Business Agreements When Doing Business Globally
It goes without saying that business and tax laws are different in different countries. Many entrepreneurs have learned this lesson the hard way by not utilizing experts to get agreements, licenses, and contracts in place prior to conducting business abroad.
As with any business venture, you should consult with experts who are knowledgeable in international business, specifically the county chosen to do business in. For certain industries and countries, taxes may be waived for the first two years of profitability and reduced for up to three more years thereafter. A savvy entrepreneur or small business owner will want to take advantage of these tax incentives.
Taxes are not the only concern when entering a new market. Topics such as general accounting, business risk mitigation, contracts, and licensing must also be addressed with experts.
There are many resources available to guide a business owner when conducting business in a foreign country. It is always a good idea to find samples to guide you in developing business agreements, whether the business is for a product or service. The business owner should write the agreement first, work through it with all parties concerned and then make it legal. It is ill-advised to work on trust alone!
Some considerations for business agreements include:
- What company name will the contract(s) be under? Is one company absorbing another or is the whole company starting from scratch?
- Who is involved in the business? Who, from both sides, serve as actual partners and will share in future revenues and royalties?
- Who actually owns the company? If one party decides to end their involvement, how will that work? Will someone else “inherit” the business? Who owns the customer base, client lists, and Joint Venture partner relationships?
- What regions or countries do the contracts cover? It is recommended that a small business start small with regions of larger countries. This allows both parties to prove the ability (and profitability) of the company.
- What are the performance requirements? What are the timelines that must be met and for how long? What are the consequences if performance metrics and deadlines are not met?
- Does either party own Intellectual Property (IP)? Are there trademarks, patents, or copyrights to be considered?
- How will the supply chain work? Are all contracts in place with suppliers?
- Are there publishing and licensing agreements? Is the business producing printed books, e-books, articles, blogs, etc? Who actually owns that content? What about content that hasn’t been developed yet?
- What languages are being licensed? In most cases, each language needs a separate licensing agreement.
- How will the administrative systems be handled? Who will oversee all systems, operations manual, planning tools, and sales tracking? Who will provide reporting?
- How will payments be made? This includes the terms of payments, profit sharing, royalties, etc. Are payments based on percentages or flat fees? This also includes the method of payment (telegraphic transfer, etc.).
- Who is responsible for manufacturing, printing, and creating products and support items? Who will ship…and from where?
- Determine pricing on products and services.
- Who has the final say on the development, production, and quality of products?
- How will back-end products be handled? Clarify who will develop and own additional products or services such as coaching programs, films, videos, broadcasts, and games. These are items many people don’t think about ahead of time and then gaps open as new products or services are introduced.
- Who will pay for ongoing costs? Who is responsible for staff hiring, training, payroll, etc.?
- Who owns domain names, provides web and technical support?
- Define how the products, services, and trade secrets will be protected.
This list isn’t meant to scare a new Global Entrepreneur away or to discourage them from doing business in a new country. All of these issues are manageable and many other small businesses have successfully established themselves in a foreign land. It can be done (and is done every single day!)
Don’t lose your chance to take your product or service to another country. Be smart about it and work with expert accountants, attorneys, intermediaries, and others who know what to do with international businesses. This will help you gain Ultimate Leverage for your business internationally.
Learn more about Global Entrepreneurship and find the strong network you’ll need to establish your business internationally.
Register today for “The Excellerated Business School for Entrepreneurs” to be held November 11-19, 2013 in Kuala Lumpur, Malaysia.
To find out more, visit us at www.BSE2013.com