Establishing a Legal Entity

Many companies trust their team of lawyers to handle the incorporation and setup of their businesses overseas. But lawyers can only do so much. Usually, lawyers can only incorporate a business but are unable to register the newly formed business for various taxes, etc. and are surely unable to set up the payroll and HR side of things. Think of it as getting a car without an engine; if it doesn’t turn on, it is useless. 

With that being said, here are the critical steps to follow when establishing a legal entity. 

Incorporation and Registration 

When a business doesn’t have global experience or expertise, they have to hope their lawyers set up their legal entity, or subsidiary. As the lawyers are coordinating this work with the local partners in the foreign country it takes time and effort of going back and forth with the US contact acting as a middleman. If the company hoped to hire employees and start their business operations, this would be a significant setback. 

When you are setting up a legal entity, save time, money and headaches by doing it right the first time. We’ve created a list of steps a business needs to take in order to properly setup their overseas entity. 

  • Name approval, where required 
  • Articles of incorporation 
  • Corporate governance structure 
  • Registration documents 
  • Tax ID 
  • Business license/entity registration approval 
  • Registration for payroll taxes and related matters 
  • Local bank account setup 

Post-Incorporation

Once an entity has been established, you can take the necessary steps to get the business functioning in a foreign market. These steps also impact the successful operations of a company, so it’s critical to ensure the following areas are setup accurately: 

  • Payroll setup 
  • Statutory benefits and social security registration 
  • Data protection registration 
  • Accounting setup, bookkeeping, and reporting 
  • Local indirect tax (VAT, GST, HST) 
compliance

Corporate Annual Compliance 

Many businesses don’t realize how difficult it is to maintain compliance after the setup process is complete. With laws and regulations constantly changing across national, state/province and city level across the world, it can be difficult and time-consuming to manage. Without the robust expertise of global compliance regular compliance changes can easily overwhelm an internal team and may often leave room for mistakes. 

The following compliance aspects must be monitored on a regular basis: 

  • Preparation of group consolidated accounts 
  • IFRS, US GAAP, or other local GAAP financial statements preparation and reporting 
  • Tax, payroll and statutory returns 
  • Statutory audit support 
  • Correspondence and administration 
governance

Ongoing Governance 

After everything is set up correctly and compliance is being maintained, it’s time to optimize operations. This is another step that is often overlooked. Establishing ongoing governance enables business leaders to make educated decisions during their global expansion. They can quickly see which countries are performing well, which markets may need to be reevaluated and find ways to grow their business efficiently. 

  • Single point of contact 
  • Status reports 
  • Key performance metrics 

What Could Go Wrong? 

In 2018, a $7.0 billion private equity firm acquired an elite global training provider in an asset purchase. The acquisition was a competitive and complicated process. 

Originally, they were set up incorrectly as a Non-Resident Employer. This meant they couldn’t set up a bank account in their country of operation. Unfortunately, without a bank account, you can’t set up pension plans because those funds are required to come from local bank accounts. 

Global Upside was able to make these corrections, but it took several months. This caused some employee frustration within the company because the employer’s mistake was costing them money. If a workforce is disgruntled enough, it could seriously disrupt a company’s operations and tarnish their reputation as an employer. 

About Global Upside   

Global Upside provides support throughout the business lifecycle, offering staffing, incorporation, PEO/EOR, accounting, HR, payroll, compliance, and M&A services in 170+ countries. For over two decades, we have supplied public, private, and non-profit organizations of all sizes with integrated growth solutions. Our experienced global teams understand the complexities of operating across multiple countries and help our clients effectively navigate the nuances of local laws and regulations. The outsourcing services we provide, simplify day-to-day operations for our clients so they can free up time and resources to focus on their core competencies.