Challenges In Setting Up A Business In A Foreign Country

Challenges In Setting Up A Business In A Foreign Country

There are concepts like the breakeven points that are seen as critical milestones when a business becomes successful. Making profits definitely indicates a successful business. An even bigger indicator of success is when a business grows. In its growth, there are stages where one needs to make important decisions. Some businesses scale up their production. Some get into new areas diversifying their business. Some get into vertical integration acquiring other businesses that are at either end of the supply chain. All these are decisions that have both costs and benefits to the business. One such decision is expanding the business to another country. 

Why enter a foreign country

When should a business consider expanding to a new country? What would it aims to achieve by entering a new country? It could mean access to a new market that translates into more customers and hence more revenue. There is also a remarkable improvement in credibility when you can flaunt a business that is successful in more than one country. It sets up the template for further expansion into becoming a global business.

Major Roadblocks

Each country has its own rules and regulations.  Most countries like new businesses coming to their country since it implies more investments. Some other countries might have a more protectionist view and have regulations that make it difficult for a foreign business to find a foothold in the country. If such a country is where the business sees a new opportunity, it might be worth reconsidering. On the other extreme, certain countries make the process as easy as possible. For example company formation in Latvia is straightforward.

The major challenges are in the form of legal requirements, registration process, tax policies, banking policy, labor laws, etc. In most jurisdictions, it will make the process much easier if there is a legal firm native to the new country that supports the business. The business might need to open a bank account within the new country as well. It is also important to get insurance in case of any unforeseen circumstances or a change in policy or political outlook.

The Optimal Route

If the new market that the business has identified is in a country that is hostile to new businesses, then the process becomes tedious. If the new market can be anywhere, one can simply register a company in Latvia or a similar country with friendly business regulations. 

Setting up a branch or a representative office is often easier than registering a new company. Some countries also offer loans, seed capital, etc. to new establishments. The tax and legal implications may also vary.

Say Hello To BPI Finance For registering a company in Latvia

The business might be required to make an investment in the new country. They would have to register their company name. There would be a need for articles of association to legitimize the way the entity intends to operate. There would be a requirement to appoint or name directors who represent the business and act on behalf of it. Apart from these common steps, there would be additional steps required to bring the new entity under legal and tax compliance. 

About Author: My name is Adam Smith, being a business-minded and health freak guy, I always desired to share my real-life experiences about my travel and business knowledge, tips, and suggestions with others.

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