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ReprintsGuidelines for Going Global
April 28, 2008
Photo by iStockphotos
By: MATT ALDERTON
The world is a big place. Thanks to the globalization of business, though, it's getting smaller by the day, which means that more and more Moms and Pops can buy from and sell to foreign markets.
A smaller world, however, isn't necessarily a united one. There are still hundreds of ways to say hello—hi, hola, bonjour, guten tag, ciao, nee how—and by the same token, there are still infinite ways of doing business. Before you globalize your business, therefore, you ought to study up on business customs, rules and regulations abroad.
Just ask attorney at law Sean M. Novick, who specializes in international law. Not only does he offer legal services for small businesses, both at home and abroad, but he's also a small business owner himself. His new Los Angeles-based company, Career-Climbers.com, provides resume-writing services for job seekers worldwide.
"The decision to go global is fraught with peril," Novick says. That's because if you're doing business abroad, and you fail to cross your Ts and dot your Is, you risk violating both foreign and domestic laws. The resulting fines could easily cripple your business. The best way to avoid having to pay them? Do your homework in order to be compliant—wherever you do business—from the get-go.
"Research, research, research before you jump in," recommends attorney Michael Diaz, Jr., managing partner at Diaz Reus Rolff & Targ, a Miami-based law firm that specializes in international law. "Spending money up front to do your due diligence will save you headaches and money later, should a dispute or problem arise in a foreign country."
If you've got your sights set on foreign markets, you've probably got dozens of questions. Here are quick answers to a few of them:
Does international law matter to my business?For more information on doing business abroad, consult the International Trade Administration's Frequently Asked Questions.
If you're selling in foreign countries, buying from foreign countries or manufacturing in foreign countries, then yes, international law probably matters to your business.
"If you have any intention of conducting business in another country," Novick says, "you must at a minimum understand the most basic aspects of the legal process in the foreign country you intend to do business in."
When doing business abroad, am I subject to U.S. law, or to foreign law?
It depends on whether you're importing or exporting. The easy answer, though, is both, according to Diaz. "For example," he says, "financial services, trade and oil have foreign and U.S. laws that apply to their respective industries, from anti-money laundering to trade and customs."
I'm exporting to other countries. What regulations do I need to be aware of?
There are different regulations in different countries. You therefore need to research relevant markets closely before diving into them. And remember, no question is too obvious.
"Most important," Novick says, "you must be aware of the tax laws and general compliance issues. By this, for example, if you are exporting a shipment to another country, be sure your product is legal in the country of choice. If it is a service, make sure that is legal, too, especially if it is heavily regulated."
Finally, check to see if there are any trade embargoes or sanctions against your target country. You can't do business abroad, after all, if it's forbidden; if it is, it's best to find out sooner rather than later.
Do I need to incorporate abroad in order to do business abroad?
"No," Diaz sayz, "you need not incorporate locally to offer your goods and services."
While you may not have to reincorporate abroad, you may have to obtain a local business license or permit. Chances are, if you need a license to do what you do at home, you'll need one to do it elsewhere, too.
How will doing business abroad affect my taxes?
As a U.S. resident, some percentage of your net revenue is always subject to tax, no matter where you earn that revenue. If you're engaged in international trade, be prepared to pay extra taxes, Novick cautions, in the form of import and/or export taxes.
What is the most common mistake that business owners make when they're going global?
According to Diaz, expanding businesses too often leap without looking. Their biggest mistake, he says: "Entering a foreign market without the proper domestic structure and overlooking foreign permit and licensing requirements."
That mistake can easily be avoided if instead of asking questions, you get them answered. "A major mistake is failing to properly research the targeted country," Novick says. "This can easily be avoided by doing some basic research and contacting an attorney. Too many small business owners just start advertising before putting their ducks in a row; in other words, they put the cart before the horse."
Where can I find more information about international rules and regulations?
Start online, at your favorite search engine, Novick suggests. "First, small business owners should determine exactly where abroad they are intending to conduct business," he says. "Then, they should do some research to see if they can find a resource Web site in that area. Normally, a quick Google search of the area they intend to conduct business, in conjunction with the term 'legal' or 'compliance' will help determine where they should start their research."
Novick recommends consulting the Small Business Administration, then searching for an attorney that specializes in international law, preferably in the law of your target country, in order to guide your next steps. A good place to start your attorney search is FindLaw, while a good place to do your own legal research is with the Trade Information Center (TIC) at the U.S. Department of Commerce. Still have questions? Call the TIC toll-free at 1-800-USA-TRADE to get advice and information from an international trade specialist.
