Four tips for companies to enter international business

By John Sterling

Many organizations, regardless of their size, are seeking opportunities to enter into international business. However, before entering a global market, it is important to strategically identify the motivation behind your decision to explore foreign markets. Many companies do not have the knowledge to take advantage of this potential source of new revenue stream. If you are looking to develop a presence in global business markets, here are a few tips to help you out.

 US-PDGov

Identify strategic needs

Entering into international business provides companies with the opportunity for expansion and increased revenue. However, this initiative has to be in harmony with the overall strategy of the company. So you need to make sure your international business plan is consistent with your business strategy in order to increase the chances of success.

Also, address strategic aspects of international growth such as sales, marketing and distribution. Incompatible, intermittent, or nonspecific deployment of resources towards international expansion can lead to an underperforming plan that will soak up your limited resources with small return. Most of all, you must have clear direction, dedicated resources and full management support.

Get to know your potential market

No matter what plan a company adapts, to tap into an international market, a prior research must be adequately conducted. Learn about your prospective markets, particularly their politics. Also do a research about the international acceptability of different marketing practices. Quotas, tariffs and other trade guidelines would be necessary to investigate when entering a new market, in order to have a full understanding of the logistics and pricing of products globally.

There are lots of online resources that can provide you with useful research and information. You may also consider hiring an international business consultant to give you country-specific statistics in a customized way. Better still, you can assign focus groups to examine your potential international market in order to determine the best market entry strategy.

Understand any regulations

Regulations and documents are the informal language of the international business. You need to understand any terms that could hamper your opportunity. Besides the barrier to trade, get to know the legality of your brand in your potential market, as this knowledge could save you a lot of legal issues. Become an expert on the international terms and conditions governing business. Also make sure to renew all the necessary documentation as well as export licensing procedures.

Seek appropriate assistance

Before going global, you may also need to secure a respected agent or representative who specializes in international business. Companies expanding or initiating into international business consider such professionals to be an important partner in helping them succeed internationally. Hiring experienced professionals to work with you in entering new markets can help you avoid missteps and get the job done right. The range of services offered may vary, but generally they help companies to implement, conceptualize and manage big or small global business development projects.

International business holds many opportunities for small and large companies. It promotes sales and proceeds, improves a company's reputation and provides a great way for businesses to manage seasonal fluctuations. By considering and implementing the above mentioned key steps, you can successfully enter the international trade and capture the dramatic revenue growth.

About the author: John Sterling is a business consultant and a writer. If you need some help with international business and trade, visit Sourcing Agent.

Best states to consider doing business in

The State a business is opened in can have sizable effects on start up costs, taxation, legal regulation, and revenue generation potential. The reason this is so is different states vary on their approach to business in terms of the aforementioned aspects. 

Since many start up businesses face considerable obstacles such as under-capitalizations, weak or inconsistent market share, entry barriers etc. every advantage that can be harnessed can help spin the favor in the direction of the start up business. Certain states can provide a more favorable business and economic environment to new businesses.

States with favorable business, legal and regulatory environments

A favorable business legal environment can protect businesses from excess litigation and legal costs in addition to more reliable legal processes can be advantageous for a business. Legal and regulatory factors may have an influence on where a company incorporates because of certain legal and regulatory factors. 

If a State favors businesses, there are legal steps and environments that can be fostered to attract businesses. A few factors that may affect a company's decision to incorporate in a given state include the following:

• Legal protection from litigation
• Corporate Registration fees
• Asset protection regardless of LLC status
• Privacy of officer information
• Formulation methods for business policy i.e. written vs meeting
• Minimum amounts requirements for Business bank accounts

One state that is highly favored by corporations is Delaware. Delaware is favored by many corporations due to an exceptional legal system in addition to accessibility to that legal system, low registration fees, anonymity of officer information, and asset protection. These are legal and regulatory variables that allow businesses to operate with less fear of law suit, cost of operation and red tape in terms of reporting information and achieving legal objectives.

States with lowest taxation

The tax rates between states varies considerably and depend on the type of business. Sole proprietorships are taxed at individual rates which are also different from state to state whereas C Corporations are taxed at corporate rates which are subject to different taxation. Additionally, both sole proprietorships and C corporations are subject to sliding scale rates except for states that have a corporate flat tax.

Furthermore, business income from capital gains and dividends may be subject to different tax rates than ordinary income making the distribution of income and state taxation of that income a key component in the tax advantages of doing business in certain states. The lowest and highest of each set of tax rates are illustrated below:

Sole-proprietorships:

Income between: $7,550-$30,650: 15%
$30,650-$74,200 25%
$74,200-$154,800 28%
$154,800-$336,550 33%
$336,551 + 35%

Capital Gains Tax varies from 0%-28% depending on the type of item sold i.e. collectible, real estate, stock etc. Qualified Dividend income is also generally taxed at a lower rate than normal income i.e. 5% for a normal income tax bracket below 25% or 15% for a normal income tax bracket at or above 25% or higher.

C-Corporations:

Lowest Flat Tax Rate: Kansas 4%
Highest Flat Tax Rate: Minnesota 9.8%

Lowest Sliding Scale Rate: Arkansas 1%-6.5%
Highest Sliding Scale Rate: Vermont 6%-8.5%

It should also be noted that state corporate tax rates may or may not include other taxes such as surtax. Massachusetts which has a flat rate tax of 9.5% includes a 14% surtax which when added on to other state tax rates may or may not end up costing less.

States with no income tax may or may not have special exemptions for business revenue, however sole proprietorships not using employer identification numbers may qualify for tax exemption. Checking with each states tax authorities is a good way to assure if one's business transactions will be taxable. The following is a list of states that do not currently have individual income tax.

• Alaska
• Texas
• Florida
• Nevada
• Washington
• Wyoming

States with economic potential and market demographics

Depending on which State a business operates in the market demographics are likely to differ. Finding the right market for a business is somewhat dependent on the products and/or services provided by a business however some sates have key economic factors that can be beneficial to a profitable business climate. A few such variables are the following:

• Income growth
• Employment rates
• Population growth
• Consumer spending
• Location to major industrial or business districts

Cities and regions within States may also provide favorable or unfavorable micro climates. These economic micro climates, two examples of which are the Dulles Corridor in Virginia and Silicon Valley in California provide a more expedient flow of information, professional interaction, and potentially cheaper logistics costs and may offset or enhance some of the influences associated with States as a whole.

Start-up business tips

Before setting up a business in a state can be prudent to prepare. Preparation involves several key techniques and methods used by many business owners.  Not understanding the risks of independent business financing, or of jumping into a business or business idea without actually knowing what will happen can be a one way ticket to business failure. 

• Plan

A sound, and effective business plan can be a very good idea before starting a business in any state. Simulating business scenarios, visualizing the business, preparing for shortcomings, logistical, inventory, capitalization, distribution and other important aspects of business operations may mean the difference between success and failure.

• Research the market

Different states have different markets, regional market saturation levels, competition etc. Knowing the market within a state is important to future revenue generation. Market analysis involves techniques such as cluster analysis, market segmentation and business market saturation.

• Know the product and/or service

Different products and services may have lower costs in different States. For example, there may be a surplus of technicians in State A but a shortage in State B. According to supply and demand the state with a surplus will have lower costs in the short run.

• Understand taxation and annual fees:

Tax issues are more than just surface tax rates and can involve business specific taxes, tax strategy and state tax rates. Review varying business models against their taxability, taxable structure and rates associated with those types of businesses.

Summary

The decision to incorporate a business based on State attributes tends to be an involved one as so many variables can come into play. The business owners may have to relocate for one thing and setting up shop in another state can require heavy start up costs, time and energy. For these reasons, locating a business in a specific state would have to favor a business considerably to be worth while both in the short and long runs.

The information in this article may serve as primer to some of the key factors worth considering in terms of starting a new business within the United States. It might be a good idea to also consider the fact business type also plays a role. Certain businesses might have more potential in certain states. For example, an orange farm without a doubt will have the best chances of success in California or Florida. Choosing another State and growing oranges in greenhouses may not be cost effective and the advantages and disadvantages between California and Florida might also be considered.

Different States have different regulatory, taxation, and market environments. These factors along with regional and urban considerations can all have an impact on the potential revenue generation and performance of a start up business. Taking the time to understand and become familiar with as many of these factors as possible before opening a business can mean the difference between sub-par and optimal business performance within one or more states of operation.

Sources:

1. http://www.irs.gov/pub/irs-pdf/p17.pdf
2. http://www.irs.gov/pub/irs-pdf/i1040.pdf
3. http://www.taxadmin.org/fta/rate/corp_inc.html
4. http://www.forbes.com/2006/08/15/best-states-business_cz_kb_0815beststates.html
5. http://www.articles-hub.com/Article/104260.html