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Setting Up Shop Abroad

Running out of selling territory? Extend it overseas.

• By Derek Torres
• August 01, 2006

If you're always looking for a new challenge -- something a little out of the ordinary -- maybe now is the time to consider starting a business overseas. After a number of years of working in the IT sector in Europe and the United States, I decided to start a business with an associate in France. While creating a foreign company isn't for everyone, doing so can be an interesting -- and lucrative -- chapter in your career. But before you begin the process, there are a number of factors you should know that apply to any country in which you decide to invest your time, energy and money.

Realize That You Don't Know It All
First, you must acknowledge that while you may be the boss, you don't know everything. Surround yourself with specialists who are old pros at launching overseas businesses -- in this case, you'll need to find a consultant or an attorney you can trust (especially one who is used to helping foreigners) and who specializes in starting small businesses. As a foreigner, you simply won't know all the questions to ask, and even if you did, you might not understand the answers.

Avoid dealing with American law firms in your adopted country; they often cater to large corporations in that country and either won't work with smaller groups or are outrageously expensive. A local law firm can help you better understand the business mentality of working in the country -- often at half the cost of an American firm.

Understand the Culture
It's impossible to over-emphasize the importance of getting acquainted with the culture where you plan to set up shop. A working knowledge of the local language and business etiquette will take you far. Applying what are perceived as overtly American business styles or tactics can only hinder your progress regardless of your location. If you're going to make money in a foreign country, you need to know how the people there think and act. A lack of language skills, cultural knowledge, business etiquette and familiarity with local laws can translate into less than stellar ROI. Handling business dealings, especially with small clients, in a foreign country in exactly the same way that you'd handle them in the United States may well prove costly.

For example, aggressive marketing tactics or calling a client or colleague by his or her first name can both be red flags in some countries. In many nations, such as France, business relationships are developed over time and deals don't happen overnight, as they often do in the United States. Business is often done outside the conference or boardroom -- it's done over a handshake and a meal. Before starting shop officially, allow plenty of time for courting new clients and developing business relationships.

Beware Arcane Tax Laws
Even though yours is technically a "local" company in your new country -- for example, I am an American citizen running a French company -- you are not exempt from the IRS. There are U.S. tax documents that your foreign company must file. Early on, find an accountant or tax attorney who specializes in both the local and American tax codes.

Starting a company abroad can be a rewarding or frustrating experience, depending largely on how you approach the process. Much of your initial success will be based on the decisions you make before you even register your company. Taking into consideration some of the above tips does not guarantee success in your overseas venture, but it may help you reduce the risk of a quick demise.