Creator to Consumer – Establishing an Entity



Season 1 Episode 3 –


30 years and still learning - Having spent most of my career post leaving the Royal Navy working in consumer goods, primarily in the perishable food sector. I find it fascinating that I still learn every day, sometimes it’s a reminder of what I have forgot but for the most part, I learn something new every day… Today’s episode is about Establishing an Entity.

Lead in Disclosure

I am not a Business Attorney or a CPA, any advice or guidance offered here is out of experience not out of education. If you want to establish a legal business entity, I recommend working with a Business Attorney and a CPA to establish the business correctly, it’s important to get it right first-time.


Why do we need to discuss this?

It is important if you have an idea, passion and eventually a product and want to get started, you seriously should consider this part of the equation. There are many reasons for establishing a company, but first of all is the tax savings, you can apportion costs incurred during the research and development stages which will be counted as pre-tax dollars, you can loan the business money which can be recovered once revenue starts coming in.

In addition to this if you set up an entity you are not directly linked to any situations, you are protected somewhat by the corporate veil. This is not anything a law-abiding or honest businessperson should be focused on but with the litigious society America has become, it’s just wise council.


What sort of Entity should I go for?

Initially most companies start as LLC’s, Limited Liability Corporations, these are generally cheaper to set up, establish and cost the least to run and maintain, versus and Inc. Incorporated Corporation.


What should I call it?

That is down to you, some companies use their Brand Name as their Entity name, what my attorney always suggests is don’t make the company name your own name or easily linked to you, as this will reduce the corporate protection. Therefore, if your name is Jane don’t make the business Jane’s Jackets or if Bill not Bill’s Bike Shop.


Use a name that stands alone, which could be the brand name, branding will be covered in a another episode, or some random name for example Alphabet, Inc. is Googles Parent company, this is not how it was initially set up, however, it does create some distance.


What if I want to change things further down the line?

You can always change the name and structure of the business at any point, yes it will cost in terms of Attorney fees, however, nothing is so fixed it can’t be changed, if you just want to change the name you can also operate as a DBA (Doing Business As) under the new name, this is the cheapest way to change it, the rules are different by State so check with your local Business Attorney.

What if my International Company wants to set up in the US?

This can be done; however, it is not as easy as it was in the past. You need to have an Agent of Service to support the Incorporation Office and administer the business once established, the fees are usually an annual cost which can range from $150.00 to thousands of dollars per year depending on what you need them to do.


You need to have a US resident to complete the set-up of a business and especially a bank account, so finding a resource to do that is key to making things happen with less complications.


To establish a bank account, due to the scandals at leading banks in the US over recent years, the fear of money laundering is very high and there are many hurdles to get over to get an account set up, including needing a US Resident. Search around there are still banks that will open accounts for International companies.


You will have to deposit a minimum of $10,000.00, to establish the account and show credibility.


There is a sum of money, which changes periodically (increases – never decreases) that a company can deposit and open an account to establish a US entity which will also allow for Foreign Nationals to move and set up the business in the US, search for the latest information on the Federal Government Website. USCIS www.usa.gov


Why should my International Business Establish and Entity in the US?

Banking and Credit purposes – America is different in how it does business from the UK and Europe, there is less automated transactions, the US has 1 currency, most US companies in the CPG/FMCG/Food space don’t need to do business with Foreign Entities. Having to deal with currency exchanges and bank transfer fees etc.


US companies like visibility of the people they do business with, Dun & Bradstreet offer up a free service to US Entities, they track the financial stability of a company, and if your US business is importing your product, you will need a DUNS # to do so. Establishing a US company means further done the line you will have a financially credible business here in the States, which will gain credibility the longer it exists, leading to potentially better payment terms and local financial support among other benefits.


Having a US entity, also mitigates the threat of litigation creeping across the pond and back to the parent company, wherever you come from.


What about insurance?

In addition to all the usually business insurance you will need, there is one that is very important and expected by every customer you deal with, that is PLI, Product Liability Insurance, this exonerates your customer of any liability linked to product issues, which could cause a claim from a consumer. If you are buying a finished product from a co-packer/producer, then you should have insurance from them covering you.


The current standard level of cover expected (as of going to print) is:

$2 million each Occurrence, $2 million General Aggregate and $2 million Products,

except products with a supplement or drug panel such as Vitamins, Minerals, Herbs and Nutritional Supplements for which $5 million is the minimum required amount for Each Occurrence.


What type of entity should an International Company Use?

Unless for some obscure reason your attorney/advisor states anything different you should set up a Inc. Incorporated Corporation, the key reason is it keeps a thicker corporate veil between the US entity and the Parent Company, there also has to be board members and annually recorded meetings and signed off minutes, which keeps a tight and balanced history of activities and events for the Corporation to report as needed.


NB: All advice and comments to the best of our knowledge were correct at the time of publishing. All points should be checked with a qualified Attorney and CPA for the latest situation and most up to date thinking and legislation when you start the process.


Now it’s all clear as mud, need more, please ask.

In our next episode, we will be talking about Passion & Product, for now thanks for reading and continuing your journey from Creator to Consumer.


Interested in reading or finding out more about selling your passion or our Creator to Consumer series please visit our Chatter page at www.beachcitysales.com/blog and click on Creator to Consumer or our general site at www.beachcitysales.com, for more direct interaction please e mail us at info@beachcitysales.com


Remember, whatever you know “good luck keeping up”

5 views0 comments

Recent Posts

See All