I received some feed back in reference to yesterday’s post, The 5 Key Factors You Must Consider When Establishing a Foreign Corporation.
It seems I left some readers with the impression that forming a foreign corporation was not worth the risk given all the legal issues that must be addressed.
While I did not intend to scare anybody who is considering establishing a foreign corporation, there are other alternatives to keep in mind if you’re looking to enter a foreign market.
One such alternative to consider is international licensing.
On this point, Laurel Delany has an informative post, Entering a Foreign Market Through Licensing.
In the post, she outlines six benefits to international licensing:
- Not too demanding on company’s resources (good vehicle when capital is scare).
- Requires a low-commitment to international expansion.
- Access markets that are closed to imports.
- Avoid taxes that might otherwise be levied on a product if exported.
- Governments in the foreign market might prefer licensing arrangements for local companies.
- Protect intellectual property against cancellation or nonuse.
Laurel cautions that while international licensing may not be the most profitable way to get started in a foreign market, such an arrangement is less risky than going all out via direct investment, which can be time-consuming and costly.
Another alternative to forming a foreign corporation is international franchising. For more on that be sure to check out 5 Key Terms to Include in Your International Franchise Agreement and How to Draft an International Franchise Agreement. The Basics.
What do you think?