Change Country

Manufacturers & Distributors

Thinking of Expanding your Business Overseas?

Posted on July 18, 2019 by

Sue Tuson

Sue Tuson

Share This

Thinking of expanding your business overseas?  The first question is usually, “What’s the best way to start?  Should I set up an office immediately or use an independent contractor familiar with the country?”  As with all business decisions, the answer depends on the nature of the business goals:

  • Is the expansion to service an existing customer?
  • Is the expansion to reach a new population of customers?
  • Does the expansion serve a marketing purpose, such as the ability to say, “We have manufacturing in country X”, a low-cost jurisdiction?”

The business goals will drive the process. Sometimes a company is looking for a way to test market conditions prior to making a substantial investment.  They may do this by considering the use of an independent contractor in the target country.  The advantage is there are very little if any, capital investment or administrative compliance costs to hiring an independent contractor.  However, there are some important considerations if you go this route:

  • What are the duties of the independent representative/distributor? Many countries have rules similar to the US that would examine whether the “independent” contractor is truly independent.  If not, the independent contractor could be considered an employee, thereby making the US company subject to all the employment laws, taxes, and payments of an employer in the jurisdiction.
  • What type of authority does the independent contractor have? Can they execute contracts on behalf of the US Company?  If an agent regularly exercises the authority to enter into contracts, they are likely to be creating a taxable presence in countries where the US has an income tax treaty.  The threshold may be lower for non-treaty countries.
  • Will you have enough control over an independent contractor to protect your brand and customer list? It is important to understand the local laws related to the status and rights of an independent contractor/distributor.  A contract should be in place that protects the company and supports its subcontractor versus employee status, as well as the rights and obligations of each party.  Legal counsel familiar with the local laws of the target country should write the contract to avoid unintended consequences.

To learn more about establishing operations overseas, contact Clayton & McKervey’s team of international tax and accounting specialists.

Share This

Sue Tuson

Shareholder

As an international tax advisor, Sue helps businesses structure their operations globally to mitigate tax costs and maximize profits.

Related Insights

Manufacturers & Distributors

6 Ways to Overcome M&D Supply Chain Obstacles

Posted on September 27, 2022 by

Katie Blake
When we talk about the manufacturing and distribution supply chain, we mean raw materials and finished goods that travel back and forth for thousands of miles before arriving at their final stop. These trips include a complex mix of trucks, trains, container ships and storage facilities plus countless touches by humans and computers. Here are some supply chain obstacles you might be facing and what you can do to overcome them.

Manufacturers & Distributors

Michigan Manufacturers: Talent Funding on the Way

Posted on September 9, 2022 by

Jim Biehl
In talking with manufacturers, we know that talent is a top issue. If you’re a manufacturer in Michigan seeking assistance with talent retention, you don’t want to miss out on applying for the Going PRO Talent Fund. This fund is designed to help employers with training, developing and retaining employees.

Manufacturers & Distributors

Are You Ready for the Bonus Depreciation Withdrawal?

Posted on August 31, 2022 by

Jim Biehl
America’s bonus depreciation addiction is scheduled to end. It may not be “cold turkey” but all businesses need to review the pending changes and related tax and cash flow impacts, especially considering a potential business slow down and/or recession.  

The Sound of Automation Podcast

Industrial automation businesses are the driving force behind Industry 4.0, and Clayton & McKervey is here to help.

Skip to content