A common misconception is that the only way to expand a business abroad is by setting up a new entity in a foreign country. However, there are various company structures to choose from and it is important to make the decision that utilises the ownership and control that best suite the business and its goals.
Expanding your business abroad can be a powerful method to develop your current business. A marketing plan must be implemented if you are looking to expand into new markets, sell products/services to new customers. To gain a competitive advantage, business owners must learn about what, where, and how of the new market environment they plan to enter. These relevant insights will assist a business to enter new markets as successfully as possible.
When looking to expand a business overseas the following key factors should be considered.
- The needs of the business in the country of choice as it regards to the overall international strategy
- The overall tax planning objectives
- The legal requirements in that country
It is important to speak to legal and tax advisors in the relevant jurisdiction before taking any steps to enter a new market. The following are the most common options that companies will consider when expanding a business abroad.
The following are the most common company structures used:
1. Register a Subsidiary of an Existing Company
A subsidiary is typically formed by registering a new company within another jurisdiction. The majority of shares would be issued to a corporate shareholder or parent company. Subsidiaries are common in some businesses, particularly real estate. A company that owns real estate and has several properties may form an overall holding company, with each property as a subsidiary to protect the assets of the various properties from each other’s liabilities. The advantage of setting up a subsidiary is to gain access to new markets, reduce costs of goods and labour, hire a skilled workforce and increased expansion opportunities.
2. Register a Branch Office of an Existing Company
The Branch Office is one of the more streamlined business structures a company has at its disposal when exploring the possibility of expanding its activities abroad. A branch office is a dependent type of company, which does not issue shares and its activities are entirely managed by the parent company in terms of the decision-making process. Opening a branch company can offer visibility and brand exposer which can positively influence a company’s profits. Expanding a business with a branch office will allow a business to target new consumers when introducing products and services. The ability to reach a new group of prospects can generate revenue but entrepreneurs are also pleased to find that they are able to gain access to markets in adjoining countries as well.
3. Register a Holding Company
This option is less common for expanding a business aboard because a Holding Company is one that holds stock in other companies. Typically, a holding company does not produce goods or services but is formed for the purpose of holding shares in other companies creating a corporate group. However, in many jurisdictions, a holding company is referred to as a parent company because they can conduct trade other business activities themselves while maintaining the ownership and control of various companies. Naturally, if a holding company takes over the majority of shares in a company, that company would be known as its subsidiary.
Company Structure Requirements
When expanding a business abroad, you will need to carry out full due diligence to understand exactly how local taxes, laws and regulations will impact and benefit your business. With that in mind, before you enter any new market, you should speak to experienced legal and tax professionals in the local market to ensure you fully understand the potential consequences and risks. They will help you to identify an overseas structure that works best for your business, without prompting undesirable tax or legal consequences in the future. If you are looking to expand your business abroad, please contact the experts at Euro Company Formations on +353 (0) 16461627 or complete the Contact us form to explore your options.