REASONS BUSINESSES EXPAND GLOBALLY4

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International expansion for young and fast-growing companies is a tricky proposition

for a variety of reasons.

Uncertainty surrounding revenue, profitability and market position can lead to conflicting priorities between management

and board members.

Those new to international expansion should keep in mind that the associated costs and

risks may seem to significantly outweigh the potential short-term benefits ...

… but the rewards of growing an international footprint are

realized over time.

Regardless of company size or profile, an organization generally decides to expand its international footprint for one or more

of the four following reasons.

EXPANDING INTO A NEW MARKET1

High-growth companies frequently operate with a “lean startup” mentality,

which includes the desire to minimize the organization’s tax and legal presences in the host country until definitive proof exists that

the expansion decision was correct.

This can be a good strategy, though it can come with significant risks.

The bottom line is that if you want to expand into a new market, you have to

perform due diligence to understand your legal obligations in the new jurisdiction.

PROVIDING SUPPORT FOR A LARGER CLIENT2

Signing a big deal with a highly valued client abroad is an exhilarating

experience for a new company.

But while flying home, it often dawns on the CFO that the client may demand “boots on

the ground” in a brand new country.

The new client may want your existing, experienced employees on site, or require

permanent, local employees to support them in the host country.

While you’ll want to meet your new client’s demands, you need to

understand related host-country legal requirements before committing.

HIRING OR RETAINING A STAR EMPLOYEE3

Today’s connected workforce allows for remote employees based virtually

anywhere in the world.

This pushes companies to consider hiring in locations not previously considered. We

commonly see two examples:

A company identifies someone in another country that has knowledge or experience

that is considered critical to the company’s success. But the new hire must

remain in his or her home country.

1

A company employs a highly valued foreign national and home-country immigration

rules force that employee to relocate back to his or her native country.

2

Companies in either of these situations may first consider paying the employee

as a contractor in the new country — avoiding the costs of establishing a legal entity and of withholding and remitting

income taxes to local authorities.

However, if local authorities deem that your hire is a de facto employee rather

than a contractor, you’ll be on the hook for back taxes and penalties.

OPENING A SHARED SERVICE, OPERATIONS OR DEVELOPMENT CENTER4

Most operational executives are intimately familiar with the business

case for building offshore development teams or shared resource centers.

But while the desire for a lower per-employee cost is compelling, establishing

any office abroad comes with its own costs.

With expert guidance, determining the optimal legal entity to establish will likely be

easy, though it may be more time-consuming and costly than you’d anticipated.

Regardless of the reasons for expanding internationally, all businesses new to the process should firmly grasp that

managing international employees will come with unfamiliar challenges.

Keeping up with new obligations and options can take a toll, particularly on small

teams in high-growth organizations.

No matter what your scenario when expanding internationally, due diligence

well in advance will be rewarded.

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If your business is expanding internationallydon’t miss this!

INTERNATIONAL EXPANSION 101KNOW BEFORE YOU GO