Why Choose Michigan for Your Foreign Subsidiary?

Posted by Sue Tuson on March 10, 2020

Sue Tuson

When making the strategic decision to expand a business into the U.S., it is important to carefully plan for the various challenges inherent in the process. Strategic issues include supply chain development, vendor management, and production optimization, while operational items include staff recruiting, human resources, sales management, and adoption and implementation of a robust marketing program. Add to these essential considerations the location for the subsidiary. In doing so, t’s important to factor in workforce education and quality, access to markets, robust logistics systems, tax structure, cost of living and more. There are many reasons to select one state over another, but Michigan offers an array of benefits that appeal to foreign companies. To help clients, prospects, and others, Clayton McKervey has provided a summary of the top opportunities below:

Robust Workforce – Ensuring there is a qualified workforce that can support the needs of the company is important when selecting a location. According to the Michigan Economic Development Council, the state has the highest concentration of engineers in the US, with 130,000 statewide. In addition, it also ranks in the top 10 in skilled trade workers, with 250,000 across the state. These numbers reflect the level of skill and education available to those who expand here.
Current Employment – To demonstrate the popularity of Michigan to international companies, another barometer is to look at employment levels. According to the Department of Commerce, foreign-owned companies employ over 238,100 Michigan employees. The countries with the most employees here include Germany with 38,000, Japan with 32,500, Canada with 25,400, The Netherlands with 25,000 and the United Kingdom with 24,400 employees.
Cost of Living – An important factor in attracting top-quality talent to the state is the cost of living. Most Americans choose the cost of living as an important consideration on where they live and work. Michigan’s cost of living is 10% below the national average and currently ranks as the fourth most affordable state in the country. In fact, Detroit has a sharply lower cost of living than many other areas. For example, Chicago is 17.3% more expensive, San Francisco is 62% more expensive, Washington DC is 42% more expensive, Brooklyn is 53% more expensive and Seattle is 39% more expensive.
Business Friendly – When an area is deemed business-friendly it often results in fewer taxes and more programs to support business growth. In Michigan, the corporate tax rate is 6% and the personal income tax rate is 4.25%; the sales tax is 6%. In addition, there are multiple state programs designed to incentivize growth, such as Jobs Ready Michigan, Good Jobs for Michigan and the Michigan Business Development Program. There are also ancillary services available through various organizations to help companies identify, assess and plan expansion. These organizations provide critical networking opportunities with law firms, accounting firms, and other experts to guide the process.
Logistics – Access to logistical infrastructure is essential to attracting foreign companies. In this regard, Michigan is uniquely situated, as it’s located within 500 miles of half the U.S. and Canadian population. There are 18 commercial airports within the state including Detroit Metropolitan Airport, which is one of the nation’s largest domestic airports.

There are many factors that influence where a foreign company decides to locate a subsidiary. While some of these are unique, it’s important to ensure the foundational items are in place. If you have questions about expanding to the U.S. or need assistance with an international tax or consulting issue, Clayton McKervey can help. For additional information please call us at 248-208-8660 or click here to contact us. We look forward to speaking with you soon.