Legal compliance for a startup doing business in the US
Ivan Bozic
5 replies
Hey PH!
We're working on a startup and we're based out of the 🇪🇺 European Union. But our target audience are companies all over the world, including the US and the EU where we will probably focus a lot of our marketing efforts on.
This is the first time we're launching a business that will need to store and process data from companies in the US, so I wanted to check in with the ProductHunt members to see if you have any recommendations on how to make sure that we're fully compliant on all legal fronts.
Note: we plan to open up a company in the United States (TBD on location and exact type of incorporation).
More concrete questions:
- How to make sure that we're invoicing both our US and EU-based clients properly from the tax side of things?
- How do we make sure that we're compliant with all the different privacy regulations?
Does anyone have experience with this and can help us find someone or a company who can help us make sure we're on track?
Thanks! 🤗
Replies
Sven Radavics@sven_radavics
intribe | Tinder for Brand Partnerships
Hi Ivan,
Recommendation with regards to 'be compliant on all legal fronts' would be to get a lawyer because that's such a big statement.
I have a great lawyer that's reasonably priced compared to a lot of lawyers focussed on startups that think all startups run like silicon valley startups with multi-million dollar seed raises. If you'd like an introduction, let me know.
In general though, there aren't any big gotchas - just small/normal requirements for each step.
Re. your concrete questions:
1) This is more a question for your accountants and is mostly a sales tax conversation, although, depending on your industry, there could be others involved. Sales tax is a state by state thing in the US.
You can actually start selling before you tackle this because there's a threshold before you need to report/pay.
Some payment gateways will help you deal with the sales tax. Stripe does this for both the US and some other countries. You'll need to check them out to see if they cover enough of Europe for you.
Also, there are services like paddle.com who are a reseller and become the vendor of record. They manage all tax issues for you. Some people absolutely love them, some people think they are a rip off. That's for you to decide - but certainly worth checking out in your research.
2) The 'good news' with regards to privacy legislation is that the US is not anywhere close to Europe.
That is slowly changing. Talk to a lawyer to get the latest but compliance with privacy in the US will be much easier to deal with than in Europe.
With regards to privacy laws it will depend a lot on your industry. If your product is dealing with Government or with Financial Products, you will have more onerous requirements than if you're just selling to your average small business, for example.
Hope this helps.
Cheers,
Sven
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Pincone
Hi @sven_radavics,
first off, thanks for the detailed reply! I'll try and answer some of the items below.
Re: Invoicing — As I mentioned, we'll be setting up a company in the US, and we're looking at using Stripe as our payment provider.
Re: Privacy — Thanks for the heads up, it seems that we'll be pretty covered in the US if we comply with the EU-based privacy regulations. We're planning to mostly target SMBs so no government institutions and not a financial product.
It seems that we can basically proceed as planned, and run everything by a lawyer. Can you make the introductions to the lawyer you mentioned in your post? Feel free to email me at ivan(at)arsfutura.com.
Thanks!
Ivan
Hey @sven_radavics just wondering if you'd gone through this recently?
Hi Ivan,
I'm a NY-based corporate, startup, and transactional attorney that has advised many clients at all stages of growth. Below are some general principles (not legal advice!) that hopefully point you in the right direction.
It's hard to be fully compliant on all legal fronts right out of the gate in the US, especially when running an early-stage startup. I generally advise clients to first address big risk areas and focus on less risky activities later on as the business grows. For example, registering a trademark is not something I feel is truly necessary for most early-stage startups. The risk of someone stealing your name or logo is relatively low when you're first starting out (and you might decide to change your name or logo in the future depending on customer sentiment anyway). However, complying with data privacy and security laws can be much more important for many companies, as you indicated in your post. You can talk to a lawyer for an hour (many will do free consultations) to understand which areas of your business present the most risk. It's hard to answer questions like this without more information about the business and the industry. Some industries are more regulated than others in the US (and consequently, certain businesses need to do more compliance work).
Generally, it's a good idea to operate through a corporate entity that limits personal liability (like an LLC or a c-corporation), to have basic contract templates set up, have an accountant or a good handle on the US tax code (which can be quite complex for small businesses), ensure that you are storing, using, and transmitting data responsibly, have a Terms of Use and/or Privacy Policy for your product if applicable, and ensure that you are complying with labor and employment laws and regulations.
Regarding data storage and usage, specifically, there are many companies that try to automate data privacy and security law compliance, but the laws in the US vary by state and there is currently no overarching federal data privacy law. OneTrust and UnitedLex are two companies that either automate or consult on data privacy compliance. There are also smaller vendors that can do this work, but the laws are constantly changing and fully automating a compliance program can be challenging because compliance depends on the nature of the business and its users.
Those are just a few thoughts and I definitely recommend you talk to a lawyer to do an initial consultation and flag things that are worth looking into more. Hope that helps! Good luck!
Pincone
Hi @dave_ugelow, thank you for the detailed answer! You've made some really great points. We're looking to incorporate over the next month or two and then will tackle the privacy and law compliance right after that.
Again, thank you and I'll reach out once we're closer to launch!