There are plenty of appealing reasons for Italian companies to expand into the U.S. The opportunity for growth and profitability in one of the largest, most diverse consumer markets in the world is tremendous. The U.S. provides access to advancements in technology and innovation, as well as capital markets, legal infrastructure, and potential strategic partners to support an Italian company’s sustained success.
While there are certain levels of complexity and bureaucracy involved with establishing a U.S.-based subsidiary, countless Italian companies are flourishing after completing such a move. However, expansion to the U.S. could be a costly mistake without partners in both Italy and the U.S. working together to help you navigate the process.
Here are four of the most common questions an Italian company considering U.S. expansion should be asking.
1) What Legal Considerations Are Important When Expanding to the U.S.?
Choosing the right legal entity can protect your parent company in Italy from legal claims and limit potential losses to the U.S. entity. This will also help you maintain compliance with local laws related to business operations, taxation, employment, intellectual property, data protection, and other issues.
Keep in mind that the U.S. (common law) does not have the same legal structure as Europe (civil law). All contracts with suppliers, distributors, and other vendors and partners must be written in the proper format with precise language. Otherwise, your U.S.-based operation could find it difficult to protect its rights.
2) What Tax Incentives Are Available?
You need to understand local taxation, not just federal. When you share your business plan with a qualified, experienced advisor, they can identify various tax incentives at the federal, state, and local levels. For example, you may qualify for incentives related to sales tax, state income tax, payroll tax, real estate tax, or investments in capital expenditures when you create jobs in a particular area.
3) What Is the Optimal Location to Support Your Business?
In addition to tax considerations, you need to choose the right location for logistics, proximity to clients, and access to talent. If you’re opening a production facility, you also need to account for access to raw materials required for production.
Depending on the industry, it might make sense to set up your U.S. subsidiary in a certain area. For example, automotive companies often settle in Michigan, while fashion tends to gravitate to New York, Los Angeles, or Miami. You need to calculate gross profit margins based on the conditions in each market.
Even time zone can be important. For example, a company in New York will have three more daytime hours to directly interact with its counterparts in Italy than a company in California.
4) What Should the Compensation Package for Key Employees Look Like?
What type of package in terms of salary, health benefits, paid time off, stock options, etc. will be required to attract the kind of employees you need to run your U.S. subsidiary successfully? Be sure to account for cost-of-living adjustments and plan ahead to have visas in place if necessary.
At minimum, you need to have someone in your organization onsite in the U.S. who speaks the language and understand the culture and local market. In addition to assigning someone to the U.S. market to oversee sales, you should have someone in place to handle administrative duties and manage relationships in the community.
How Prager Metis Can Support Your U.S. Expansion
In addition to having an Italian partner who understands the local market, tax code, legal system, and culture, you need a partner in the U.S. who understands your business goals and requirements and has the experience to facilitate your U.S. expansion.
Prager Metis works closely with Value Services to provide the guidance and services you need to successfully expand to the U.S., all under one roof. We can make sure you have accurate, current, and complete information that enables you to make confident decisions. Because we regularly work with companies expanding to the U.S. and Italy, we have a vested interest in your organization’s success on both sides of the ocean, not just in the U.S.
Whether you’re thinking about opening a new commercial office or production facility in the U.S. or considering an acquisition, Prager Metis and Value Services welcome the opportunity to serve as your trusted resources and partners to answer your questions and inform your decision-making process.
If you’d like to see how Prager Metis services can be customized to the specific needs of your organization and industry, contact Andrea Fantozzi, Partner and Director of the Italian Group in the International Department of Prager Metis CPAs. Call 212-643-0099 X10279 or email afantozzi@pragermetis.com.
