In part I of: “How to set up your back office in the United States as a European Entity” we walked you through the first steps of setting up your legal entity. Now that your legal entity is established, an EIN number has been assigned and your U.S. bank account has been opened, it is time to arrange your overseas bookkeeping and payroll.
Step 4- Set up your overseas books
The first step in setting up your bookkeeping in the United States is to choose your preferred bookkeeping program. In general, most U.S. software options are relatively inexpensive, compared to Europe. However, it is important to check whether your preferred program allows you to work with different currencies since you most likely will be working in Euros and US Dollars. Additionally, make sure that your U.S. bank can link to your bookkeeping software. Many European software programs do not have this option. Also, check whether the software allows you to automatically include sales tax. With 12,000 different sales tax jurisdictions in the United States, this is not something you want to do manually.
Consequently, tax filing also works differently in the United States. Once a year you have to file your corporate income tax return on Federal, State and Local Tax levels. Furthermore, you have to quarterly file your sales tax on the State level. If your Life Science & Health venture is new to the United States, it is recommended to consult a tax professional. They can help you navigate through the sometimes complex U.S. tax landscape and ensure you comply with all regulations.
Step 5 – Finding the right talent for you U.S. venture
In every state you have to make sure that you follow recruiting laws, hiring laws and employment laws. Everything from the salaries you offer down to bonuses, medical benefits, payroll, taxes and even how you recruit can vastly differ from state to state and set a precedent for all future hiring at your company.
It is important to keep in mind that when recruiting new employees you must be careful that you do not discriminate in any way, while following the Equal Employment act. Therefore, during interviews it is forbidden to ask about the interviewee’s age, religion, current salary or family situation. Additionally, there is a difference between U.S. and European benefit packages and offered compensation. Generally speaking, salaries in the United States tend to be higher compared to Europe. This is especially true for sales and business development jobs and less so for clerical jobs. However, European employees tend to have more vacation days and sick days than U.S. based employees. When you have found the right fit for your company most employment is based on at-will contracts, also called offer letters.
Step 6 – Payroll in the U.S.
When setting up your payroll in the U.S., there are a few things to consider. First and foremost it is important to have your insurances in place. For example, your workers compensation insurance. This insurance needs to be arranged before your first employee starts working, otherwise you will most likely be penalized. The amount of workers compensation premium depends greatly on the type of work your employees perform. If your employees need to travel often, this is seen as higher risk. As a result it will increase your workers compensation insurance.
Furthermore, healthcare insurance and 401(k) benefits (also called retirement planning) are very important to U.S. employees. These benefits are generally more expensive when a company has a small team. They become less expensive with more employees on the payroll. Furthermore, your company should be registered in every state where you employ, even if your employees work from home. This consequently registers them to do payroll taxes in those states.
Getting all steps in place is key for an efficient back office in the United States. It will help you manage your U.S. team and operations better. If you want to start this process or are in the middle of figuring it out, do not hesitate to consult an expert. In the end, complying with all these different laws on a state and federal level can be a little daunting.
This blog was written by TABS Inc., a trusted partner of AxelaRx. Our partners help you start, do business and accelerate in the U.S. market. View all our services here.