Expanding into the US: the finance infrastructure most scaling businesses get wrong

The decision to enter the US market is usually made on the strength of a customer pipeline, a product fit, or a strategic imperative. The finance infrastructure that needs to be in place before meaningful US revenues start flowing is rarely given the same priority. It should be.

The gap between a UK or EU entity receiving its first US customer payment and having a properly structured, tax-efficient, investor-ready US finance operation is significant — and closing it retrospectively is materially more expensive than building it right first time.

The entity question: why Delaware matters

For any business planning to raise from US institutional investors or build significant US operations, the entity structure question is not really a question. US venture capital investors strongly prefer — and in most cases require — a Delaware C-Corp as the investment vehicle. The reasons are structural: Delaware corporate law is predictable, well-tested in courts, and deeply familiar to every US lawyer and investor involved in the process.

The typical structure for a UK or EU business entering the US market involves incorporating a Delaware C-Corp and establishing the existing UK or EU entity as a wholly-owned subsidiary — or in some cases a parallel operating entity — beneath it. This "flip" structure, as it is commonly called, requires careful planning around the tax and commercial implications in both jurisdictions. Done well in advance of a fundraise, it is manageable. Done under time pressure during a live investor process, it creates risk to the timeline and occasionally to the deal itself.

Accounting standards: US GAAP vs IFRS

UK and EU businesses report under IFRS. US investors, US acquirers, and US public markets operate on US GAAP. For most early-stage SaaS businesses, the practical differences are manageable — the two standards have converged significantly on revenue recognition (ASC 606 and IFRS 15 are closely aligned in principle) and lease accounting. But the detailed application guidance differs, the presentation formats differ, and US investors expect US GAAP-format reporting as a matter of course.

For a business at Series A or approaching Series A from US investors, this means at minimum maintaining a parallel set of management accounts in US GAAP format, and — if a US listing or US acquisition is a plausible exit path — beginning the formal transition to US GAAP as the primary accounting standard for the group.

Transfer pricing: the most commonly underestimated risk

When a UK entity and a US subsidiary transact with each other — for services, for intellectual property, for shared functions — transfer pricing rules require those transactions to be priced as if they were between unrelated parties. This is the arm's-length principle, and it applies under both OECD guidelines and the US Internal Revenue Code.

For a SaaS business, the most common inter-company transactions are an IP royalty (the US subsidiary pays the UK entity for the right to use and commercialise the product in the US) and a services agreement (covering shared functions — finance, HR, legal, product — that are provided by one entity to the other). Getting both of these structures right, with documented contemporaneous transfer pricing policies, is not optional — it is a US tax compliance requirement and an IRS audit risk if done poorly.

US sales tax: not VAT

UK businesses entering the US often assume that US sales tax works like UK VAT — a federal, unified system with a single registration and straightforward compliance. It does not. US sales tax is administered at the state level, with each of the 50 states setting its own rates, its own rules on what constitutes taxable supply, and its own economic nexus thresholds that determine when a business becomes obligated to collect and remit.

For SaaS businesses specifically, the treatment of software as a service varies significantly by state. Some states treat SaaS as taxable digital goods. Others exempt it. Others tax it only if there is a tangible component. The 2018 South Dakota v. Wayfair Supreme Court decision established economic nexus as the trigger — so a SaaS business with customers above a certain revenue or transaction threshold in a given state creates a tax collection obligation in that state, even without any physical presence there.

US payroll and employment: state-by-state obligations

Hiring in the US creates immediate payroll tax obligations, benefits obligations, and in many states — additional registration requirements, paid leave mandates, and local employment law compliance. The US has no equivalent to the UK's relatively unified employment tax system. Each state where you have an employee creates a separate set of obligations.

For a business hiring its first US employees, the immediate practical requirements include registering for state payroll tax, setting up federal tax withholding through the IRS, establishing a compliant benefits structure (health insurance is not statutory in the way UK employer pension contributions are, but is expected by most professional hires), and complying with state-specific employment law — including at-will employment documentation, required notices, and local minimum wage requirements where applicable.

What "investor-ready" means in a US context

US investors do not review management accounts in the same format UK investors do. They expect a P&L presented in US GAAP format, with revenue recognised under ASC 606, operating expenses broken out by function (R&D, S&M, G&A), and metrics presented in the format that is standard in US SaaS — ARR, MRR, NRR, burn multiple, CAC, and LTV. The absence of this format does not disqualify a business from a US raise, but it creates friction — and in a competitive process, friction costs time and credibility.

Beyond the format, US investors expect a finance function that is operating at the standard the capital will demand post-close. That means monthly management accounts produced within 15 business days of month end, a rolling 12-month forecast updated monthly, and a data room that can be shared quickly and withstands diligence.

The case for a fractional CFO in US expansion

A full-time US CFO hire before the US business is of sufficient scale to justify the cost is a common and expensive mistake. Senior US CFO compensation runs to $250,000–$400,000 base, plus equity and benefits — a cost structure that is hard to justify until US revenues are material and US operations are complex enough to require a dedicated senior finance lead.

A fractional CFO with direct US market experience can cover the ground that matters — the entity structure, the investor relationships, the GAAP accounting, the transfer pricing — at the point when it is needed, without the overhead. As the US business scales to the point where a full-time hire is justified, the fractional engagement provides the transition: the processes are in place, the investors know the business, and the new CFO walks into a finance function that is already running at the right standard.