Starting a Business in the USA: A Guide for German Companies

The USA is one of the most attractive and dynamic markets worldwide. The Southeast, in particular, is currently experiencing strong growth in industries such as mechanical engineering, automotive, medical technology, IT infrastructure, renewable energies, and wood processing. At the same time, crossing the Atlantic requires careful planning to successfully navigate expansion.

The German-American Chamber of Commerce (GACC South) supports German companies with comprehensive consulting and practical assistance – from the initial market analysis to the successful opening of a business location.

It is important to know that in Germany, the company's registered office is generally located where the management is based and constitutes the company's tax center. This location determines, among other things, the jurisdiction of the tax office and the legal classification of the company. In the USA, however, the legal domicile can be located in one state, for example, due to business-friendly legislation, while the actual business operations take place in another state. It is important to note that this separation introduces tax and legal complexities, as both the state of incorporation and the state of operation may have different requirements regarding tax returns, compliance, and liability.

The popularity for a duration of time of the "Delaware Corporation" in the USA is primarily based on the business-friendly legal framework offered by the state of Delaware. This includes a specialized commercial court (Court of Chancery), flexible corporate structures, a high level of shareholder data protection, and low incorporation and administrative costs. For this reason, many companies, even those not operating in Delaware, have historically chosen this state as their legal domicile.

However, it is increasingly common for companies to choose the state as their legal domicile that they are already certain they will exclusively or predominantly operate in. Regardless of the state of incorporation, a company must be registered as a "foreign entity" in every state where it operates, paying taxes, complying with local regulations, and potentially paying additional fees. Incorporating in the state where the company operates can therefore reduce administrative burden and costs, and simplify the legal structure.

1. Choosing the Right Legal Structure

One of the first and most important steps is deciding on the legal structure of the US company. The two most common corporate forms are the Corporation (Inc.) and the Limited Liability Company (LLC). Both offer limited liability but differ in structure and taxation:

Corporation (Inc.): Particularly suitable for larger companies or joint ventures with multiple shareholders. It is subject to corporate income tax and is often the preferred structure for investors.

Limited Liability Company (LLC): Offers greater flexibility, lower administrative requirements, and in many cases allows for "pass-through" taxation, where profits are directly attributed to the owners.

An experienced US lawyer can help you choose the right structure based on company size, shareholder structure, and tax optimization.

2. Location Selection: The Strategic Importance of the States

The USA is not a single economic area, but rather a complex of 50 states, each with its own laws, taxes, and incentive programs. Therefore, location selection is a strategic factor for success.

The Southeastern USA, including states like Texas, North Carolina, Georgia, and Florida, has been considered a promising region for German investors for years. Reasons for this include:

• Business-friendly conditions and moderate tax rates
• Domestic and international infrastructure and connectivity (ports, airports, interstate highways)
• Proximity to major automotive, life sciences, and energy clusters
• A strong German-American business community

States like Texas and Louisiana also offer attractive expansion opportunities through energy and industrial projects.

3. Tax Aspects and Double Taxation

The US tax system is complex and multi-tiered. In addition to federal tax, many states levy their own state taxes, supplemented by county and city taxes. Sales tax, the US equivalent of value-added tax, also varies regionally in amount and application.

For German companies, working with a Certified Public Accountant (CPA) is advisable.

Essential to correctly fulfill tax obligations and avoid double taxation. The double taxation agreement between Germany and the USA offers important safeguards in this regard, but requires careful tax structuring of the US business.

4. Administrative Steps After Incorporation

After successful registration of the US company, several administrative steps follow:

• EIN (Employer Identification Number): The tax identification number, which is applied for at the Internal Revenue Service (IRS).
• Bank Account: A US business account is necessary for payment transactions and tax returns.
• Local Registrations: Depending on the state, business licenses, operating permits, or tax registrations may be required.
• Employment Registration: Companies that hire employees must register with the local labor and social security authorities.

5. Success Through Local Partnerships

Sustainable market entry is particularly successful when companies establish local networks early on, for example, through membership in business organizations, industry associations, or GACC South.

These networks offer access to decision-makers, potential partners, and valuable exchange of experience with established German companies.

Overall, the formal part of setting up a company can be completed within a few weeks. Legal incorporation takes 1–3 weeks, and the waiting period for the EIN (Employee Information Certificate) is another 4–6 weeks. After receiving the EIN, a bank account can be opened, which takes approximately 3–6 weeks. Even though the bureaucracy tends to be less complex than in Germany, it is important to allow sufficient time for gathering and completing company data and personal information. Companies can roughly expect to invest a high four-figure sum in the bureaucratic aspects of setting up a business. To ensure a manageable process through the many steps of setting up a company, the German-American Chamber of Commerce (AHK USA-South) provides comprehensive support to German companies in networking, coordinating appointments, and project management.