Internationalization is a real challenge, and contrary to popular belief, it doesn’t always translate into success. An internationalization strategy is a long and complex process that mobilizes the various resources of a company. To ensure its success, it’s essential to know how to prepare it properly. To do this, you need to decide on the form it should take. The company can choose between several possibilities , such as setting up a branch, a liaison office or simply deciding to create a subsidiary.
What shapes should you choose for your layout?
The choice of location depends on many factors, including the company’s objectives, its human and financial resources, and its commitment to internationalization.
The creation of a liaison office
This type of set-up is designed to gather information, enabling a company to make local contacts and gather all the elements necessary for future collaboration. However, this status is limited in that the company cannot sell its products or services. This type of layout is therefore not intended for commercial use. The advantage of the liaison office is that it does not have its own existence, which means that expenses are deductible from the parent company’s income.
How do you create it? To set up a liaison office, a single declaration of existence to the Chamber of Commerce and Industry is sufficient.
Setting up a branch
A branch is a geographical extension of the parent company. In this way, the parent company’s products can be marketed in the host country. Unlike a liaison office, a branch is considered for tax purposes as a permanent establishment with no legal autonomy and no assets. If the parent company’s country has not signed an international agreement, it may be subject to the principle of double taxation between OECD (Organization for Economic Cooperation and Development) countries.
How do you create it? Formalities are straightforward, and vary from country to country. The branch must be listed in the local trade and companies register. The parent company must appoint a branch manager, who must hold a residence permit stating that he or she is in charge of the branch, unless he or she is a member of the European Economic Area.
The subsidiary
This is a type of set-up that enables a parent company to market its products autonomously and as a legal entity. Unlike a branch, a subsidiary acts in its own name, is fiscally autonomous and has its own assets. The method of taxation corresponds to the tax laws in force in the country where the company is based. The creation of a subsidiary enables the entrepreneur to isolate his activities and take the fewest possible risks in terms of deficits. One of the main advantages of a subsidiary is that it protects the parent company in the event of default.
How do you create it? There are two possible solutions:
- 1/ Either set up a new company in your home country. A long and costly process, but one that enables the company to adopt the best legal status for its business.
- 2/ Or take over a foreign company. The company can take part in a buyout of a local company by purchasing shares or subscribing to a capital increase.
