If you’re looking to start a business, you’re also probably asking yourself: where is best?
The UK and USA are attractive options, giving entrepreneurs access to strong and growing economies. However, when making the choice, it’s best to look at them a little more closely side-by-side.
Don’t worry, we’ve done all the work for you!
Setting Up The Business
When it comes to the pros and cons of setting up a business in these countries, one offers simplicity, whilst the other offers choice. Let me explain…
UK: As long as you have the right visa, starting a business in the UK is relatively straightforward. You can open a limited company for £50 on Companies House and all you have to do is file an annual tax return to register profits. Given that the same laws govern the entire UK, setting up a business there, wherever you choose, is pretty simple.
USA: The USA on the other hand is a little more complex. Not just because it’s notoriously hard to get a working visa there as a non-citizen, but because businesses have to comply with federal laws, state laws and other local laws. Whilst this does mean you can choose a state that has laws more suited to you (ie those that have lower taxes for corporations), it can make the choice a little more complicated.
Taxes
The amount of tax your company will pay is likely a factor that will influence your decision around where to start up a business.
UK: The current Corporation tax in the UK stands at 25% for companies with profits over £250,000 or 19% for those with profits under £50,000. If you are a company that earns over £90,000 per year, you will also need to charge a 20% VAT. When it comes to your personal income, earning over £50,271 puts you in the highest tax bracket, meaning you’ll pay 40% tax on earnings.
USA: As with a set up, the US system is a little more complex. Federal corporate tax is 21%, but businesses may also have to pay extra state and local taxes. Whilst some states offer no taxes, others range between 1-10%. That means that in some places in the US, Corporation tax may be lower, but it depends where you go.
When it comes to federal income tax, you’ll only pay the top rate of 37% if you earn over $626,350+. However, State taxes are also imposed so again, your tax efficiency depends on where you choose to work.
Location
Another thing to consider that sets these two economies apart is their locations.
UK: The UK sits on the edge of Europe, giving it direct connections to EU markets. It is also well positioned for working with Middle Eastern markets due to time differences. This can be a great benefit for businesses looking to trade internationally, especially as the UK has a much smaller population than the US.
USA: The US has a population of over 330 million people, making it a great domestic market. Whilst there can be some rules to overcome with inter-state trade, it’s definitely an economy built for trade, without needing to manage international regulations.
Cost Of Living
The cost of living in a country doesn’t only impact your personal life, but your business too. The cost of living can be a great indication of local wages, which might affect your profitability:
UK: Major hubs like London, Manchester, Edinburgh and Leeds can come with high costs of living. The average wage in London is about £44,370 – so hiring employees isn’t cheap!
USA: The US is so vast that the cost of living can have such a big range. The average salary in the U.S. is $63,795, but this will differ hugely from state to state and city to city, so making the right choice for affordability is important. Major business hubs like Silicon Valley and New York for example will come at a huge premium, so make sure you’re prepared.
Startup Culture
Luckily, both of these economies have healthy startup cultures.
UK: Cities like London and Manchester are big startup hubs, full of investors and accelerators that can help push businesses forwards. The UK also has funds specifically designed to boost innovation, making it an exciting place for new companies.
USA: The USA is home to the world-famous Silicon Valley, but also has hubs like New York and Austin that are growing big tech scenes. Whilst they definitely have bigger ecosystems, they can also be harder to break into – making it more difficult to cut through the noise.
USA vs UK: Which Is Best?
Both the UK and USA are great options when it comes to starting a business.
If you want predictable laws and international trade, then the UK is probably a better option. However, if you want to tap into one of the world’s biggest economic markets and don’t mind the complex regulations, then the US might be the one for you.
Ultimately, it all comes down to what is best for your business, but with the right planning, you’re sure to make the right choice.
Good luck!
