Setting up shop stateside: How to establish a US business entity

If you are an Irish company setting up in the United States, taking time to organise operations properly is essential.

Going Global USA: Learn your Legals is a concise and yet comprehensive guide to the most important elements you should consider, covering how to manage taxation, visas and immigration, and trade and customs. In this deep dive, learn how best to approach establishing a US business entity.

How to establish a US business entity

Setting up in the US without adequate research and planning exposes your company to the risks of litigation and state and federal taxation penalties.

To qualify to do business in the United States, you must, at the very least, have a registered branch office in the country. Choosing the branch office option can, however, make the parent company in Ireland a more visible target for lawsuits and legal claims, and liable for US federal, state, and local income taxes.

Form a distinct US legal entity

It is more prudent, and in the long run more cost-effective, to form a distinct US legal entity, be it either a US business corporation, known as a C-Corp, or a US limited liability company (LLC).

A C-Corp is similar in structure to an Irish limited company and is usually a better option than an LLC for overseas businesses. While there are tax advantages to forming an LLC, they apply to individual shareholders rather than shareholding parent companies. As C-Corp shareholders are perceived to be more ‘separate’ from the everyday activities of the company, C-Corp owners tend to be less exposed to litigation, and to have more limited liability.

Remember, however, that C-Corp profits can be taxed twice, under the US ‘double taxation’ system.  Firstly, at federal and at state level, a C-Corp is assessed for corporate income tax on profits. Then, if the company chooses to distribute earnings, shareholders will pay capital gains tax on dividend income.

On the plus side, C-Corps are familiar entities to both customers and institutional investors, are scalable, and can be made public. And as most early stage companies reinvest profits to fund growth, when dividends are not issued, double taxation is not a major concern.

US location, location, location

Wherever you plan to do business in the United States, it is probably best to set up in the State of Delaware, where legislature deservedly enjoys a reputation for having America’s most business-friendly laws.

Delaware is one of only five US states with a separate non-jury Court of Chancery, with judges focused solely on business law. The Chancery Court is also unlikely to interfere in arrangements where signed corporate agreements are already in place.

Unlike in other states, shareholders and directors of Delaware-registered corporations do not have to be Delaware residents. In addition, Delaware corporate law applies to Delaware corporations no matter where they actually operate, or where their physical headquarters are located.

Delaware also offers favourable taxation laws. The state does not tax royalty payments and non-residents are not liable for personal income tax, including capital gains tax on dividend income.

While it may cost less to register a business in other states, potential short-term savings should be off-set against the long-term legal certainties that the Delaware legislature provides.

As easy as ABC Delaware: How to form a C-Corp or LLC

There are four steps to forming a C-Corp or an LLC in Delaware.

  • Firstly, check online that your preferred choice is available and decide on a business name for your corporation or LLC.
  • Secondly, appoint a registered agent to receive service of process and other correspondence on behalf of your company. If you have a Delaware address (which must be more than a PO box number), you can do it yourself. Otherwise, you can appoint an attorney or an accountant as a registered agent, or you can use a registered agent service company, which will charge you as little as $50 for their services.
  • Thirdly, file a Delaware Certificate of Corporation that includes the name of the corporation, the name and address of its registered agent, the purpose of the corporation, and the total number of shares that the corporation is authorised to issue. The fee for filing this documentation is $89 (at time of writing), if all your information is contained on one page. Otherwise, an extra $9 is charged for each additional page.
  • Lastly, you must remain ‘in good standing’, which requires you to file an annual report and pay a franchise tax. That part is crucial. If a Delaware corporation loses its good standing, it loses its limited liability shield, and the corporation’s creditors can make claims on shareholders’ personal assets.

Franchise tax is not based on income. It is based on overall share value and is assessed using two methods: the authorised share capital method and assumed par value capital method.

It is important to take professional advice to avoid paying more franchise tax than is necessary. If you authorise a large number of shares but only issue a small portion of them, or if the shares have no par value, you could end up with a franchise tax bill for tens of thousands of dollars. A corporation with 5,000 or fewer authorised shares, will pay at least the minimum franchise tax fee of $175 annually.

Foreign qualifications

If your US company is conducting business in any state other than the state in which it is incorporated (for example, outside Delaware), it will most likely also need to register in each additional state, in a process known as ‘foreign qualification’.

As the rules for foreign qualification vary from state to state, consult with a business lawyer or, at the very least, conduct some research on the state’s Department of State website. Foreign qualification involves additional paperwork and expense. A Delaware corporation applying to do business in New York will spend at least $334 to obtain all required certification.

Note that, whether you file a foreign qualification or not, a company deemed to be doing business in a particular state will be subject to state income taxes in that state. However, there are states, such as Texas, where generous tax-free allowances mean that most small businesses pay little or no state income tax.

Talk to your Enterprise Ireland advisor to get advice on setting up your company’s presence in the United States or read more in Going Global USA: Learn your Legals

How Dublin’s Novaerus helps the world to breathe easier

The soaring heat of 2018 highlighted the value of clean water. In Ireland, it was scarcely a matter of days before blue skies and barbecues were replaced by water shortage warnings and hosepipe bans.

Even in a country in which it rains much of the time, there was little grumbling about these restrictions. We understand the complex effort and investment required to ‘create’ water that is fit for human consumption.

Water grabs headlines. But there is another natural resource, just as important to human health, that until recently has been taken largely for granted – the air that we breathe.

Why the quality of indoor air matters

“It’s only recently that we’ve become aware that the quality of our indoor air is not as good as we thought, and is contributing to poor health and infection,” says Kieran McBrien of Dublin-based Novaerus.

“This problem is compounded by the fact that we humans spend most of our time indoors, where air gets trapped and endlessly recycled,” he says. “Each human being is shedding thousands of skin cells every hour, throwing off billions of micro-organisms every minute, and we’re breathing it – all of it.”

For humans who spend most of their time indoors – especially vulnerable populations like children, the elderly, and the sick – particulate matter and contaminants in indoor air can exacerbate asthma, allergies, and chronic diseases, and directly lead to viral and bacterial infections.

This is the problem Novaerus was founded to address. Operating mainly in the healthcare sector, the company has patented a plasma technology that reduces the airborne pollutants which lead to health problems like infection, allergies, asthma and irritation.

Novaerus manufactures a range of portable devices that can be found in hospitals – operating theatres, ICUs, emergency rooms, patient wards, construction areas – as well as elderly and child care facilities, schools, and emergency response vehicles, anywhere in fact that the quality of air can detract from human health, productivity and wellbeing.

Standing up for air quality

Kieran McBrien, Senior Vice President for International Business Development, has been with Novaerus since its foundation and says that in the early days, the main obstacle the company faced was an unwillingness to accept that anything was wrong with the air quality.

“In hospitals, for example, most hygiene standards still don’t apply to air quality so it’s an easy one to ignore,” he says. “That’s despite a mountain of scientific evidence showing that pathogens can travel for long distances on the air currents that swirl around hospitals and other buildings. As long as the air is moving, so is the bacteria.” These bacteria and viruses can transmit infection via the air or they can fall on to instruments or surfaces to contaminate hands.

“Some markets are more accepting that air quality is an issue,” McBrien says. “We started in the US where we targeted the elderly care sector, and today we have a significant number of installations that are helping to reduce the instance of respiratory illnesses and other airborne issues. We’re also branching out through hygiene programs in schools.”

The firm has also gained traction in Africa, Eastern Europe and particularly Asia – in South Korea, for example, a staggering 80% of all ambulance rescue vehicles now carry Novaerus technology. (Novaerus is also one of only two companies to pass stringent air sterilisation standards set by the South Korean government to enter operating theatres.)

Reaching global distribution

Having started small, Novaerus is now operating in the big time. Sales of the portable devices are expected to grow by 40-50% this year and the company is targeting markets including China, Germany, Japan and India next year and beyond.

Distribution is handled by a global network of partners, mostly in the healthcare sector, who pitch and sell the proprietary technology into hospitals, clinics, ICUs, operating theatres, anywhere there are people whose immune system is compromised – including the staff whose daily attendance is integral to the business operation.

Innovation is the driving force behind this success – “our whole operation revolves around R&D,” says McBrien – and the company has an enviable facility including fully-equipped labs at its HQ in the DCU Innovation Centre, Dublin. (The company also has a US base.)

A decade or so on, however, Novaerus has not forgotten the role played by Enterprise Ireland in its growth. “Enterprise Ireland got involved with us at an early stage and helped us to find distributors in the US, Asia, Europe and the Middle East, most of whom are still with us, says McBrien.

“The effort that Enterprise Ireland puts in to help Irish companies is just fantastic,” he says. “Setting up trade missions, getting small companies onto the big stage, opening doors, where else would you get it?”

McBrien, a native of Belfast with a background in business and languages, is also adamant that being Irish on the global stage is an advantage. “For us, there’s the whole tech side of things where [Ireland] has a very good reputation,” he says. “The Irish are seen as friendly people, very receptive and good to do business with.”

Meditec US hospital supply chain

How Meditec conquered the US hospital supply chain

Breaking into the US market isn’t always easy but with the right supports, infrastructure, attitude, and product, it is achievable.

Alan Sullivan, Managing Director of Meditec Medical, addressed the Enterprise Ireland knowledge event aimed at helping Irish manufacturers to navigate the US supply chain.

His company has enjoyed tremendous success in the US thanks to the Mediflex, a specialised mattress for clinical use, which prevents pressure sores. While the innovative product is now used in hospitals across the region, initial entry was made with the help of a planned introduction from Enterprise Ireland.

“Enterprise Ireland brings US companies to Ireland to showcase what our businesses do. One day we were told that Boston Children’s Hospital were in – the holy grail for suppliers,” he explained.

Opportunity knocks for Meditec Medical

“Dave Walsh, the hospital’s Director of Supply Chain Administration, came into our office and we showed him around. He said there and then: ‘When can you trial this?’

“We went to Boston with the sample and presented, then started talking about the innovative stain-resistant cover, and the traction started to build from there.”

From the start, Alan was keenly aware that opportunity only knocks once, which drove the company’s rigorous preparation ahead of every visit.

“I have one chance and I have to get that right.

“Before going into the US market, there are certain things you need to be ready for. The last thing you want to do is to go into a big seller and for them to ask, ‘do you have X in place?’ and for the answer to be ‘no’, or to have not even considered an answer,” he said.

“We got our product tested in the east coast of America for compliance with fire regulation. Because we were already looking for our FDA approval, we already had those wheels in motion.”

Securing a long-term relationship

There can be several boxes to tick, he explained, and no value in attempting to cut corners. Teaming up with local expertise is often a good idea.

“For the FDA approval, we did a lot by ourselves, but we also got a consultant in the US. Importing into the US is very different to importing into Europe. You have to have an importer on record, essentially a company in the States who will keep your records to be referenced by organisations like the FDA.”

“When it comes to customs clearance, you have to get a partner to ensure everything runs smoothly,” he added, noting that delays early in the process can have a disproportionate impact on long-term relationships.

“It’s important that all of the details are nailed down before it leaves Ireland. Don’t promise the order will be there by Tuesday, only for it to get caught in customs.

While an in-market distributor can offer big benefits in terms of access, contacts and local knowledge, Alan insisted that staying clearly visible in discussions was key to the success of the product’s sell-in.

“The main thing about dealing with a distributor is that you can’t just allow them to take the products on and present them,” he said. “I know my products, how to present them, the engineering that goes into it. It’s very hard to relay this to someone with 2,500 products in their portfolio.”

Nailing the process

This hands-on approach served Alan and Meditec extremely well over the course of their developing relationship with Boston Children’s Hospital.

“We sent the product over by flight and I followed it over myself. I met key people from the hospital and we got a chance to iron everything out. Anything we didn’t have in place, we nearly had in place. We got the trial.”

The process, Alan explained, was not simply a test use period – but also an ongoing opportunity to refine the product to suit the buyer’s needs.

“We already had a heel section and the clinicians wanted a head section too. So, we went home, added that and came back.

“Labelling, visibility, everything – we changed and customised it to get it right.

“The clinical aspect of the product stayed the same, but we adjusted the features.”

This detail-oriented approach was precisely what the hospital stakeholders were looking for and was an important element in the eventual success of the trial.

 “I trained up the people on the ground and put my distributor in the position where they could fix any issues,” he explained.

“If they feel like you’re far away and you’re not going to put in the hard yards, they’ll go for the safe option –  like a US multinational. You need to show them.”

Hanley Energy’s path to powering giants of the internet

Innovative solutions and a partnership approach have been central to the success of Hanley Energy, a global innovator in energy and power management delivery.

Headquartered in Stamullen, Co. Meath, Hanley Energy was set up in 2009 by co-founders Dennis Nordon and Clive Gilmore. The pair started out in a Local Enterprise Office incubation centre and, thanks to decades of experience in designing and delivering turnkey solutions for Europe’s most power-intensive users, they quickly built up a portfolio of domestic clients, including CIÉ, Glanbia, Roadstone and Largo Foods.

“Initially all our work was with indigenous Irish companies, providing energy management solutions, in real time, for companies who wanted to see exactly what their energy usage was,” says Nordon.

While the company still operates across a range of sectors, from food production to pharmaceutical, transport and heavy manufacturing, in 2010 it began developing specialist power management solutions for the country’s burgeoning data centre sector.

Powering data centres – lynch pin of the digital world

Used to house the vast banks of computing power required to store, process and distribute an insatiable amount of data, these data centres are the lynch pin of the digital world and one for which continuous, clean energy supply is mission critical.

Hanley Energy developed a range of bespoke solutions to enable its Tier 1 data centre clients to maximise uptime and minimise operational costs. Because of the secrecy that surrounds data centres, it cannot name these clients but suffice to say, “they are the giants of the internet,” says Nordon.

In 2013, the company opened a new headquarters and manufacturing facility in Stamullen. Within 18 months it had doubled in size. Demand is such that in 2018 a further extension will see it expand its physical footprint by 50%.

Today Hanley Energy employs 57 people and has grown by providing clients with a one stop shop solution for energy products, software and service, from consultancy and advisory, to design, build & maintenance, as well as the complete life cycle management process.

“Essentially, we help our clients to reduce their overall energy costs, ensure 100% up-time and optimise their operational competitiveness,” says Nordon.

But it isn’t just technical know-how that accounts for Hanley Energy’s success. “While innovation is our unique selling proposition, a key driver of our growth is relationships,” he says.

“Our commercial tag line is ‘Trusted Energy Partner’ and that is our ethos. It’s by being a trusted partner that you can really add value for clients. It’s about building relationships and working with clients on a partnership model over the long term.”

It is this partnership approach that has helped them develop its significant overseas business, starting with an invitation from a client located in Ireland to deliver a cutting-edge solution to one of its overseas plants.

They realised we are not some ordinary ‘me too’ vendor and asked us to look into a problem they were having in the United States,” explains Nordon.

“Hanley Energy is not simply a reseller or integrator but a developer of innovative technologies. We’ve been working with big data centres for long enough now that we understand the challenges they face. They are enormous power consumers with a mandate that requires them to keep that power on 24/7 365 days a year. For these clients, an outage simply cannot occur. We are tasked with keeping the power on and we create the solutions to do that,” says Nordon.

“We also provide the metrics that allow granularity as to how much power they are using and where they are using it. When you are using energy at this level, a percentage saving is colossal.”

Leveraging the overseas presence of multinational clients based here has enabled Hanley Energy to establish operations in Germany, Sweden, the US and Australia, with a further office planned for South Africa.

Once Hanley Energy has established a presence in each new market it then seeks out additional opportunities there, which require its skillset and expertise.

Resourcing global expansion

Enterprise Ireland’s overseas offices have been a huge help to us in that, from providing us with initial office space, to making introductions and identifying opportunities,” he says.

Expanding into international markets can put a massive strain on resources. To avoid this Hanley Energy has implemented a Global Competence Centre model as part of its strategic growth plan, based at its Irish headquarters. 

“Our senior management and technical expertise resides in Ireland and all our research & development and new product development operations take place here,” says Nordon.

“Many of our products are IP (intellectual property) protected and have taken years to develop. So when we enter a new market, operating on a Global Competence Centre model allows us to parachute our expert personnel in wherever and whenever they are required, to train up the teams on the ground. This has helped us get up to speed quickly in each new market. It is a very effective way to scale and has been our strategic driver for growth.”

To learn more about expanding your business internationally visit Markets & Opportunities.

Retail tech USA

Irish companies shop innovative tech solutions to US retail sector

Eva Murphy Ryan, market executive for education and technology based in Enterprise Ireland’s New York office, explains how Irish companies are poised to disrupt the fast-moving US retail tech sector.

From the rise of data analysis and personalisation to voice recognition applications, new technologies are continually changing the retail landscape. With brands and retailers feeling an increasing pressure to stay ahead of the competition, the retail technology sector in the US represents a significant and growing opportunity for Irish exporters. The scale of that opportunity is huge, with the US retail industry already estimated to be worth $2.6 trillion. (Source: National Retail Federation)

While the US has long been a hub for digital technology, innovation is now poised to transform the ways in which consumers shop. This month, US retailer Nordstrom acquired two retail tech companies, integrating new tools to further improve customer experience. These acquisitions enable Nordstrom sales associates to communicate with customers outside of the store, offering style advice and personalised product recommendations, while strengthening Nordstrom’s ability to send consumers customised mobile messages.

With US giants such as Nordstrom and Amazon viewing tech integration as the future of retail, we have begun to see Irish companies target growing opportunities in the US. Hannah Webb, Head of Retail Technology for Enterprise Ireland in the USA, comments “Retail technology companies in Ireland understand the challenges that US retailers face. They provide highly advanced platforms and innovative solutions that address issues, such as how to track online to instore purchases, how to manage data analysis, and deliver enhanced customer experiences.” 

Three such companies supported by Enterprise Ireland are VisitorM, Pointy and Voysis.  

Limerick start-up VisitorM bridges the gap between physical and digital customer experiences. Touchscreen stations allow customers to provide feedback on their in-store shopping experience at the point-of-sale. VisitorM’s technology is soon to be used by shoppers in the US under a new deal with established clothing retailer Old Navy.

A second innovative Irish start-up, Pointy, makes it easy for local shops to display their full product range online, enabling them to be found by local consumers on search engines like Google. The solution helps retailers to reach a much wider audience and drive in-store visits. In the US, more than 2,000 retailers across 50 states currently use Pointy, with the company on track for adoption by 1% of all US retailers by the end of 2018.

Irish start-up Voysis helps retailers to respond to Alexa and Amazon’s position in the market. The brand-specific platform that Voysis provides adds voice capabilities to websites and mobile apps, delivering a more conversational experience to consumers, that moves beyond the use of smart speakers. Voysis aimed to replicate the experience of speaking to an in-store associate, allowing their solution to be just as helpful and knowledgeable about the context of what the consumer seeks while shopping. With the prediction that, by 2020, 50% of all searches will be voice searches, solutions like Voysis are shaping the consumer experience now and informing the future of retail. (Source: comScore)

Showcasing Irish innovation and building strong networks with keys buyers are important steps to growing business in the US retail tech sector. With support from Enterprise Ireland, these companies and others from Ireland’s retail tech cluster have the opportunity to present their solutions at major US trade shows, such as NRF Big Show, which attracts 40,000 attendees, and Shoptalk, attracting 8,500 attendees. David Andreasson, Director of Finance and Operations at Voysis, comments, “At Shoptalk, one of the largest retail conferences in the world, brands immediately saw the value of what we provide and the experiences that are brought to life through the Voysis platform.”

With retail evolving rapidly, brands and sellers, from the established to the emerging, will continue to source innovation and technology that will help them compete into the future. As Irish technology companies continue to target the US retail market, they will succeed by promoting strong and highly differentiated value propositions.

This article was originally published in the Sunday Independent.

Key questions to ask at your Spanish and Portuguese Market Advisor meeting

The combined population of Spain and Portugal is more than 10 times that of Ireland, while Iberia’s landmass is 7 times larger than Ireland’s.

If you are considering doing business in Spain or Portugal, your first step should be a call with our dedicated team.

  • What do you need from me to move this forward? Enterprise Ireland works with clients who have the potential to make an impact, by connecting with buyers and finding opportunities in the market. Irish client companies play a great role in this process too. To make the most of your opportunities in the Spanish and Portuguese market, ask your MA what you can do to move the process forward and ensure success.
  • What kind of timeline are we working with? Different markets work on different timelines. Winning business in this market requires dedication over time; developing your relationship with a buyer in Spain or Portugal is as important as any business negotiation. Ask your MA what kind of timeline you should expect when entering this market. That way you can be prepared for the different steps and milestones in the process.
  • What should our buyer persona look like? Knowing who you want to sell to in this market is very important. It is essential to understand the dynamics of your target market. With the help of your MA, decipher what your buyer persona looks like and work to adapt your pitch to that persona. While this can vary within the market (especially in Spain’s autonomous regions), legitimate and specified buyer personas can be useful in identifying who to approach in market first.

Enterprise Ireland is committed to helping Irish firms succeed in global markets and have industry experts on hand, ready to help you access the Spanish market.

Our Market Advisors are always available to support you and provide business expertise and on-the-ground knowledge.

For more, download our Going Global Guide

Enterprise Ireland’s top tips for entering the Spanis and Portuguese markets can be viewed by clicking the graphic below.

Key questions to ask at your UK Market Advisor meeting

Enterprise Ireland is playing a key role in supporting ambitious companies seeking opportunities in the UK.

If you are considering doing business in the UK, please be sure to reach out to our team in London.

  • What are the associations and organisations I should be speaking to in the UK?
  • Who are the key stakeholders in my sector in the UK?
  • What are the major considerations for buyers in my sector in the UK beyond price?
  • How do I need to present my company in the UK to challenge domestic competition in the market?
  • Who are the potential competitors for my business in the market? How strong is their foothold in the market?
  • What are the differences between how my sector operates in Ireland vs the UK?
  • What is the post-Brexit outlook in the sector?
  • How are Irish companies viewed in the UK?
  • What are the benefits of a UK based office? virtual or physical?
  • What do I need to do to set up a UK registered company?
  • What are the key sources of UK market information in my sector?
  • What supports can Enterprise Ireland UK provide in the market?

For more, please reach out to the MA here and be sure to check out our Going Global Guide

Enterprise Ireland’s top tips for entering the US market

Ireland enjoys a unique advantage in trading with the US because of our deep historical links, in fact, it is Ireland’s second-largest export market, with almost 800 Irish companies operating across the United States.

If you are considering doing business in the US, please be sure to explore our tips to enter the market below and also be sure to reach out to our dedicated team.

  • The US is the world’s largest economy and is it the most competitive market in the world. Ensure your value proposition is differentiated before you try to acquire customers.
  • The population of the State of Alabama is the same as the entire Republic of Ireland, while Ireland’s GDP is similar to that of Colorado. It may be of benefit to take a more regional approach to your US market development, and not just gravitate to the main cities and economic centres. Spend some time understanding where the largest market opportunity and highest concentration of your customers may be.
  • Building rapport is very important in the US. Spend time developing relationships with your key target customers/buyers.
  • Attention to detail is valued in US business culture. US buyers will expect high-quality sales & marketing collateral, and it’s important that your collateral is updated with US-specific grammar and spelling.
  • Approach the market with a “customer needs” perspective not a “product” or “technology” perspective. What is the problem you are trying to solve with your product or service?

For more be sure to check out our Going Global Guide 

If you would like to know what to prepare ahead of your first MA call, click the graphic below

hospital supply chain

How Irish medtech suppliers can navigate the US hospital supply chain

For Irish medtech suppliers, few opportunities are more attractive than successfully breaking into the US market. But doing so is not always easy.

 That isn’t just because the US medtech market is fiercely competitive. It’s also a matter of navigating a supply chain environment which is radically different to that familiar in Ireland.

Enterprise Ireland recently hosted a knowledge event aimed at helping Irish suppliers to prepare for entering the market. Dave Walsh, Director of Supply Chain Administration at the Boston’s Children Hospital, and Charlie Miceli, VP Network Chief Supply Chain Officer at the University of Vermont Health Network, shared insider insights on what US hospitals expect from potential partners.

Understand the role of supply chain

As an Irish supplier, you should begin by understanding the landscape and, importantly, how communication, collaboration and relationship building are more important than what Dave described as “the hot pitch”.

“If this isn’t a need we have right now, we’re going to tell you,” he explained. “If the opportunity isn’t there right now, but we think we’re going to need it in six months, we’re going to keep in touch with you.”

Establishing an introduction is based on networking and understanding that, as long as a deal is mutually beneficial, business can inevitably be done.

“We’re a team, we all work together. We want to work with you if there’s a benefit on both sides.”

Get to know different types of hospitals and procurement methods

Buying in the US market usually takes place either directly, when a hospital or health network deals with distributors and suppliers, or via a group purchasing organisation (GPO), in which smaller systems pool together to help them buy at scale.

While the promise of bigger orders can make large networks and GPOs attractive, their scale can also force them to be more risk-averse, so that sometimes it is more beneficial for Irish companies to work directly with smaller hospitals.

“Getting in at group level can reap huge rewards. There are six hospitals in the University of Vermont Health Network,” explained Charlie. “But innovation can sometimes take place at smaller hospitals.”

Make sure you have boots on ground

As working with a supplier on another continent can be perceived less favourably than local alternatives, perceptions of risk must be minimised for potential buyers.

“Being Irish can raise questions,” Dave said, “‘It’s a good quality product, but what if we have problems?’”

The most effective solution is also the most straightforward: to be present in the US, and available for regular meetings with key stakeholders. While that can mean frequent flights, it is also often essential to success.

US hospitals and GPOs will often expect to meet the boss, and just not their representative or distributor. The founder and head of your organisation will bring a uniquely intimate knowledge of the solution, and their involvement is also crucial to the collaborative approach required by US supply chains.

Consider your first move

While your first interaction is crucial, it will also depend on where your business is in its growth pattern. Begin by determining what stage you are at, and then select the time and venue to meet the right people.

“Trade groups are great,” explained Dave. “Whether national or smaller, such as regional meetings, they’re all worthwhile. I can meet 50 people in two days at these events. It could take an entire year at the hospital to achieve that.”

And while getting a slot at some trade shows can be expensive, ‘reverse expos’ – in which buyers occupy stands and are approached by suppliers, rather than the more traditional format – offer an increasingly popular approach to networking.

“Is it worth investing for a small company? A booth can be pricey but get into a reverse expo with the right plan and it could easily become money well spent.”

Consider your reimbursement model

Frustratingly for suppliers, there is little consensus on how the reimbursement model may change with the rise of the Internet of Things (IoT) and subscription models.

However, it is a matter of ‘when’ rather than ‘if’ things will change, and the best advice for now is to monitor the market closely to prepare for an impending shift.

“If change happens, it will happen quickly,” commented Charlie.

Avoid the ‘circular wheel’

The selling cycle in the US medtech market can be very long – approximately six months for a defined need, followed by a vetting cycle of three to six months, and longer again if a solution is not in response to a specific requirement.

For that reason, finding the right person at the right stage is crucial. Every time you’re passed sideways to another department or another contact can add days or weeks to an already lengthy process.

There is one simple way to avoid ending up on what supply chain calls the ‘circular wheel’: ask the question of how to engage.

“Try to understand what the roles are,” said Dave. “Ask us the question, we’ll find you the right person to talk to at the right stage.”

Take the heavy lifting off IT

“As everything becomes more digital, there is more pressure on IT departments in hospitals,” Charlie noted. “So you need to be able to take the heavy lifting off IT.”

At a minimum, it means that producers of digital products should be able to demonstrate an intimate working knowledge of technical details, from the interface standard to security risks and mitigations.

But beyond that, it may also have implications for companies that rely on free pilot schemes in healthcare facilities as part of their sales process. Such is the time and cost associated with implementation, that they must also be sold convincingly to make the offer worthwhile.

“A pilot has to go through the governance process, because IT has bigger cost growth than other departments,” added Charlie. “Free pilots do happen, but not without work. Implementation will be costly.”

Know your suppliers

There are few, if any, medtech suppliers who do not rely in some way on third-party suppliers. It’s crucial to recognise that, as the producer, you hold full responsibility for who they are, how they work, and their components or contributions to your end product.

“You’re accountable for everyone who feeds into your product,” explained Dave.

“It’s important to bear in mind that customs, standards, specs, and so on will vary from region to region.”

Use the data you have

One of the perceived barriers to entry into the US market is a lack of data, particularly in instances where it’s difficult to implement an initial pilot.

While local data is always preferable, due to differences in health system structures, European and Irish data can nonetheless make an incredibly strong contribution to the case. In fact, depending on the industry, it can even offer an advantage if it happens to be one where the EU is seen as a leader.

“Sterilisation, for instance, is more advanced in EU than the US,” said Charlie. “And the latency is five to seven years, due to testing and so on. So the demonstration of reliability and data from successful European adoption can make all the difference.”

 

Ireland enjoys a unique advantage in trading with the US and is Ireland’s second largest export market. Learn more about entering the US market here.

Bellurgan Precision beats the challenge of staying competitive

“Enterprise Ireland has been so supportive over the years, it’s not just about money. What they do is open your eyes to opportunities.”

CEO, Stephen Hogg

Key Takeouts:

  • Bellurgan Precision specialises in solving complex design and manufacturing issues, focusing on the medical device and aerospace sectors among others.
  • Competitors in low cost countries meant that Bellurgan must continually add value to their offer in order to stay ahead of the curve.
  • Project support from Enterprise Ireland enabled them to invest in new technologies and training in order to build capabilities and reduce production times.

Case Study: Bellurgan Precision

Components produced by Bellurgan Precision at its state-of-the-art facility on the Cooley Peninsula can be found in a range of high-tech products, ranging from medical devices, aircraft parts, and electronic systems, developed by some of the world’s leading manufacturers.

Having recently celebrated 40 years in business, the family-owned company employs close to 100 people, generating worldwide sales of €12 million, and is targeting annual growth of between 15% and 20% over the next three to four years.

For companies in the sector, remaining competitive is a challenge. Bellurgan’s success is built on a combination of engineering expertise, quality, and an unwavering commitment to customer service. The company’s focus on operational excellence enabled it to add value beyond simply competing on cost, as Bellurgan Precision invests in innovative technologies, processes and skills to get ahead of international competition.

Selling engineering expertise

“We don’t really have a product,” says CEO, Stephen Hogg. “We sell engineering expertise. Our success is built on deep engineering capability and quality standards. We have an excellent team committed to solving complex design to manufacturing problems. When a customer comes and sits down to talk about the product they want us to make for them, they often leave two days later, having found that there are far fewer parts involved than they first thought.”

This is very important in the highly regulated medical devices areas.

“70% of the cost of a product is locked in at the design stage,” Hogg explains. “We help our customers cut out costs at that point. These products have to be approved by the FDA and so do the supply chains. It’s very hard to change the design of a product once it has been approved.”

The company’s principal focus is on the medical devices and aerospace sectors, with many of the world’s top companies on its highly impressive customer list.

“This is largely driven by demographics,” Hogg points out. “The global population is expanding, and there is strong growth in the middle classes, in countries like India and China, which is increasing demand for services such as healthcare and travel.

 

Competing against low-cost countries

“We are either a Gold partner or number one supplier with all of our customers, who are all global multinationals,” he continues. “Virtually everything we do is exported. Less than 1% is used on domestic market. We might sell products to multinationals based in Ireland, but they will ultimately integrate them into products which are shipped around the world.”

“Remaining competitive is a constant challenge. “We have to compete against low-cost countries, and this means continuously adding value for our customers and investing in new technologies, processes and skills to stay ahead,” says Hogg.

Support from Enterprise Ireland for continuous improvement

Enterprise Ireland has been so supportive over the years,” he adds. “It’s not just about money. What they do is open your eyes to opportunities. They took us on visits to world-class players like the Mayo Clinic and Cleveland Clinic. We were able to hear world-class clinicians talking about their work and this was a great help to us. Enterprise Ireland also strongly supported our continuous improvement programme – we just couldn’t compete without that.”

One example of that programme was the implementation of lights out manufacturing. This allows a highly sophisticated machine to run 24/7 while only being attended to for one shift a day. The pallets are set up by the operative and automated process takes over after that.

“We have also bought a robotic system to help place parts and that gives us the flexibility to make better use of high-end machines”, Hogg adds. “Enterprise Ireland has also helped us with our investment in these technologies. We have participated in a number of different Enterprise Ireland programmes, with the most recent one being Lean. It impacts everything. The great thing is that it is open to everyone to get involved. Everybody can take part and make suggestions for improvements and solve problems. It changes the way people approach problem-solving. It’s hard to put a value on that.”

Looking to the future, he says that growth will come from existing and new market segments and building strong relationships with customers.

“You have to be out in the market all the time, continuously planting acorns. You can’t just sit back on what you have. It’s all about relationships and we get great support from Enterprise Ireland in terms of trying to attack new markets and new market segments.”

Learn more about Enterprise Ireland’s Competitiveness supports here.

US tax

How to tackle the US tax system

With three different layers of taxation – at federal, state and local levels – the US tax system can be both complex and confusing. Irish firms considering doing business in the states should seek tailored advice from a certified public accountant or a tax lawyer.

The following pointers may work as a starting point to alert you to possible liabilities. Download the full Going Global USA: Learn your Legals guide now.

Individual taxation in the US

Irish citizens become liable for US income tax assessment if they are holders of a permanent residence card – a ‘Green Card’ – or if they are deemed to have ‘a substantial presence’ in the United States.

You will be deemed to have a substantial presence in the US if: you have been present in the country for 31 days in the current year and a total of 183 days or more in the last three years, based on a calculation including all days you were present this year, plus 1/3rd of the days you were present last year, plus 1/6th of the days you were present two years ago.

For example, if you were present in the US for 126 days in 2018, 2017 and 2016, you would be judged to be ‘substantially present’ and liable for US income tax assessment. Because 126 days in 2018 + 42 days in 2017 (1/3rd of 130) + 21 days in 2016 (1/6th of 130) equals: 189 days, which is greater than the 183-day threshold.

If you only visit the US for a maximum of 120 days a year, you do not cross the 183 day ‘substantial presence’ threshold.

Tax treaty benefits

An Irish company’s profits may become subject to US taxation once it is deemed to have a US permanent establishment (PE), under the terms of the Double Taxation Treaty agreed between the two countries in 1997.

An Irish company will be adjudged to have a permanent establishment in the United States when it has a fixed place of business there, or when it is conducting business activities through a dependent agent, which can include an employee of a third-party company.

The Double Taxation Treaty allows Irish residents and entities to be taxed at a reduced rate on certain types of income. For example, the normal federal rate of tax for foreign corporations is 30%, but where the 1997 treaty applies, it is 15% for Irish companies. Qualifying dividends are usually subject to 30% tax, but where the treaty applies it is 5%. Instead of paying 30% on royalties, or on interest paid by US obligors, in both cases, Irish companies pay zero.

To become eligible for any of the tax treaty’s benefits, Irish companies must provide customers with a US tax form, Form W-8BEN, which includes their US taxpayer identification number. Each issued Form W-8BEN is valid for three years.

Once an Irish company hits the threshold for US corporate taxation, it makes more and more sense to form a US subsidiary or entity instead of operating a branch office.

US state and local taxes

US state and local taxes, including income tax, sales tax and use taxes, are not covered by the Double Taxation Treaty. As a result, Irish companies may accrue state and local tax liabilities when none apply at federal level.

Taxation varies significantly from state to state and within states, so professional advice is vital, particularly when negotiating the ‘apportionment’ system, which is designed to mitigate income being taxed in multiple states.

As in Ireland, corporate taxpayers are taxed on an annual basis, and you may choose to organise your tax year so that it differs from the calendar year. New corporations can use a short tax year for their first tax period, if it benefits them. Self-assessed tax returns must be filed by the 15th day of the third month following the close of a tax year. Taxpayers can obtain a six-month extension to their filing, depending on a number of conditions including depositing the full amount of tax due.

While federal tax returns can be sent by hard copies in the post, online, or by using IRS tax-preparation software, Enterprise Ireland recommends that Irish companies use a professional service provider.

US tax credits

There are a number of tax credits and incentives available to foreign companies operating in the US. For Irish companies, those at state level are most relevant. Provision of tax credits varies greatly but can include credits for: jobs and hiring, investment, alternative and renewable energy, R&D, and using a particular port for imports and exports.

Some of these credits can be claimed retroactively. Furthermore, it is sometimes possible to negotiate a discretionary incentive with a state before commencing an investment project.

Transfer pricing

It is important that an Irish parent and its US operating subsidiary deal with each other on an arm’s length basis to minimise the risk of tax authorities challenging whether income has been earned in the US or in the firm’s home country.

Care must be taken to avoid challenges resulting from invoicing a subsidiary at a higher price than would be charged to a third party, and to avoid US customs problems when invoicing a related party at a price that is seen as too low.

Advice should be taken on the funding of US operations when investing in a start-up or in expansion, especially when looking for the most tax-efficient way to secure borrowings to fund expansion in the United States.

PwC has published a guide on US tax issues, which you can download here.

The IRS has an information page for foreign businesses here.

Download the full Going Global USA: Learn your Legals guide now.

How Focusing on Competitiveness Drives Innovation in vStream

 “Because we are selling something innovative we have to be as efficient as possible in order to get the value out of what we charge clients. That’s very important when you are creating ‘world firsts’, as we often are.”

 

Key Takeouts:

  • The recession in 2008 prompted vStream to develop a presence in the UK sooner than planned.
  • 70% of vStream’s revenues come from outside Ireland, including international sports teams and global software developers.
  • Management worked closely with Enterprise Ireland to develop an operational strategy, as efficiency is key for a creative agency.

Case Study: vStream

By boosting its competitiveness Dublin-based vStream is spending more time innovating and less time administrating.
The award-winning experiential technology company creates immersive consumer experiences for big-brand customers.

Set up in 2007, one of vStream’s first Irish commissions was a 3D rugby and soccer fan experience created for Dublin’s Aviva Stadium. The personalised, stereoscopic adventure allows visitors to the stadium to be individually called up to play for Ireland, and to do so ‘virtually’.

In 2008, the recession prompted vStream to focus on competitiveness and develop a presence in the UK sooner than planned. It paid off, resulting in a major commission from the Westfield Shopping Centre group to create world-first experiences, from ‘5D for Christmas’ to clickable video content for Spring-Summer shoppers, launching in Westfield Stratford City, one of Europe’s largest shopping centres.

Commissions from further afield followed, including work for the San Francisco 49ers – an American Football team – and the US Super Bowl.

Today, 70% of vStream’s revenues come from outside Ireland. The company has worked with global brands such as Formula One teams McLaren and Mercedes F1, and enterprise software maker SAP, using leading-edge technologies, such as Augmented and Mixed Reality and gestural holographic interfaces, the kind found in Tom Cruise movies.

Using Microsoft HoloLens, vStream recently created a holographic, interactive tour guide named Simone to demonstrate one of carmaker Audi’s newest high-tech models, a world first.

At vStream’s core are the complementary skills of co-founders Niall O’Driscoll, a creative director, and Andrew Jenkinson, a technologist.

Working with Enterprise Ireland to boost operational excellence

“What we do has always been very different and big brands are always trying to tell their story in a new way,” says O’Driscoll.

It’s a competitive space, however. Management at vStream has worked closely with Enterprise Ireland to implement operational excellence. “There are other companies in our area. They don’t look exactly like us but we cross over a number of different competitors,” says O’Driscoll.

Creativity drives innovation at the company and if the technology required to deliver an experience doesn’t exist, “we build our own”, he says. To ensure vStream has the resources to do so, operational efficiencies are vital.

“Because we are selling something innovative we have to be as efficient as possible in order to get the value out of what we charge clients. That’s very important when you are creating ‘world firsts’, as we often are.”

vStream drives competitiveness from concept through to delivery

The company recently introduced 10,000ft, a resource management and time-tracking software programme. “It allows us to track hours and integrates with our accounts process. We are trialling it as part of changes to our internal management processes designed to boost efficiencies and drive competitiveness across the board, from concept through to delivery.”

The company has also introduced cloud-based collaboration tool Slack. “Email is unwieldy, especially long chains of emails. Slack allows us to organise our communications much more efficiently.”

Much of vStream’s intellectual property has been patented and future revenues will increasingly come from licensing its technology around the world. Here, too, Enterprise Ireland funding has helped.

“We had created all this value but had realised only a small amount from our IP. We have done the R&D, proved our product in the market, now it’s about taking it out to compete in as many markets as possible. Future growth will come from exploiting that IP commercially and we are hiring someone now to help us make that move from being a projects-based to a services-and-products-based-company,” says O’Driscoll.

vStream drives competitiveness from concept through to delivery

He knows that to win in a global market no company can afford to carry excess weight.

“You need the flexibility to be able to diversify as we did during the recession,” he says. “The market shifts and changes all the time and to compete you have to be efficient and innovative enough to turn on a dime.”

Learn more about Enterprise Ireland’s Competitiveness supports here.