One of the most important tasks for companies hoping to bring their creative ideas to life is securing finance. Although there are other approaches to draw in investors, incorporating your firm in the US can greatly increase the likelihood that you will obtain the capital you need. This article examines the many advantages of US incorporation, including increased investor trust, access to a wide range of financial markets, favourable tax treatment, and the ability to capitalize on a strong entrepreneurial environment.
Section 1: The Benefits of US Incorporation
Legal and Regulatory Framework
The legal and regulatory system in the United States is well-established and offers businesses stability and predictability. Strong intellectual property rights, open contract enforcement, and a well-defined legal framework for corporate activities are all included in this framework. Investors, especially those with global experience, frequently want to know that a dependable legal system is safeguarding their money.
Consistency and Predictability
Intellectual Property Protections: To promote investment and innovation, the US offers robust protections for patents, trademarks, and copyrights.
Transparent Legal Procedures: The American legal system guarantees the prompt and equitable resolution of disputes.
Business-Friendly rules: A number of states, including Delaware, have rules that are easy for businesses to incorporate and maintain.
Read Also: The Role of Pitch Decks in Securing Startup Funding
Section 2: Access to Capital
Diverse Capital Markets
The world’s biggest and most varied capital markets are found in the United States. Access to a large pool of possible investors, such as venture capitalists, angel investors, private equity companies, and institutional investors, is made possible for startups who incorporate in the US. These investors frequently have more inclination to fund businesses that are incorporated in well-known and respectable jurisdictions.
Venture Finance
Numerous venture capital companies with varying specialisations and substantial financial opportunities may be found in the US. US venture capital companies made approximately $130 billion in industry investments in 2020 alone.
Angel Investors
A sizable network of angel investors exists in the US and is eager to assist early-stage companies. The US Angel Capital Association estimates that over 70,000 firms are funded by angel investors each year.
Open Markets
The chance to list on US stock markets and become publicly traded might be quite attractive to investors for established firms. The two biggest stock exchanges in the world, NASDAQ and New York Stock Exchange (NYSE), offer a lot of investor interest and liquidity.
Section 3: Increased Credibility and Confidence
Investor Self-Assurance
Investors may see a startup that incorporates in the US as more credible and reliable. Because of their strong economy and stricter regulations, US-incorporated firms are seen by many investors as being more stable and trustworthy. This notion can be especially helpful for foreign firms trying to draw in investors from the United States.
Perception of Stability: Incorporation into the US signifies compliance with strict regulations.
Reputation: A US-based business can improve its standing in the international market.
Regulatory Environment: Investors are more inclined to invest because of the robust protections offered by the regulatory environment.
Section 4: Benefits to Taxes
Tax Regimes That Are Advantageous
Startups can profit from the favourable tax systems offered by several US states. Delaware, for example, is well known for having tax regulations that are favourable to businesses. One such legislation is the absence of a state corporate income tax on products and services supplied by Delaware enterprises that operate outside of Delaware. Investors searching for effective methods to optimise their returns may find the business more appealing as a result of these tax advantages.
State-Specific Benefits
No Sales Tax: Delaware is one of the states that does not charge companies a sales tax.
Benefits of Corporate Taxation: In certain states, corporate tax rates that are competitive might improve profitability.
Federal and state tax incentives for research and development (R&D) can lower total tax obligations.
Section 5: Robust Entrepreneurial Ecosystem
Support Systems
An extensive network of networking opportunities, incubators, and accelerators is available in the United States. Startups may take use of these tools, get mentorship, and make contacts that may lead to financing prospects by incorporating in the US.
Incubators and Accelerators
Opportunities for investment and mentoring are offered by organisations such as Techstars and Y Combinator. Y Combinator reports that these firms have raised more than $65 billion in capital.
Opportunities for Networking
Startups and potential investors are connected through a plethora of conferences, pitch events, and networking opportunities.
Support Services
Access to financial, legal, and advisory services with a focus on fundraising and company development.
Read Also: Equity vs. Debt Financing: Which is Right for Your Startup?
Section 6: Easy-to-Use Exit Strategies
Acquisitions and Mergers
The exit strategies that are accessible for their investments pique the curiosity of investors. The United States of America offers a favourable atmosphere for initial public offerings (IPOs) and mergers and acquisitions (M&A). These exit plans may become more appealing to investors by incorporating in the US.
Market for M&A Activity
Numerous chances for successful exits are presented by a robust M&A market.
First Public Offerings
With their high liquidity and visibility, US stock exchanges such as NASDAQ and NYSE are well-liked locations for initial public offerings (IPOs).
Secondary Markets
In the US, there are active secondary markets that facilitate trading of shares prior to a complete withdrawal, offering extra possibilities for liquidity.
Section 7: Case Studies
Example 1: Stripe Originally formed in Ireland, Stripe is a multinational technology business that constructs the financial infrastructure for the internet. But because of the strong US investment environment, it was able to draw in a sizable amount of venture capital funds after being incorporated in the US.
US Incorporation’s Effect
- Attracted elite venture capitalists, including Andreessen Horowitz and Sequoia Capital.
- Raised more than $2 billion in capital.
Example 2: Zoom Video Communications
After being formed in China, Zoom became incorporated in Delaware. Its credibility was greatly increased by this action, which helped it obtain money from prestigious US venture capital companies and eventually go public on the NASDAQ.
US Incorporation’s Effect
- Raised a substantial sum of money from backers including Sequoia Capital.
- Had a post-IPO market valuation of moreover $100 billion.
In summary
There are several benefits to incorporating a business in the US, and these benefits can greatly increase the likelihood of obtaining investment from investors. The United States of America is an appealing site for entrepreneurs due to its strong legal and regulatory framework, varied financing sources accessible, favourable tax regimes, supportive entrepreneurial environment, and streamlined exit possibilities.
The strategic advantages of US incorporation should be taken into consideration by entrepreneurs hoping to maximise their funding prospects. They may attract a wider spectrum of investors and position their firms for better success by doing this.
Resources
If you are considering incorporating your startup in the US, then we recommend using a trusted service provider such as Firstbase,io who also happens to be our primary partner, helping hundreds of Startups like yours to incorporate in the US
