In today’s increasingly global economy, even relatively small enterprises can find opportunities to extend their reach far beyond their local areas, and even outside their home countries.
That’s especially true for freelancers, consultants, and other ‘knowledge’ workers, as well as Internet-based businesses and e-sellers.
With international communications so fast and simple — thanks to the Internet, email, Skype®, and various e-commerce platforms — doing business with a customer half a world away is not much different than working with someone in the same city.
In addition, more and more customers recognize that having global resources is a smart practice — offering them greater flexibility, options, and access than ever before. They welcome partners, ideas, and expertise from abroad.
For freelancers and e-sellers, the United States, the United Kingdom, and the countries in the European Union represent attractive opportunities for expansion and growth.
For one, the regions offer some commonality in business culture, in technological sophistication, and in general economic climate. What’s more, success in one region can often (but not always) be translated into success in another. If you are finding new customers and buyers in London, you may find very similar opportunities in Atlanta, or Brussells.
That said, however, these regions do have their own peculiarities and differences that you will need to navigate.
And there are three operational questions you need to think about before making your move.
1. DO YOU NEED A PHYSICAL PRESENCE IN THE COUNTRY?
If you are opening a trattoria, a construction firm, or dry cleaning service, you will need a building, a store, or other physical location to conduct business in the US, or a country in the EU.
But for esellers, freelancers or consultants, the need for an actual office or even a local in-country address is an open question, which usually involves marketing and other expectations.
Will customers need to meet you face to face? Will you need to visit their offices, their factories? Their installations? Do you need representatives ‘on the ground’ in the country at all times? Do you need to store inventory or goods physically in the country you’re selling to?
Or will your customers expect to do business via email or phone or videoconference? Will a local address help build trust and confidence? Or is that irrelevant to the nature of your business, and the relationships you hope to develop?
For most esellers and independent professionals, the cost and complexity of establishing an in-country location will outweigh most benefits of actually ‘being there’.
Our suggestion: Travel when you must, but don’t open a office unless your customers demand it.
2. SHOULD YOU ESTABLISH A BUSINESS ENTITY IN COUNTRY?
This is more of a legal and operational question than marketing one.
The question is, will your customers or suppliers be doing business with you — the person or business your home country — or with some business entity established locally, in the US, UK, or EU? Will it matter to your customers? How does it affect you?
In some cases, establishing a formal business entity in the UK, US, or EU country where you want to expand — whether you have a physical presence there or not — can offer you some advantages. (Mainly in making it easier to set up in-country business bank accounts. More about that below.)
But there are also offsetting disadvantages. A separate in-country business will make your account more complicated, and will create tax liabilities and other administrative burdens for you.
Here are the options for the US, UK and EU. Note that there are some common trends and patterns, although the specifics differ.
As an out-of-country business or individual, you can establish three different types of business entities in the US.
A sole proprietorship is a business owned and operated by an individual. It’s a common choice for freelancers, small businesses and independent contractors. All profits from the business are taxed to the individual. And any liabilities or debts to the business are the responsibility of the business owner — the proprietor.. Note that you will need to file a US income tax return, and will have to pay US taxes on profits you earn from sales in the US.
A partnership is a business entity jointly owned by two or more individuals. In most cases, all partners are equally liable for debts and taxes owed by the partnership. Here too, the partnership must file US income tax returns for all business conducted in the US, as well as various other reports and forms.
A corporation, or an LLC is a business entity that helps protects its owners from personal liability, by placing most obligations in the corporation or LLC itself. The corporation or LLC pays its own taxes on profits, and has rather complicated setup and reporting requirements to the US federal and state governments.
More information here:
In the UK, you have similar options to those in the US.
A Sole trader is the simplest business organization to set up. But you will be responsible personally for any debts or liabilities the business incurs in the UK. You will also have to file accounting and other tax reports after you register as a sole trader.
A Limited Company
The finances of a Limited Company are separated from the personal finances of the owners, but there are complex reporting and management responsibilities for the company. In the UK it is relatively easy to set up a Limited Company, even as an individual or business located outside the UK, but most businesses seek the help of an account or other specialist in setting up a limited company.
A partnership provides a legal structure for two or more people to run a business together. All partners are equally responsible for the business’s debts. There are also specialized accounting rules and responsibilities.
You share responsibility for your business’s debts. You also have accounting responsibilities.
You may have other responsibilities depending on what your business does. You may need various licenses, permits, and insurance, for example, and there are also special rules to follow if you sell goods online, buy or sell goods from abroad, and if you store or use personal information.
There is more here: https://www.gov.uk/set-up-business
The rules here depend on whether your business already operates in a European Union country, or you want to establish a business from outside the EU.
If you operate in a EU country now and want to expand within the EU, a good option is to create a European Company — called an SE — which is a public limited-liability company regulated under EU law.
Having an SE makes it somewhat easier to run a business that spans more than one country in the EU — without setting up a network of subsidiaries. There are a number of ways to form an SE from existing companies in the EU. But note there may be capital requirements and other regulations that vary between countries.
If you are outside the EU right now, the other option is to establish a business in a EU country and expand from there.
3. HOW WILL YOU GET PAID?
If you hope to do business with customers or suppliers in the US, the UK, or the EU, you need to determine precisely how you will get paid for what you do, and how you will pay for services or goods that you buy from abroad.
The traditional solution has been to set up a business bank account in the country where you’ll be doing business as a buyer or a seller.
You send your customer a conventional invoice, and they send you a check, or a direct deposit to your local bank account in Belfast, or in Madrid, or in New York. And you then wire the funds back to your account in your home country.
Unfortunately, unless have made the effort to create business entities in those countries, setting up business banking accounts in the US, the UK and EU will be difficult, if not impossible.
In most cases, to set up a bank account in the US, the UK, or in a EU country, you will need an actual physical business address in that country. And you — or an authorized representative — will need to appear in person to present the necessary identification and documentation to open the bank account. Note that there may be rather substantial fees for using that account. And you will be paying premium rates for currency exchange as well.
In addition, when you need to wire funds to or from that account, you will be paying substantial fees for international transactions through conventional banks.
THINK ABOUT A GLOBAL PAYMENT PLATFORM
For more and more companies, a more direct and simple solution is to take advantage of international payment platforms such as Payoneer, which don’t depend on conventional wire transfers or the usual bank-to-bank systems.
As a freelancer or independent professional for example, you simply establish an account with Payoneer, which takes a matter of minutes, and can be activated the same day. It can be done entirely online. No need to appear in person — in country or otherwise.
Your Payoneer account will be linked to your bank account in your home country. You won’t require a bank account in the UK, EU, or in the US to do business there.
To get paid for freelance work consulting services, for example, you simply send a payment request (much like a conventional invoice) through Payoneer. It’s delivered almost instantly. And it allows your customer to pay via their company checking account, a company credit card, or other means.
The funds go directly into your Payoneer account, which you can access directly from ATMs worldwide, or transfer to your local bank account, as you prefer.
The advantage is, you’re not paying high banking fees for maintaining accounts, wire transfers, or currency exchange. And it’s all easier and simpler for your customers.