US vs UK: Where Should You Start Your Business?

United States vs United Kingdom

 

Where should you start your business the US or the UK? Does it make much of a difference?

 

Starting a business can be a complex process, but careful planning and execution can increase your chances of success. The decision of where to start a business depends on many factors such as the specific industry, tax implications and treaties, target market, and funding options. Both the US and the UK have their own advantages for companies. The US has a well-established ecosystem with a huge market, almost limitless venture capital, and a culture that encourages risk-taking, while the UK, especially London, has a growing startup ecosystem and an easy banking system.

 

So, where is the best country to grow your business – the US or the UK? In this article, we compare the US and the UK when it comes to growing and scaling a business.

 

Factors to Consider While Choosing Between the US and the UK;

 

Tax System in the US and the UK

 

One of the key considerations when choosing between the US and the UK is the tax system, as it can easily affect your return due to tax implications. That’s why considering factors such as tax relief on returns is highly important when forming a company.

 

For instance, while the U.S. has a progressive federal income tax system with rates ranging from 10% to 37% for individuals, individuals in the UK are subject to income tax with rates ranging from 20% to 45%. Additionally, there is a National Insurance Contribution (NIC) for employees. However, it's crucial to note that these rates apply to residents of the US and the UK.

 

If you are a non-resident, meaning you don’t live in the US or the UK, once you have a company in either country, you are subject to other taxes. In the US, this includes Federal Corporate Income Tax, which is currently 21%. On the other hand, the Corporate Tax rate in the UK starts from 19% and may go up to 25%. (Since April 2023, some changes have been made in the UK Corporate Tax. It is collected from the net profit annually and has increased from 19% to 25%. Companies making less than £50,000 in profits continue to pay tax at 19%, while the 25% rate applies to companies making a profit of more than £250,000. There is a gradual increase for companies earning between £50,000 and £250,000.)

 

Additionally, in the United States, apart from federal taxes, you may also be subject to state taxes and sales tax, which can vary significantly. Some states have no income tax, while others have relatively high rates. In that case, if you are a non-resident and want to start a business in the US,choosing one of the states that has no income tax, such as Delaware and Wyoming, would be much more logical so that you may avoid double taxation.

 

Moreover, the U.S. has a complex sales tax system, with rates varying by state and sometimes by locality (check the Free Sales Tax Calculator for the US) . On the other hand, in the UK, there is Value Added Tax (VAT), and businesses may need to register for VAT if their taxable turnover exceeds a certain threshold (check the Free UK VAT Rate Calculator) . The standard rate is 20%, and there are reduced rates for certain goods and services. Keep in mind that you can always start your business in the UK and register your VAT with Startxpress online and anytime.

 

Considirations

 

Complexity: The U.S. tax system is often considered more complex than that of the UK. Navigating compliance with federal and potentially multiple state tax regulations can pose challenges for businesses of all sizes.

 

Rate Structure: The UK's simplified corporate tax rate may be attractive to businesses seeking a straightforward approach. In contrast, the U.S. provides opportunities for deductions and credits that can effectively lower the tax rate.

 

In conclusion, both the U.S. and the UK present distinctive advantages and challenges in their respective tax systems. The decision should be grounded in the specific needs and circumstances of your business, taking into account factors such as your industry, target market, and growth plans.

  

Business Environment

 

When it comes to starting a business in the US or the UK, knowing the business envoriment is also another important issue.Here’s an overview of the US and the UK business envoriment.

 

An Overview of the US and the UK Business Environments

 

The US has a friendly business enviroment for SMEs and tech startups as well. The country has been awarded as the friendliest counrty for startups and SMEs so many times, taking into consideration human capital investment, research and development, entrepreneurial infrastructure, technical workforce, and policy dynamics. When it comes to forming a company in the US, choosing the right state is highly important.If you are a non resident and want to start a e-commerce business in the US, LLC in Wyoming would be much more logical choice because of low annual fees, no state income tax and fast formation on the other hand for startups founders INC in Delaware would be a better choice because of funding oppurtunities, abundant venture capital and ease of doing business. On the other side the UK has so many things to offer as well, the UK is one of the largest economies of the world, with a highly skilled workforce. Also London has an expanding startup ecosystem comprising 40 startup hubs and incubators. This includes organisations like Tech Nation and The Founders’ Network, which work with hundreds of entrepreneurs, founders and startup companies. There is also a lot of government support provided for startups in the UK such as innovate UK to support startups. Many of these opportunities are made publicly available on the government’s website and can be easily applied for online.

 

Conclusion

 

In conclusion, as you embark on your entrepreneurial adventure, remember that you can always get in touch with our dedicated team for assistance. Whether you choose to start your business in the dynamic landscape of the United States or the thriving ecosystem of the United Kingdom, Startxpress is here to support you. With our platform, launching your business becomes a seamless experience, ensuring that you step into the world of entrepreneurship confidently. Reach out to us for guidance and make the journey of establishing your business in the US or the UK a smooth and successful one.