Globalization is still in full force and now more than ever, small businesses are breaking into the international market. But with increased access to new business market, there is also increased access to potential liability. Here are four questions you should ask as a business owner when considering expanding into an international marketplace.
1) Who are my potential clients?
When working internationally, it can sometimes be more difficult to investigate potential vendors or customers to evaluate whether or not they will be able/willing to do business with you. Also, there may be more risks in operating in certain countries or with certain governments as clients given that country’s political and economic structure.
2) What are the country’s compliance requirements?
Also, different countries will have different regulations as to how you can do business within their country. This means that the relationships that you make in one country may need to be structured differently in another country. Sometimes you may need a distributor or other local liaison. Other times you can directly access the market. There may be different costs associated with the ways that you operate, so this evaluation must be taken in to account before entering that market.
3) What are the tax concerns that my business faces?
Different countries tax different income in different ways. Some countries directly tax foreign direct investment. Others have bi-lateral or international treaties that allow for some tax benefits. Also, the IRS has specific standards for US businesses that general revenue abroad. Especially if you foresee significant international income, it becomes critical to sit down and discuss the process with an international tax professional.
4) What culture concerns should I be aware of?
Having the relevant understanding of a specific countries culture is critical in the business process. Some cultures value the relationship as much if not more than the business. Others are more formal and “arms-length.” This also impacts what different business deem to be an agreement. Cultural research is a necessary part of doing business internationally.