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, mobilizing all the company’s resources. To ensure its success, it is essential to know how to prepare for it. To do this, you need to consider the form it should take. The company can choose between several possibilities , such as setting up a branch or 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 needed for future collaboration. However, this status is limited insofar as the company cannot sell its products or services. This type of location is not intended for commercial purposes. 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 sense, it enables the parent company’s products to be marketed in the country where it is established. Unlike a liaison office, a branch is considered for tax purposes as a permanent establishment with no legal autonomy or assets. If the parent company’s country has not signed an international treaty, it may be subject to the principle of double taxation between OECD (Organization for Economic Cooperation and Development) countries.
How do you create it? The formalities are straightforward, and vary from country to country. The branch must be registered with the local trade and companies register. The parent company must appoint a branch manager, who must hold a residence permit showing his or her activity, 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, i.e. with its own legal personality. Unlike a branch, a subsidiary acts in its own name, is fiscally autonomous and has its own assets. It is taxed in accordance with the tax laws of the country in which it is established. The creation of a subsidiary enables the entrepreneur to isolate his activities and take the fewest possible risks in terms of losses. 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 the country where you are based. This is a long and costly process, but it enables the company to adopt the best legal status for its business.
- 2/ Or take over a foreign company. The company can participate in a local buyout by purchasing shares or subscribing to a capital increase.
