If you’ve established your company well in the United States, you’re thinking about opening branches overseas. This step allows you to expand your business, build your professional network, and reach a new market. After all, your next biggest client could be waiting just across the ocean. To ensure that your expansion leads to greater profits, make sure you take these steps before moving any of your assets abroad.
Whenever you’re thinking about a major financial decision, you must act with due diligence, meaning that you carefully examine every aspect of the decision. Due diligence applies to a variety of fields:
- Client and vendor contracts
- Property acquisition
These areas all have huge effects on your business’s future. For example, if you don’t pay your taxes properly, you risk receiving fines that limit your expansion plans. Similarly, rushing into a contract with a new vendor without assessing the company’s financial history increases the likelihood of a bad deal. Acting with due diligence gives you peace of mind when you finally sign that contract or purchase that building.
Your investors also want to see proof that you’ve meticulously planned your expansion. After all, you’re using their money to cover your premises, supplies, employees’ wages, and other expenses. As a result, you must save all your budgeting worksheets, risk factor reports, and cash flow statements, and bring them to your investors’ meetings. Providing these details is especially important if you’ve invested in a company that offers due diligence assessments.
Prepare for Extra Expenses
Opening a branch overseas gives you many opportunities to make money. Lots of countries have lower supply costs than the US, and overseas customers have never experienced your products before, so they’re eager to try them. However, these chances to make money can be negated by extra fees if you’re not careful. Follow these tips to ensure that you’ve accounted for taxes and duties in your budget.
You’re used to the US’s domestic tax system because you’ve been filing taxes since you got your first job. Taxes become trickier when you add in international revenue, though. Laws vary from country to country, but most nations tax businesses that operate within their borders regardless of each business’s home country. Additionally, the US has a system to accommodate countries that don’t have high taxation rates, so you pay taxes on your international income twice. Of course, if you make enough revenue, you still make a profit, but you must leave enough room in your budget that you’re not surprised with a prohibitively high tax bill.
Duties are another group of international fees for which you need to account. The government levies these taxes every time you transport goods across the border. Duty taxes vary based on the value of your products and the country to which they are headed, and they can be up to 37.5 percent of your goods’ worth. These taxes are either specific, meaning you pay a certain amount per product, or ad valorem, meaning you pay a percentage of your product’s worth. Work with an international tax advisor to find out how much you’re going to pay in duties for each international shipment before sending out your first order. This method allows you to ensure that each load is worth its duty tax.
Preparing to expand your business to a foreign country is an exciting process. You’re ready to make large-scale profits, so you need to prepare adequately. By educating yourself about due diligence, international tax laws, and duties, you ensure that your move goes successfully. Because laws change, don’t forget to refresh your memory of this information regularly.