Lina Barfoot
Lina Barfoot, Editor at SavvySME

Legal

What legal issues do you have to consider when trading abroad?

If you're interested in entering another country, what are the first things you have to consider, as far as legal issues go?

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2 Answers

Heather Chai

Heather Chai , Head of Communications at Asialink Business

Great question! There are many factors you’ll need to consider, depending on the country you want to set up your business in - So careful planning is the key.

If you are looking to expand your business with China, Australia’s largest trading partner, here are a few practical tips that might help.

Doing business in China may seem rather daunting for newcomers. Taking a strategic approach is one of the keys to making the process manageable. In particular, it is important to:

• Avoid going into China cold – get a foot in the door first by making connections and conducting research before travelling there

• Take care with your choices of advisers, partners and contractors

• Allow time for bureaucracy – both filling in forms and waiting for approvals

• Choose a business structure based on research specific to your industry, objectives and your product

• If establishing your own business there or in a partnership, make sure you are directly involved in the setting-up process.

Once you’ve decided to set up a business in China, there are a number of channels of entry open to foreign investors; the one you choose must fundamentally be supported by your company’s business objectives.

Setting up a business in China overall generally takes three to six months and involves various government authorities and procedures that may differ depending on the industry your business is in and the structure you have chosen.

The four primary options Australians businesses can choose from to set up a foreign investment enterprise (FIE) are:

1. representative offices (RO)

2. wholly foreign owned enterprises (WFOE)

3. joint ventures (JVs) – of which there are two types – one being foreign invested partnerships (FIP).

You can find out more – including on investment rules and regulations and other factors you need to consider– in these free business guides:

https://asialinkbusiness.com.au/country-starter-packs

In addition to China, the guides cover a number of other key markets as well, like Singapore, Hong Kong, India, Korea and Indonesia.

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Ian Smith

Ian Smith , CEO at CargoHound

I can answer on the United States - There are many legal considerations including IP, contracts/agreements and immigration - I have chosen to talk about setting up a US presence below:

Having conducted extensive market research and a thorough competitor analysis you may decide to sell directly to your customers by setting up a US presence. You can either do this by opening a branch office or establishing a separate US subsidiary, such as a Corporation. While establishing a US presence can add complexity it also has major advantages. Some types of entities can protect your assets at home by restricting your US legal liabilities to your American operations. Your business will also be seen as more “American” which provides buyers with a greater comfort level and can also avoid any “Buy American” mentality.

The primary concern for foreign companies when establishing a US entity is deciding on the form of entity to be established.

Types of US Entities

1. Corporations

2. Partnerships

3. Limited Liability Companies (LLC)

Doing Business in Multiple States

Once the decision has been made on the type of business to establish, one of the next decisions to be made is where to incorporate or form. Usually, the corporate entity is formed or incorporated in the US state where it will be conducting its business. However, a US corporation may be formed under the laws of any state and have its principal place of business elsewhere so long as it “qualifies to do business” in each state in which it operates. This means that investors may choose the state law that best fits their needs. Once the state has been selected, a corporation or an LLC can generally be formed within 24 hours, similar to the time it takes to form a corporation in Australia. Delaware has proven to be a popular state for the incorporation of various corporate forms because its statutory regime is based on the principal of contractual freedom and because the state is known for having an efficient filing office and experienced and knowledgeable business entity lawyers and courts. In addition, the Delaware annual reporting requirements are relatively simple and Delaware law and practice are well-adapted to corporations whose principal place of business is not located in Delaware.

For more detailed information on the types of US entities and other options for doing business in the States refer to www.unitedstatesconnect.com

Lina Barfoot

Lina Barfoot, Editor at SavvySME

Thanks Ian that's great answer, very informative. It seems like such a complicated issue so it's good to know there's resources available for companies interest... read more
Thanks Ian that's great answer, very informative. It seems like such a complicated issue so it's good to know there's resources available for companies interested in this.
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