Executives can often underestimate the complexities of international expansion, which means they find it hard to achieve consistency and standardisation from day one. Find out if your company is ready to expand into new markets.
Is your company ready to expand internationally?
Find out if your company is ready to expand into new markets by answering these six questions.
1. Are you familiar with the accounting regulations in the target market?
Understanding what needs to be done to meet local requirements, and the length of time it is likely to take, will influence your decision-making - from choosing the right accounting software, to establishing how to provide all relevant information to the local authorities.
In the Philippines, for example, understanding the accounting and tax laws can be difficult, as even government officials can offer differing interpretations - a situation that can create confusion and challenges.
2. Do you know what, and how long, it takes to incorporate your company?
Incorporation can be a lengthy process, it almost always involves very specific steps to take to get incorporated. Once your company has been established there are the post-incorporation compliance tasks to tackle as well, any of which can stop a new business in its tracks.
In the majority of jurisdictions, a private company can be established within a month. However, there are some notable examples where incorporation takes far longer. In Argentina, Honduras, Venezuela and Taiwan this typically takes three months or more.
3. Are you up to speed with the local payroll requirements?
From gross-to-net calculations, to withholding tax and timely salary delivery, you will need to find a way to remain compliant with the local regulations when it comes to managing your payroll.
Did you know that a considerable number of jurisdictions are still mandating pay increases, in some cases to address issues caused by inflation? Luxembourg, for example, mandates salary indexation based on inflation ratios.
4. Have you researched all of the tax obligations in the country you're targeting?
Understanding tax requirements is paramount but, surprisingly, this is often overlooked or is inadequately considered. In many jurisdictions, tax registration is run as a separate process and must come after full incorporation.
In markets with frequent revisions to tax legislation, such as Chile, it is advisable for businesses to consult with local advisors who can assist in interpreting new laws.
5. Did you know that you will often need to have a registered office in the new country?
In order to operate in some countries, your business will have to pass certain substance compliance requirements. This can include the establishment of a registered office address, as well as local compliance reporting infrastructure.
For example, businesses must demonstrate that they have a physical company address in Mexico, in order to operate legally. It is not enough to simply have a virtual Mexican address.
6. Are you aware of the local employment laws to hire your new team?
When setting up and operating an entity, it is crucial to align not only with mandatory legislation, but also with socially accepted customs in order to remain compliant while attracting the best talent.
Companies in Honduras must present four-monthly reports that include salary information to different institutions - generally as a hard copy. This adds to the administrative compliance burden for companies operating there.
If you answered 'yes' to all of these questions, you're probably ready to expand your business - but there are still many other things to consider.
If you answered 'no' to any of them, then you might not be ready to expand internationally.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.