American labour law: what you need to know
You want to set up your company in the USA, but don’t know how to deal with American laws. Contracts, minimum wage, working hours, paid holidays, social protections… But what rules apply in the United States?
3 key things to know about US labour law
Oral employment contracts
In the United States, there is a very common practice in employment contracts: oral employment contracts. These, also called “at will” employment contracts, are exclusively verbal (in France, for example, we use written employment contracts).
Thus, even if the contract is the result of a verbal agreement, the contract is deemed to exist between the employer and the employee.
Unlike the employment contracts we are used to, these types of contracts can be terminated at any time, at the initiative of either the employer or the employee, without justification, without reasons and without notice. The big difference here is that the contract can be terminated without notice.
However, in the law there are grounds for illegal dismissals in the case of discrimination, violation of public interest, retaliation for reporting, etc.
In practice, however, both parties usually give two weeks’ notice before an employee leaves the company for good.
Nevertheless, it is noticeable that more and more employers in the USA are using the written contract. This is the case when the company in the USA hires a highly qualified employee, it allows them to protect themselves from any type of legal action from the employees.
If the employer decides to draw up an employment contract, it will usually contain the following elements
- The date of validity of the employment contract if it is a fixed-term contract
- Details of the clauses agreed by both parties
This employment relationship, governed by a written contract, is called a “Contract Employee”.
Wages, hours, holidays: American working conditions very different from those in France
In the United States, the federal gross hourly minimum wage has only been set at $7.25/hour since 2010. This minimum hourly rate is guaranteed to all employees; it is also called the subminimum. However, each state is free to set its own value for this hourly rate: for example, it is $10 in California or Massachusetts, $9 in New York, $8.05 in Florida, or $5.15 in Georgia. The proposed minimum wage for each state can be found online: https://www.dol.gov/
It should be noted, however, that in the event of a dispute, the law most advantageous to the employee applies.
In terms of employee payment, it is possible to pay an employee by the hour (Hourly Position) but also by the flat rate (Salary Position).
As far as working hours are concerned, it should be noted that there is no limit to the number of working hours per week. It should be noted, however, that the usual working time is an average of 40 hours per week. Beyond that, overtime is paid at 1.5 times the basic hourly wage, but this is not a legal rule.
Comme pour le temps de travail, il n’existe pas de règlementation pour encadrer les congés payés. C’est au bon vouloir de l’employeur d’accorder des congés payés à ses employés. Cependant, on recense environ 90% des employés qui bénéficient de congés payés ou non-payés.
On s’aperçoit qu’en pratique, 2 semaines de congés payés par an sont octroyées à l’employé (après la première année de travail).
Leave for medical reasons
In the USA it is possible for an employee to take up to 12 weeks leave per year. This leave may be for specific medical reasons or for family reasons. These 12 weeks will of course be considered unpaid, but it ensures that the employee remains in their job until they return.
The cases in which leave can be taken are
- Birth of a child (up to the age of one)
- Serious illness of spouse, child or parent
- Serious illness directly related to the employee
Social security charges in the US
Social charges in the US are known to be lower than in France, for example. In the USA, they amount to approximately 7.65% for employee charges and 15.55% for employer charges.
The latter are intended to finance the unemployment insurance scheme and the disability scheme (occupational illness/workplace accidents). There is also about 1.45% dedicated to the financing of Medicare (hospitalization).
Since 2015, the legislator has required companies with more than 50 employees to take out private health insurance for their employees who work more than 30 hours a week. For employees of companies with less than 50 employees, the financing of the health insurance remains at their expense. It is therefore strongly recommended that you take out health insurance in case of health problems, as medical costs in the USA are high.
American labour law is quite different from French or European labour law. It can be described as a labour law without any real framework or regulation. It is therefore essential that you become familiar with the regulations in force before starting your job search or before recruiting a new member to your team.
For more information, contact our Orlando office at: firstname.lastname@example.org .
Choose Florida to start your business
More and more entrepreneurs choose Florida and more particularly Orlando to develop their business.
Setting up a business in the United States is not something you can improvise, you have to weigh the pros and cons and take an interest in the potential tax optimization that could result from it.
Fact! The decision to set up in America has been made, you are now hesitating as to the choice of the state in which you will set up your company.
As many choices as there are states!
Your choice is between two states: Florida or Delaware.
In both cases, Florida and Delaware offer zero income tax.
However, these two states have many differences. To know:
1- If you choose Florida to locate your business then you will benefit from a physical address for your offices which will allow you to open a bank account locally much more easily and quickly
2- Having your company in Florida means benefiting from the notoriety of this state and its good image. Delaware suffers from the image of a tax haven that is associated with it. Read here: Why you should avoid Delaware.
3- It is true that the cost of creating a company in Florida is higher than a company in Delaware, but this difference is that of banking and fiscal tranquility!
Do not hesitate to contact us to validate that Florida is the right place for your business needs.
Your final choice is to start your business in Florida
Why Florida, why Orlando
In the USA, Florida is known to be one of the favorite destinations for Europeans and Quebecers.
The main reason is the time difference. Indeed, there is only 6 hours time difference with Europe which is very advantageous to do business with European companies. One should also not neglect the daily flights between the USA and Europe.
If expatriates choose Florida, it is not by chance. Indeed, in general, the cost of living is much lower than in New York for example. Also, the economy as well as the tax rates are much more advantageous which offers more benefits for foreign entrepreneurs.
Finally, with rates of return much higher than other major U.S. cities, Florida is the ideal place to start a business.
Studying the American market
Before starting a business in the U.S., make sure you have done a preliminary study to validate the viability of your business. Many companies close after only a few months because they did not know the market.
If you prepare your installation and if you do your market research correctly you could quickly start generating very large profits. Indeed, the state of Florida is known to host some of the biggest American companies: Burger King, Disneyland, etc.
This is why early research is more than essential to the success of your business.
Choosing the LLC in Florida
Once the idea is found and studied, it is time to choose the legal structure and to start the administrative steps to incorporate your company. The most common legal form used by expatriates is the LLC. (See the article on LLC).
The LLC is the quickest and easiest form of incorporation in the US to create a company. This type of structure is the ideal choice for start-ups and medium-sized companies.
It should be noted that Florida has one of the lowest taxes in the United States, which makes it the ideal place to do business.
Taxes in Florida
There is no state income tax in Florida. There is only a 5.5% sales tax.
If you are not resident in the USA and you have an LLC, this type of company is tax transparent (it is not the company that is taxed but its partners).
This is why this destination is favored by entrepreneurs but not only, retirees also come to enjoy the sun and the tax advantages of living in Florida.
Florida, an excellent asset for your business
Florida has an excellent reputation in the business world. Although the income tax is zero and the rest of the taxes are low, the state of Florida is not on any of the OECD’s risk lists. It is therefore possible to manage your company from the USA or from abroad.
If you are ready to take the plunge, our firm offers its assistance for the creation and administrative follow-up of your company in the USA. We are registered as a Registered Agent and can therefore represent your company on American soil with the American authorities.
In the eyes of the law, we are your legal representative.
But not only that, in addition to this Registered Agent mandate, we can also take care of your company’s accounting in order to comply with American standards.
Contact our Orlando office at email@example.com .
Everything about the LLC in the US
What does this acronym refer to, which you must have come across dozens of times when talking about setting up a company in the USA?
Is it the best legal structure to consider, what are the advantages?
Let’s discover together the contours of this legal structure very appreciated by foreign entrepreneurs.
What is an LLC in the United States?
The acronym LLC stands for Limited Liability Company and is used for limited liability companies in the United States. Since the liability is limited, this means that the members of an LLC are by definition protected. They will not be held personally liable for the debts of the company.
Choosing an LLC is the easiest way to start your business in the United States. Indeed, the LLC is the lightest legal form to create a company there.
But not only that, the LLC offers many advantages for its owners in terms of taxes, profits and losses.
An LLC is a hybrid model between the corporation – for its limited liability, and the partnership – for its flexible organization.
A little history
Originally, there were 3 types of legal structures to start a business in the United States: the sole proprietorship, the partnership and the corporation. It was not until 1977 that the LLC was invented in the state of Wyoming to meet a new economic and business need.
It was only after the Internal Revenue Service (IRS) gave its approval that all other states legalized the creation of LLCs in their states.
But for what purpose? There was a need to create a structure that could be managed and taxed as a partnership while protecting the members from potential liabilities and losses as if it were a corporation.
Also, the law initially stated that an LLC had to have at least two members. It is now possible for an LLC to be composed of only one member.
What are the advantages of an LLC?
If you choose the LLC to start your business, you must keep in mind the advantages of this type of legal structure.
Possibility of not being resident in the USA
- Any foreigner can open an LLC in the USA without being a resident of the USA. You can open your LLC and live abroad.
Legal protection against debts
- Personal: with an LLC, your business debtors cannot affect you personally. Your assets are therefore protected;
- Professional: this is the only type of corporation that prevents personal lawsuits and debtors from liquidating your business in response to a judgment.
- Unlike other structures, the LLC is much more flexible and less expensive. This is a boon for Entrepreneurs.
- The income and expenses of an LLC are distributed to its members (the term “member” is used in an LLC, not a partner or shareholder) and thus the members avoid double taxation at the corporate and member level.
Taxation can be zero in the US if the company is considered as non-ETBUS (“Engaged in a Trade or Business in the US“). Don’t forget that it is not the company but its members who are taxed in their country of residence. This only concerns the so-called active income.
No limit on the number of partners
- It is possible to have as many partners as you want with an LLC in Florida, USA
More advantages to discover HERE.
How many partners for the LLC?
It is quite possible to create an LLC by being the only owner, just as it is possible to create a company with several members.
It should be noted that in order to benefit from zero taxation in the USA, it is strongly advised to have only one member (this simplifies the procedures for tax exemption in the USA). Thus, for federal tax purposes, you are considered a disregarded entity.
Members of an LLC can be individuals or corporations.
Is it possible for a foreigner to form an LLC in the US?
A foreigner can legitimately form an LLC in the United States. There are no restrictions on foreigners forming LLCs in the US.
A non-US resident is therefore free to form an LLC under the laws of the state in which he or she will form the business.
Create your company in the USA today
For your project, we strongly recommend you to choose the LLC in Florida. We do not propose the creation of company in Delaware, Nevada, New Mexico, Wyoming because it is usually impossible to open a bank account in the USA for companies registered in this state (more information on this article).
We therefore recommend Florida, which offers the same advantages while having a better image, and which especially allows to open a bank account on the spot.
For several years, we have been helping many entrepreneurs to create their LLC in the USA.
We invite you to contact us if you need more information about creating an LLC in the State of Florida in Orlando.
Our team can prepare a free, no-obligation quote that best suits your needs.
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