With free trade agreements, government grants and new technologies at their disposal, overseas markets are now within reach for small Australian businesses. So what’s actually involved in setting up a business overseas?
In my last article, Thinking of Expanding Overseas, I recommended these ways to start planning for an international expansion:
1. Consult government organisations
2. Join a business association
3. Study the market
4. Start small
5. Examine your finances and consult your bankers
For those a step closer to taking the plunge overseas, here’s some advice on the financial and business setup issues involved.
1. Determine your overseas company structure – Do you need a physical presence overseas or can you simply operate 100% online from Australia? What kind of structure is best suited – a wholly owned subsidiary, joint venture, branch, representative office? Do you need a local partner overseas? Will you need to move one of your staff offshore to keep things on track, or can you manage everything from Australia? How will your business cope if you start moving staff away from their local core duties? The structure of the business should be a top priority – research things like finding and hiring new employees and putting them on your payroll system, opening overseas bank accounts etc. Your business can’t proceed overseas without these basic things in place.
2. Recognize that you’ll need business support – Every country has completely different requirements and regulations for hiring employees, opening finance facilities, filing taxes, setting up insurances etc. You will need an accountant or financial advisor to help negotiate leases and contracts, determine how to pay foreign suppliers and set up accounting and tax reporting processes. Even where you have in-house knowledge of all the cross-border compliance issues, there often isn’t time to apply it well. Outsource these business functions where you can – you can’t hope to do everything yourself as well as try and make some money and keep your local customers happy!
3. Use your professional contacts – Do your due diligence and make use of your contacts’ local knowledge and experience to identify trustworthy partners in your target market – use your gut and trust your instincts (but ask for help if you need it!). Accru can introduce you to overseas affiliates we have worked with for many years to help you understand the local environment, and they in turn can introduce you to their relevant contacts.
4. Secure solid contracts – Your company will be subject to unfamiliar regulations and, depending on your agreement with distributors, you may have significant legal exposure. Keeping that in mind, get solid contracts with the companies you’re working with, preferably contracts that you can enforce in Australia. Got any lawyer friends? You may need to find one… Again, Accru has contacts that can help you in these areas. Having a reliable lawyer is golden in these unpredictable and “new” business ventures.
5. Seek tax advice early – As always, know your obligations up front. There is no point going into this new venture if you end up with a whopping tax bill (from the ATO or from overseas) that wipes out your profits. Every country has different tax legislation and reporting obligations, and each deals very differently with Australia. Ask your accountant for advice and build these tax obligations into your cashflows and forecasts, so there are no surprises down the track. Depending on the jurisdiction, you may find you can’t get tax relief for losses on foreign exchange, or you may be taxed on gains which you won’t have recognised in Australia.
Accru has a huge amount of experience helping businesses internationally, particularly in Europe where Accru Felsers roots lie, and in Asia. Throughout Asia, we work closely with trusted bilingual partners on-the-ground to help clients execute their growth strategies. Please see our Accru Asia website for more information and don’t hesitate to contact me if you would like assistance.