Learn What Expats Need to Know When Setting Up a Company Overseas
Setting up a business is full of challenges and obstacles at the best of times. However, when it is a new company overseas, these challenges are multiplied. Below is a selection of key areas expats should keep in mind when thinking of starting a business abroad.
Know the market
When considering setting up a business overseas, one of the first things you should consider is how the cultural, geographical, and economical differences could impact their business. Just because you have business experience in your home country, doesn’t mean that the same business model and strategies will translate well in a foreign country.
Some important things to consider are:
- The cost of labor
- Where to source materials from
- The best location to set up your business premises,
- Whether the technological capabilities are sufficient to run your business e.g. broadband speed
- Who your main client base would be
- Who your main competitors would be
- Is their sufficient demand to sustain your business?
Additionally, you should research the current political climate of the country and how this might impact your business in the future.
There are certain steps you could take to make the experience of setting up a company overseas easier, such as:
- Bringing a partner into the business who is local to the area (some countries require this)
- Joining a business organization, which will help you create business contacts within the local community. In the UK some of the most well-known business organizations are:
- The Federation of Small Businesses
- The Forum of Private Business
- The British Chambers of Commerce
- The Confederation of British Industry
- Hiring a local accountant and/or lawyer to help you understand the laws and regulations of the country
Before setting up your company overseas, you should ensure that you have enough money to cover all the initial start up costs and be able to finance the business until it can sustain itself. Be aware that there may be laws regarding the transfer of foreign money into the country.
A large financial cushion should be factored into your business plan, as expected costs are likely to differ from the actual costs, especially when setting up a company in a foreign environment.
If you require additional financing, you should make yourself aware of the options that are available to you and the challenges you may encounter. In some countries, banks are unwilling to grant loans to start-up companies. Therefore, you may have to find an investor or get a loan from friends or family members.
You should also decide which would be the most suitable way to structure your business. In the UK some of the most popular options are as a:
- Sole trader
- Limited Liability Partnership
- Limited Company
- Not-for-profit organization
Laws and regulations
Each country has its own business laws and regulations. It is important that you familiarize yourself with these when planning on starting a company overseas. Using a local lawyer will help you avoid any unexpected costs and delays.
The first thing you should do when deciding to start a company overseas is to check whether you are legally allowed to do so. Certain visas prohibit an individual from starting up a business (e.g. Tier 5 visa in the UK).
Additionally, if you are intending on hiring employees, you should make yourself aware of the country’s employment laws, such as:
- Minimum wage
- Employer contribution to pensions
- Statutory pay
- Health and safety requirements
- Data protection obligation
- IP laws
Taxation regulations will also vary between countries. In order to avoid incurring any penalties it is important that you know the:
- Tax return filing deadlines
- Tax payment deadlines
- Authority to who any returns and payments should be submitted
- Types of taxes your company is subject to e.g. sales tax, VAT, corporation tax, capital gains tax
A local accountant would be able to advise you on the taxation rules and regulations of the country.
This is one of a series of articles from Bambridge Accountants who with thousands of happy clients and over 10 years of experience have US expats choose Bambridge Accountants.