5 Things To Keep in Mind When Starting a Business Overseas
Whether you want to expand local businesses to international markets or launch an all-new offshore company, there are a few things you should know before starting a business overseas.
Though there is massive profit potential associated with overseas businesses, it comes with a multitude of risks and challenges. So, before you take the plunge, you must keep these 5 things in mind:
1. Company Registration and Regulatory Requirements
The business registration process has different requirements in every country. While some countries require the involvement of native partners, some limit property rights for foreigners. You must know the regulatory requirements of the country you are going to establish your business in.
Your company formation agent will apprise you of all the registration and regulatory requirements before filing the incorporation papers. In many countries, failure to comply with the rules can cause permanent shutdown of the business. So, before you start a business in a foregin country, you must fully understand its rules regarding foreigners-owned businesses.
2. Varied Tax Situations
Different countries have different tax situations. Some countries have different tax requirements for foreign-owned businesses. The United States, for example, allows foreign earned income exclusion (FEIE) to US-based businesses operating overseas. Similarly, companies based in a foreign country are not required to pay U.S. FICA or Social Security taxes. However, you may not be able to avail these tax exemptions in some countries. You can contact a lawyer or tax expert to know what exemptions is your company eligible for.
3. Different Economic Landscape
The economic climate of every country is different. Even the countries that have considerable economic opportunities have their fair share of economic challenges, such as potential for high inflation or income disparity. Entrepreneurs are more inclined to start businesses in countries that have stable economies.
You must consider the “genuine progress indicator” (GPI) of the country before you start your business there. Unlike GDP, GPI is a metric that shows economic growth and prosperity by adjusting personal consumption data on the basis of education rates, income distribution, crime rates, and even pollution.
4. The Impact of Cultural Differences on Businesses
You cannot grow your businesses if you don’t adjust all aspects of it according to the cultural landscape of the country. Culture has a huge impact on consumer behavior in any economy. Contrary to popular belief, language is not the biggest barrier when it comes to running a business in a foreign country. English, for example, is the official language in many countries, but not all of them can be approached with the same marketing strategies.
Many businesses fail in the first generation because they don’t fit the culture. You must be fully aware of the cultural differences of the foreign country before launching your business there. This way, you will be able to attract more customers, serve them well, and retain them in the long run.
5. Language Barriers
Language is a big part of a country’s culture. All your business efforts may get lost in translation if you don’t take enough time to understand the local language of the region you are going to launch your business in. Language differences can cause companies to make big blunders, for example Braniff Airlines used a phrase as its slogan that meant “fly naked” in Mexico.