5 Essential Things to Know When Starting an Overseas Business
There are many reasons why you might want to start an overseas business.
Some of these include gaining access to an international market, selling a product that appeals more to a foreign market than it does a domestic one, or taking advantage of a new business opportunity.
While taking advantage of these opportunities by starting an overseas business can be very lucrative, there are some potential pitfalls that you should be aware of.
1. Business Regulations
There are many regulations that you will have to know about and adhere to as you start your business.
Some of these include not being able to own any property in a foreign country, or even stipulations that you have a local partner for your overseas business.
Learning about the regulations that apply to the specific country you are interested in is a very important step in preparing to start a business there.
To comply with these regulations, it helps to have a physical address and partner in that country. This address will be used to receive any documentation you need and the partner will be there to handle all this for you. Do note that in some countries, especially in Asia, your business will be closed in an instant if they realize you are not following local regulations.
2. Economic Climate
Every country is economically different. While developing countries provide you lots of opportunities, establishing a business there does come with some risks such as high inflation rates or income disparities. This might lead you to look for opportunities in established or stronger economies, but note that starting a business there might be a lot harder due to increased competition.
Important metrics to keep in mind when comparing two economies include education and crime rates, income distribution, and how people spend money. These metrics help you identify market trends better and help you find out if the existing market has the economic resources to support your business.
3. Dealing with New Tax Situations
Operating an overseas business will come with new tax complications.
Depending on the country your business is based in, you might qualify for some tax exemptions. These exemptions reduce the amount of tax you pay in your home country with the understanding that you might have to pay taxes in the country you start the new business.
It is important to talk to a tax expert to find out if you will have to remit taxes to your home country from the country the new business is based. In most cases, you will not have to, but if your country has some tax treaties that require you to do so, you must comply.
Finally, you will be responsible for paying taxes in the country you would like to start the business. In countries like South Korea, you will be required to pay taxes that are pegged on how much you pay your employees if you start a business there.
Because of how complicated it can be to sort this out, many businesses turn to a South Korea PEO to handle this for them. A PEO like New Horizons Global Partners will not only handle these taxes for you, but they will also handle all aspects of your employee’s payroll and payroll compliance so you only have to worry about running the business.
4. Potential Language Barriers
Language can make or break your business. Many businesses have been lost due to translation issues or not understanding the nuances of what is being said. Advertising mishaps can happen, and when they do, they will offend your target audience and lead to losses.
Things get even harder when negotiating contracts. When you do not understand the language, you might think a deal is done when it is not, leading to a lot of confusion and embarrassment.
Fortunately, this pitfall is very easy to avoid. By hiring an interpreter or a bilingual employee, you will have someone to let you know exactly what is said as well as help you understand context and nuances. The person you hire to help in this regard should understand English, the local language, as well as business terminology to be effective.
5. Adapting to Cultural Differences
Language barriers are just one part of the equation because cultural barriers exist too. Even when countries speak the same language, you still need to tailor your messaging to fit the particular audience you are targeting.
By viewing localization as an important part of your business strategy, you will gain a lot of advantage over your competitors who may not be doing the same. This strategy allows you to serve your target audience better, attract new customers, and convert customers into your brand advocates.
Don’t forget to tailor your products and services for this local culture too, because just changing the language will not be enough in most cases.
Starting a successful overseas business can be tricky. This is why it is so important to understand the potential pitfalls you might encounter so you can avoid them.