive to companies.
However, although there may be certain advantages to doing business under the protection of a company, owning a company also requires following certain obligations, such as filing annual statements, making corporate disclosures, and potentially being taxed twice. And while it may be true that owners of LLCs don’t have to comply with as many corporate formalities as corporation, e.g., having a board of directors, members of LLCs are still expected to adhere to their corporate governance documents and industry standards.
But if you’re a freelancer, despite the advantages of operating as a company, some brand owners may not feel it’s the right move for them. You may not want the burden of handling the paperwork associated with running a company. As a foreign national, you may be reluctant to get involved with the federal or a state’s government, and may prefer to “fly under the radar,” so to speak. You may find it easier to set up an online store under your own name, or on a social media platform, because you’re not genuinely concerned about personal liability.
Regardless of the structure you choose to operate your business under, it’s a good idea to consult with a licensed U.S. attorney to learn about the possible consequences of doing business under a separate legal entity versus under your own name, including operating as a sole proprietor using a dba or trade name.
What about my website or app?
If you’re the owner of a foreign brand seeking to do business in the U.S., then it’s essential that your brand has a digital presence and that consumers can buy or obtain information about your product online. There are various factors to consider when deciding whether you need a website or a mobile app. Websites are more accessible to occasional users and generally faster to launch, but they are less capable of leveraging device hardware such as a camera or GPS. And sure, apps are popular, offer offline access, and a more personalized experience for the consumer, but they can also be expensive and require multiple downloads and updates. A mobile-friendly website might be a better option if you’re just starting out or have modest sales. Whatever route you choose, there is no shortage of options. You can select an established player like WordPress, Squarespace, or Wix, or a newcomer like GojiLabs or TechAhead.
Whether you opt for a website or mobile app to sell your products, make sure you have a back-end developer or engineer as part of your team to maintain your site/app’s optimization, handle security issues, integrate payment processors, and manage your databases, server, and application programming interfaces. There are affordable options available. You only have to do a little research. Upwork and Fiverr are popular choices.
Do I need to market on social media and buy ads?
Yes, you should market on social media because it’s generally free and could be very effective. But as with most strategies, there are pros and cons for entrepreneurs and small business owners of foreign brands who target a U.S. audience through social media. Social media breaks down geographic borders, allowing owners of Chinese brands to promote their products to consumers in Alaska. You can also use social media to target the specific type of consumer who is most likely to be interested in the goods and services you sell and build brand loyalty. However, on the negative side, creating an effective social media presence can be time-intensive and laborious. You might also risk reputational harm to your brand if a disgruntled user posts a negative comment to your account and that becomes viral. If you’re not savvy with social media, consider engaging a social media manager.
The answer to whether you should buy ads depends on multiple factors, including your budget, goals, and target audience. Particularly if your brand is relatively new, going the organic (unpaid) route may be a more effective strategy where you build trust and foster relationships among your consumers before investing in paid marketing.
What licenses do I need, and how can I make sure that I’m compliant with applicable law?
The U.S. has federal law, and each of the 50 states has its own laws. Some states have more stringent regulatory regimes than others. California and New York tend to require licensure for whatever it is you want to do, while other states like Wyoming and Arizona often take a more hands-off approach. Whether the sale of your goods or services requires you to have a license depends on what you’re selling, in what state(s) you’re selling, how you’re selling it, and to whom you’re selling. For instance, are you selling crypto or clothing? To everyone in the U.S. or only residents of Texas? To minors or adults? Online or in-person? Several states offer websites to help business owners know what licensure is required and how to obtain it.
You should also be aware of privacy laws. The U.S. does not have a federal privacy law, but many states do. If you have an app or website, make sure it’s compliant.
Do I need a commercial lease?
If you want to establish a physical presence in the U.S., then you’ll likely need to lease or rent a store. Lease contracts and purchase and sale agreements can be very convoluted and complicated to understand, even for native-English speakers. So, it’s advisable that you have an experienced attorney represent you in any such transaction.
Why do I need to register my trademark?
A trademark is a distinctive word, phrase, symbol, sound, scent, or color you use to sell your goods or services and that allows consumers to distinguish your products from your competitors. There are many benefits to trademark registration. Owning a registered trademark adds value, legitimacy, and prestige to your brand. And if you’re looking to raise capital or attract investors to your business, protecting your brand and innovations isn’t just a legal necessity; it’s a strategic advantage. Sophisticated investors look for companies that take their intellectual property seriously. Studies show that startups with trademark and patent protection are up to 10 times more likely to secure funding than those without, and often command much higher company valuations. Registering your trademark sends a powerful message. You’re a trustworthy business owner, you’re protected, and you’re in this for the long haul. Don’t risk losing out on investment opportunities or seeing your hard work copied by competitors.
Having a registered trademark is a necessity if you sell on e-commerce platforms such as Amazon or Facebook Marketplace because it provides the most effective means of having infringing marks and knockoff (counterfeit) goods taken down.
Another benefit of having a registered trademark is the ability to obtain an additional revenue stream. You can license the use of your registered trademark to generate royalties. That way, someone else does the hard work while you kick back and collect royalty checks. Make your IP work for you.
Traditional American law firms typically charge $1500 or more to register your foreign trademark in the U.S. However, there are certainly more affordable options available that provide the same quality of service. A trademark may be the name of your company or social media handle, but it can also be so much more. It is the culmination of your business profile and website and/or app identity. Whether it’s your logo, product name, product design, or another distinctive indicator you used to distinguish your brand, your trademark is the face of your company, and it’s how consumers remember you. If you are serious about doing business in America, you will invest in obtaining trademark registration.
What about other IP?
A trademark is only one form of intellectual property (IP). There are also patents (inventions), copyrights (creative works), trade secrets (confidential and proprietary information), and right of publicity (an individual’s name, image, voice, or likeness). Securing IP protection is essential if you want to grow your brand and ward off copycats. Consult with a licensed IP attorney to find out what assets you have and how best to protect and monetize them.
Are there other considerations?
The U.S. economy continues to be attractive to business owners across the globe because of its scale, with a staggering GDP of approximately $25 trillion. U.S. consumers have an unquenchable thirst for an array of products and possess unrivaled spending power. But if you want to take advantage of U.S. consumers’ buying potential, you need to operate your business here the right way. That means complying with the law and maximizing the strength of your brand. If you do both, there’s no limit to how successful your business can be.