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Legal Ramifications of a Multinational Business

Imagine the following scenario. You are a citizen of Country A, a small, developing nation. You decide to move to Country B, a large, developed nation. After a few months, you start a trading business and open a small office. You hire a few local workers to take care of daily essentials and a few more back in your place of birth. Your clients are in several countries all over the world, the places where you ship your goods every month.

From a legal perspective, there are several questions to consider:

  • The office is located in Country B, but you have employees in Country A. What kind of contracts should you have them sign? What are the legalities of each type?
  • Would it be better to set your enterprise in one of the nations where your customers are? Would this be beneficial to you or cause your business harm?
  • What tax options do you have? What about tariffs and quotas?
  • Are there any trade agreements or treaties between your country of origin, your country of residence, and the nations where you find your clientele? If so, how can you take advantage of these?
  • What existing rules and regulations affect the products you are dealing with?

As you can see, setting up a multi-national business is not as easy as it seems. Yet, it is also not impossible. The important thing is that you have the right information and do your due diligence. After all, you don’t want to break the law by being negligent, get arrested, and have to spend time and money posting a bail bond to continue running your business.

It Starts With Your Company

Legally-speaking, there are many types of businesses you can establish. Examples include a sole proprietorship, a limited liability company, and a general partnership. You must first call or visit the chamber of commerce in your city and inquire about each one. Bear in mind that the type of business might have the same name in different countries, but this doesn’t imply it is the same.

Once you have decided on your company’s legal entity, the next step is to determine whether you plan to open a head office, a branch, an agency, or a factory or production facility. As with the entity itself, if you decide to open a head office or an agency, there might be diverse legal ramifications based on where you live.

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Employing People

Unless you work freelance or are not interested in your new firm to grow, you will have to hire employees at one time or another. From an international business perspective, there are several aspects you should be aware of:

  • The people you hire locally are subject to local laws. Those working abroad should submit to the laws of their nations.
  • If you are hiring ex-pats, make sure you do your research on temporary and full-time foreign worker permits and what each one entails.
  • Not knowing the law is not an excuse for breaking it. If you are unaware of labor laws in your country, find out or hire the services of someone who can help you.
  • Draft specific, detailed contracts for different types of employees. Along with temporary and full-time workers, others such as part-time, on a project-basis, independent contractors, and unaffiliated.

Your employees are your biggest source of wealth and your most important aspect. Ensure you are doing right by them and also by your organization and yourself.

Intellectual Property and Distribution Agreements

Intellectual property relates to any non-tangible asset that either you or your business own. For instance, they could be trademarks, company secrets, logos, slogans, manuals, designs, and ideas. As for distribution agreements, they signify outsourcing processes to third parties, who will be responsible for the transportation and selling of your goods.

As a rule of thumb, patents on intellectual property are only valid in those countries where the application is filed. If you have branches or customers in other nations, it will serve you well to file for them there. You don’t want your products to be safe only in the place where you make them.

Concerning distribution agreements, verify that your demands and expectations are being met and are written down in a solid, full-proof contract.

Starting a new business is one of the most exciting journeys a person can take. It is especially true when you are opening a multi-national company. You are learning novel concepts, pushing the boundaries, and exploring new frontiers.

But before you take the plunge, do your research and make sure you understand the different legal processes you must go through and the reasons for them. They will avoid unnecessary headaches as your business expands.

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