Routes to Market in USA

1. USA >
2. Expanding a Business >
3. Routes to Market

Routes to Market

So you've decided to expand your business to the USA and researched your market. Now it's time to decide how you will register and set up the business. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?

Here are your typical options when expanding a business into USA. Your form you choose to incorporate you business in will determines the amount of regulatory paperwork you have to file, your personal liability, and the taxes you have to pay.

As a foreign company expanding to the USA the usual entry options are: 

Agents, distributors, representatives - The virtual presence option. Having a US presence by way of a virtual office or staff who represent your interests.

• Establish an Office - Set up an office with your own managers and staff on the ground in the US and start your office organically.

The most common way to start up a business in USA include:

• Sole Proprietorship: A business owned and managed by one individual who is personally liable for all business debts and obligations.

• Partnership: Two or more people share ownership of a single business.

• Corporation: A legal entity owned by shareholders.

• S Corporation: A special type of corporation created through a tax election. An eligible domestic corporation can avoid double taxation (once to the shareholders and again to the corporation) by electing to be treated as an S corporation.

• Limited Liability Company (LLC): A relatively new, hybrid-type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership

• Cooperative: A business or organization owned by and operated for the benefit of those using its services. Cooperatives are not a legal structure.

• Contract sales consultants - Hire the services of a marketing consultant, contract sales force, or a marketing organisation for a fixed period to go out and find leads for you in the US and feed them back to you

• Joint venture/strategic alliance - Access the market through a partner and share risk and rewards with another organisation. The advantages are the quick access to local market intelligence and to customer bases, access to technologies you may not otherwise have. On the other hand, with alliances you tend to lose some control as far as marketing, information systems, human resources and financial decisions are concerned.

• Acquisition - Buy a market share in the form of a competitor or supplier that is already in the US. This will provide instant presence, local market intelligence, access to customers and quality control. Many UK companies expanding a business in USA use this strategy as first step.
  
  

Licensing

Licensing is the permission for someone else to use your intellectual property rights: either a patent, trademark, trade secret, or copyright. Different types of license include:

• Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.

• Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.

• Patent License - The allowance of another party to use your patented product, design or process.

• Trademark License - Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore   sustain customer confidence and satisfaction.
  
  

Franchising In USA

Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.

The benefits of franchising your business in the USA include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.

Disadvantages of franchising a business in the USA: although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.

The business format franchising has been representing the driving tool to start franchising in the USA since 1950. Around the middle '50s the first McDonald's, Pizza Hut and Kentucky Fried Chicken restaurants were opened. Since then, the franchising formula has never ceased to an extremely successful and profitable way of starting a business in USA.

Click here to Ask an Expert about Routes to Market in USA