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USA

Employer of Record United States

Global Expansion's Employer of Record services provide the ability to quickly grow, manage, and pay international teams, without the need for a local entity. Our award-winning tech platform plus integrated support services make hiring, managing and paying your global workforce a breeze.

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Hiring in the United States

For companies that want to hire employees and run payroll in the United States without first establishing a business entity or subsidiary, Global Expansion provides Employer of Record services (EOR USA).

Our EOR services streamline and simplify the global hiring process. We handle the core global HR tasks - compliance, contracts, payroll, global benefits, and more - so that you forgo hours of ongoing admin, human error, and risky compliance.

In the United States, companies would historically establish a subsidiary or branch office to legally hire in that country. With Global Expansion this step is no longer necessary. We have subsidiaries all over the world and therefore can legally hire on your behalf. The employees are ours only on paper and report directly to managers within your company.

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Labor Laws in the US

In the United States labor law, benefits, taxes, etc. vary between states. However, many employment laws in the U.S. fall under federal legislation. Federal legislation is what is featured in this hiring guide. We recommend that you utilize an Employer of Record service to help navigate states and federal employment compliance. 

Employment Contracts

United States labor laws standardize employment rules for business organizations and ensure the protection of workers. There are 5 types of employment contracts in the US.

  1. Full-time contract

    Employees under this contract typically work 35 hours or more a week. They’re also entitled to healthcare benefits, leaves and holidays, and other privileges like retirement plans.

  2. Verbal contract

    Verbal contracts are non-written employment agreements legally binding in the United States. Employers and employees discuss and agree on employment terms and conditions, including job role, duration, compensation, and other details, in the presence of a witness.

  3. Part-time contract

    These contracts apply to employees who work reduced hours — typically less than 35 hours weekly. Most employment contracts in this category provide more flexible schedules with a per-hour pay rate.

  4. Zero-hour contract

    Zero-hour contracts are for employees with on-call or seasonal work. These employees receive an offer only if there is work available. This contract typically specifies the minimum hours and shifts an employee can work per month.

  5. Freelance contract

    Freelancers are tapped to complete particular projects. Contracts for freelancers indicate the project details and duration, allowable work hours, salary payments, and other terms to protect the interests of both parties.

Employee Probation Period

There is no legally prescribed probationary period for a US employee, so it depends entirely on the arrangement that's been agreed between the employer and the employee. That said, a 90-day probationary period is standard in the US.

Annual Leave in the US

The Fair Labor Standards Act (FLSA) does not require payment for time not worked, such as vacations, sick leave or federal or other holidays. These benefits are matters of agreement between an employer and an employee (or the employee's representative).

US Public Holidays

Here is the full list of public holidays in the US.

New Year’s Day 1st January
Martin Luther King Jr. Day 20th January
Memorial Day 25th May
Independence Day 3rd July
Labor Day  7th September
Veterans Day 11th November
Thanksgiving 26th November
Christmas Day  25th December

 

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US Maternity Leave

Under the Family and Medical Leave Act (FMLA), most new parents are entitled to 12 weeks of unpaid, job-protected leave to care for a newborn or a newly adopted child.

There are some conditions:

  • Have worked for their employer for at least 12 months
  • Have worked at least 1250 hours over the past 12 months
  • Work at a location where the company employs 50 or more employees within 75 miles

US Paternity Leave

The rights and conditons for paternity leave in the US are the same as those conditions for maternity leave, please refer to the above section.

Sick Leave in the US

Currently, there are no federal legal requirements for paid sick leave.

For companies’ subject to the Family and Medical Leave Act (FMLA), the Act does require unpaid sick leave. The FMLA provides for up to 12 weeks of unpaid leave for certain medical situations for either the employee or a member of the employee's immediate family. In many instances paid leave may be substituted for unpaid FMLA leave..

Work Hours in the US

  • The Fair Labor Standards Act stipulates that a standard workweek consists of 40 hours.
  • Work done beyond 40 hours requires overtime pay.

Overtime in the US

The federal overtime provisions are contained in the Fair Labor Standards Act (FLSA). Unless exempt, employees covered by the Act must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay.

There is no limit in the Act on the number of hours’ employees aged 16 and older may work in any workweek. The Act does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime is worked on such days.

Termination of Employment in the US

There are no legal requirements surrounding termination of employment in the US.

Notice Period in the US

Generally, the labor act does not require employees or employers to give any notice period. However, the Worker Adjustment and Retraining Notification Act (WARN) protects workers, their families, and communities.

It does so by requiring employers with 100 or more employees (generally not counting those who have worked less than 6 months in the last 12 months and those who work an average of less than 20 hours a week) to provide at least 60 calendar days’ advance written notice of a plant closing and mass layoff affecting 50 or more employees at a single site of employment.

Employees entitled to notice under WARN include managers and supervisors, as well as hourly and salaried workers. WARN requires that notice also be given to employees' representatives, the local chief elected official, and the state dislocated worker unit.

Severance in the US

There is no requirement in the Fair Labor Standards Act (FLSA) for severance pay.

Regardless, severance pay is often granted to employees upon termination of employment. It is usually based on length of employment for which an employee is eligible upon termination.

Salary and Wages in the US

US Minimum Wage

The federal minimum wage is $7.25 per hour for workers covered by the Fair Labor Standards Act (FLSA), but states also have their own laws on minimum wage. In case an employee is subject to both laws, the higher amount applies.

Average Salary in the US

According to Statista, the average hourly salary in the US was $10,93 in October 2022. This equates to a yearly average of $22,734.4.

The mean annual wage for a full-time wage or salary worker in the United States is $53,490 per year, according to the U.S. Bureau of Labor Statistics (BLS).

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13th Month Salary in the US

There is no mandatory requirement to pay the 13th or the 14th month salary.

Income Tax in the United States

The United States levies tax on its citizens and residents on their worldwide income. US citizens and resident aliens may exclude, however, up to USD 112,000 (for 2022) of their foreign-earned income plus certain housing expenses if they meet specified qualifying tests and if they file US tax returns to claim the exclusion.

Non-resident aliens are taxed on their US-source income and income effectively connected with a US trade or business (with certain exceptions). A nonresident alien is subject to US tax on income that is effectively connected with a US trade or business and on US-source fixed or determinable, annual or periodic gains, profits and income (generally investment income, including dividends, royalties and rental income).

For individuals, the top income tax rate in the US for 2023 is 37%, except for long-term capital gains and qualified dividends. The United States income tax rates for 2023 are as follows:

Single Taxpayers

Taxable income (USD)

Tax rate (%)
0 to 11,000 10
11,000 to 44,725 12
44,725 to 95,375 22
95,375 to 182,100 24
182,100 to 231,250 32
231,250 to 578,125 35
Over 578,125 37

Married taxpayers filing jointly

Taxable income (USD)

Tax rate (%)
0 to 22,000 10
22,000 to 89,450 12
89,450 to 190,750 22
190,750 to 364,200 24
364,200 to 462,500 32
462,500 to 693,750 35
 Over 693,750 37
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Social Security in the United States

  • Under the Federal Insurance Contributions Act (FICA), social security tax is imposed on wages or salaries received by individual employees to fund retirement benefits paid by the federal government.
  • The following two taxes are imposed under FICA:
    • Old-age, survivors, and disability insurance (OASDI)
    • Hospital insurance (Medicare)
  • The taxes generally are borne equally by the employer and the employee, with the employer responsible for remitting each employee’s portion to the federal government.
  • The OASDI tax is imposed on the first $147,000 of wages, at the combined rate of 12.4%. The Medicare tax is imposed on total wages, at the combined rate of 2.9% (plus an additional 0.9% for wages above a certain threshold).

Contribution

Group 1083

OASDI

Medicare
Employer Group 1083 6.2% 1.45%
Employee Group 1083 6.2% 1.45%

Persons who are self-employed are subject to a separate tax that is comparable to the social security tax paid by employers.

The US has totalization agreements in force with over 20 countries to eliminate dual social security taxation and to help ensure benefit protection for employees.

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Deductible Expenses in the US

Personal Deductions

Citizens and resident aliens can deduct the following common items:

  • Qualified residence interest
  • State and local income or sales taxes and property taxes up to an aggregate of USD 10,000
  • Medical expenses, certain casualty, disaster, and theft losses, and charitable contributions, subject to limitations
  • Child care expenses.
  • Alimony (no longer deductible for divorces occurring after 31 December 2018)

Non-resident aliens may deduct, subject to limitations:

  • casualty and theft losses incurred in the United States
  • contributions to US charitable organizations
  • state taxe
  • local income taxes.

No deduction is allowed for personal interest. However, interest paid on investment debt is deductible, but only to the extent that there is net investment income (i.e. investment income net of investment expenses other than interest).

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Standard Deductions

The standard deduction for married couples filing jointly for tax year 2023 rises to $27,700 up $1,800 from the prior year.

For single taxpayers and married individuals filing separately, the standard deduction rises to $13,850 for 2023, up $900.

For heads of households, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022.

Business Deductions

For tax years beginning after 2017, you may be entitled to take a deduction of up to 20% of your qualified business income from your qualified trade or business, plus 20% of the aggregate amount of qualified real estate investment trust (REIT) and qualified publicly traded partnership income.

The deduction is subject to various limitations, such as limitations based on the type of your trade or business, your taxable income, the amount of W-2 wages paid with respect to the qualified trade or business, and the unadjusted basis of qualified property held by your trade or business. Individuals will claim this deduction on Form 1040 or 1040-SR, not on Schedule C.

Unlike other deductions, this deduction can be taken in addition to the standard or itemized deductions.

Deductible Expenses

Employment Expenses
  • None
Personal Deductions

Citizens and resident aliens:

  • Qualified residence interest
  • State and local income or sales taxes and property taxes up to an aggregate of USD 10,000
  • Medical expenses, certain casualty, disaster, and theft losses, and charitable contributions, subject to limitations
  • Child care expenses.
  • Alimony

Non-resident aliens:

  • casualty and theft losses incurred in the United States
  • contributions to US charitable organizations
  • state income taxes
  • local income taxes
Standard Deductions
  • Married couples filing jointly: $27,700
  • Single taxpayers and married individuals filing separately: $13,850
  • Heads of households: $20,800
Business Deductions
  • Up to 20% of qualified business income from qualified trade or business

  • Plus 20% of the aggregate amount of qualified real estate investment trust (REIT) and qualified publicly traded partnership income.

US Immigration

Learn about work-related immigration policies in the US, US work visa requirements, and US work permits. Below are the most important nonimmigrant types of work visas in the USA:

Visitor for business—B-1

B-1 status is issued to people temporarily visiting the United States to engage in business on behalf of foreign employers. B-1 holders may not be employed by or receive salary from US employers, but, among other activities, they may negotiate contracts, sell company products, develop business leads and attend conferences and business meetings on behalf of their foreign employers.

A temporary business visitor may accept reimbursement for incidental expenses such as travel expenses. A B-1 visitor must retain unrelinquished domicile in the foreign country to where he or she intends to return at the conclusion of his or her temporary US stay.

In general, business visitors with B-1 visas may enter the United States for periods of up to six months. However, B-1 status can be granted for a shorter period, often not exceeding 30 days, unless the business visitor can justify a longer period of admission. Applications for an extension beyond the initial entry period can be sought from the United States Citizenship and Immigration Service (USCIS).

Specialty occupations—H-1B

The H-1B category covers foreign nationals employed in specialty occupations that require a theoretical and practical application of highly specialized knowledge, as well as a bachelor’s degree or the equivalent in the field.

Before applying for an H-1B visa, an employer must file a Labor Condition Application (LCA) with the Department of Labor (DOL) and certify that, among other things, the foreign national will be paid at least the prevailing wage for the proffered position.

On 15 March 2019, the DOL issued policy guidance regarding LCA posting requirements.:

  • A prospective employer must also provide notice of filing the application by posting a hard copy notice, electronic notification or, when applicable, notification to the company’s bargaining representative.
  • If posting by hard copy notice, the employer must post notice of filing the application in two conspicuous locations at the employment site for at least 10 consecutive business days.
  • If the employer meets the requirements, the holder of the H-1B status is entitled to a maximum six-year stay in the United States.
  • In specified circumstances, extensions beyond the six-year limit may be available.
  • Each year, only 65,000 H-1Bs are made available. In addition, regulations allow a further 20,000 H-1Bs to be issued to persons having a master’s or higher degree from qualifying US post-secondary institutions.

These requirements apply to both initial and renewal petitions. Prior to issuing this policy guidance, the USCIS generally permitted petitioning employers to provide general statements regarding the dates and locations of an H-1B worker’s proposed or possible employment at external client locations.

The current policy guidance specifically overturns the prior guidance and institutes a requirement for a specific, detailed itinerary corroborated by contracts covering these employees’ work.

Labor Condition Application

On 19 November 2018, a new ETA Form 9035, Labor Condition Application (LCA), was implemented by the DOL. The new LCA form requests that the employer discloses the following:

  • Estimated number of workers that will perform work at the intended place of employment
  • Whether the worker subject to the LCA will be placed with a secondary employer at the place of employment
  • If the worker is placed with a secondary employer, the legal business name of the secondary employer

These revisions were made to improve transparency about the number of H-1B workers being sent to worksites, the locations at which H-1B workers will be placed and the entities with which H-1B workers will be placed.

Specialty occupations—Trainees—H-3

H-3 status may be issued to foreign nationals to enter the United States for up to two years to receive training and to develop skills that will be used in their careers abroad. The following conditions apply:

  • Trainees must participate in structured training programs at US companies.
  • The programs must incorporate theoretical and practical instruction, and may not consist solely of on-the-job training.
  • The training must be unavailable in the foreign national’s home country, and the skills acquired must apply to work outside the United States.

For short-term training assignments (typically up to three months), an H-3 visa may not be required (for someone who falls under the VWP or who does not require a US visa), because in some instances the US immigration authorities recognize the “B-1 in lieu of an H-3” visa, which allows individuals to apply at a consulate (or in the case of the VWP, at the port of entry) for admission for the purpose of short-term training.

Spouses and unmarried children of H-3 visa holders are eligible for H-4 status, but are not permitted to work in the United States.

Intracompany transferees—L-1

The L-1 visa allows foreign companies with affiliated operations in the United States to transfer needed personnel to their US facilities. L-1 visas may be issued to foreign nationals who are employed abroad in executive or managerial positions, or who hold positions involving specialized knowledge in the company’s procedures, processes, services and/or products.

On 15 November 2018, the USCIS issued a Policy Memorandum (PM) clarifying the requirement that the qualifying organization must have employed the principal L-1 beneficiary at the related foreign entity abroad for at least one continuous year during the three years preceding the time of petition filing.

The PM explains the following:

  • The L-1 beneficiary must be physically outside of the United States during the required one continuous year of employment.
  • The petitioner and the beneficiary must meet all requirements, including the one year of foreign employment, at the time the petitioner files the initial L-1 petition.

Specifications

The PM states that while a qualifying foreign entity employs a beneficiary abroad, brief trips to the United States for business or pleasure in B-1 or B-2 status tolls the one continuous year of employment abroad. If the beneficiary made brief trips to the United States that year for a total of 60 days, the beneficiary would need to accrue at least an additional 60 days of qualifying employment to meet the one-year foreign employment requirement.

On arrival in the United States, the beneficiary must assume an executive, managerial or specialized knowledge position with the US affiliate, parent, subsidiary or branch office. Managers and executives may be issued and retain L-1A status for up to seven years, while L-1B specialized-knowledge personnel may remain in the United States in that status for up to five years.

Startups

For startup operations, L-1 visas are granted initially for a one year “new office” period.

For visa extensions, startup companies must prove at the end of the year that they are “doing business” in the United States and have made progress toward becoming viable operating entities that need the services of managers, executives or personnel with specialized knowledge.

If, at the end of the first year, the startup company is unable to prove that this progress has been made, it may be possible for the individual to receive an extension of an additional year to continue to grow the business.

Limitations

L-1B specialized knowledge visa holders may not work primarily at a worksite other than that of the petitioning employer if either of the following conditions will apply:

  • The work to be carried out will be controlled by a different employer.
  • The off-site arrangement will provide labor for hire, rather than service related to the specialized knowledge of the petitioning employer.

Extraordinary ability—O-1

The O-1 visa category is for persons of extraordinary ability in the sciences, arts, education, business or athletics.

Separate tests for demonstrating extraordinary ability exist for the following categories of individuals:

  • Foreign nationals in the motion picture and television industries
  • Other foreign nationals

Most foreign nationals must prove their claim of extraordinary ability by providing evidence of sustained national or international acclaim. They may enter the United States only to work in their fields, and US immigration authorities must determine that their entry substantially benefits the United States.

O-1 petitions are submitted to the USCIS for adjudication, and in some instances must be accompanied by proof of consultation with appropriate US labor unions (particularly those representing individuals in the arts, entertainment or athletics).

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US visa requirements overview

B-1 Visa

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H1-B Visa

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H-3 Visa

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L-1 Visa

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O-1 Visa

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Value Added Tax (VAT) in the US

  • The US does not have a federal VAT, the federal government raises money primarily through income taxes.
  • Most states and many municipal authorities have sales and use taxes. These are generally imposed as a percentage of the retail sales price and the combined state and local rate may rise above 10%. Individual states have their own tax rates and rules regarding which purchases are taxable.

Mandatory Benefits in the US

It’s important to understand the legal requirements of hiring employees in the US (whether it’s remote or in-office) so that your business remains compliant. As part of Global Expansion’s International PEO and Employer of Record (EOR) solution, we guarantee employees are registered with the appropriate government agency, and that they receive mandatory benefits such as minimum wage, workers’ compensation and paid time off (PTO).

Additionally, all tax deductions associated with the employee are processed at the source, meaning our in-country entity will be responsible for paying all taxes to the authorities on behalf of the new hire.

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period, severance pay and 13th month pay
  • Mandatory benefits also include social security benefits.
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Mandatory Benefits overview

  • Public Holidays

  • Maternity Leave

  • Paternity Leave

  • Sick Leave

  • Overtime Pay

  • Severance Pay

  • Social Security Benefits

US Payroll

Us payroll tax information

The US system of tax administration is based on the principle of self-assessment. US taxpayers must file tax returns annually with the IRS and with the state and local tax authorities under whose jurisdiction they live if those governments impose income or net worth taxes.

On the federal return, taxpayers must report income and deductions and must compute the tax due. Taxes are generally collected by employer withholding on wages and salaries and by individual payment of estimated taxes on income not subject to withholding.

Normally, tax due in excess of amounts withheld and payments of estimated tax must be paid with the return when filed. The taxpayer may also claim a refund of an overpayment of tax on the annual return.

Penalties and interest

Substantial penalties and interest are usually imposed on a taxpayer if a return is not filed on time or if tax payments, including estimated payments, are not made by the applicable due dates. Tax returns may be selected for an audit at later dates by the IRS or state auditors.

Failure to provide adequate support for amounts claimed as deductions on the return may result in the disallowance of deductions and in a greater tax liability, on which interest and/ or penalties are levied from the original due date. In general, taxpayers must maintain supporting documentation for at least three years after a return is filed.

US citizens and resident aliens - Form 1040

US citizens and resident aliens file Form 1040, US Individual Income Tax Return. The due date for calendar-year taxpayers is normally 15 April, though extensions to file tax returns may be obtained by filing a request with the IRS. However, an extension to file a return is not an extension to pay tax. To prevent interest and penalties from being charged on unpaid tax, a calendar-year taxpayer should pay any tax due by 15 April.

Nonresident aliens - Form 1040NR

Nonresident aliens with reportable US gross income must generally file Form 1040NR, US Nonresident Alien Income Tax Return. This return is required even if a taxpayer has effectively connected income but no taxable income or if income is exempt under a tax treaty.

Nonresident aliens are not required to file Form 1040NR if they are not engaged in a US trade or business during the tax year and if any tax liability on US-source investment (portfolio) income is satisfied by the 30% (or lower treaty rate) withholding tax.

If required, Form 1040NR is due on 15 April for nonresident aliens who earn wages subject to withholding; otherwise, the due date is normally 15 June. Extensions to file the return (but not to pay tax due) may be obtained by filing a request with the IRS. An employer (US or foreign) is responsible for withholding US income and social security taxes from nonresident alien employees.

Payroll Accrual in the US

In this section you’ll find additional information about payroll accruals. This includes wages, salaries, commissions, bonuses, and other payroll related expenses that have been earned by employees, but haven’t been paid or put on the books yet.

Country Accruals Additional Information

6.2

Social Security

1.45

Medicare

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Description

Employees are responsible for paying 100 percent of their own federal and state income taxes. Tax withholding for employees simply serves as a way to ensure they pay their taxes in a timely manner. On the other hand, employers and employees share the burden of paying for Social Security and Medicare. According to the U.S. Social Security

Administration, employers are required to contribute an amount equal to 6.2 percent of employee wages for Social Security and 1.45 percent for Medicare. Employees pay 4.2 percent for Social Security and 1.45 percent for Medicare. The tax on Social Security applies to the first $110,100 of income an employee earns.

Payroll Accruals Additional Information

Annual Leave

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Maternity Leave

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Paternity Leave

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Sick Leave

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Overtime

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Severance

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Social Security

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Accrued Benefits in the US

Christmas Bonus % 0%
Christmas Bonus Over Vacations % 0%
Severance per Year% Subject to Contract
Vacations %

No mandatory leave, however generally it is based on 10 days a year (2.74% of annual salary)

2.74%

Of annual salary
Notice %

No mandatory notice period (unless mass lay-offs than 60 days required)

  
Christmas Bonus Over Notifications % 0%
Vacations Plus % 0%

Total percentage of Salary (yearly)

The total employment accruals as a percentage of salary per anum

2.74%

Why use Global Expansion to hire in the U.S.

Establishing a branch office or subsidiary in the US can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because the US labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by United States law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into the US. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our International Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.

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