8 Tips for Starting a Business in Another Country

With nearly 96% of consumers living outside the US, starting a business in another country can certainly offer plenty of growth potential. In this article, we’ll discuss how to successfully navigate this challenging feat and how Wise Business can make the expansion process much easier.

With Wise Business’ online account, you can manage your overseas business and get paid without hefty fees in the currencies you want.

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Table of Contents

Consider seeking the right financial help What kind of business are you starting? In which country will you start your business overseas? Decide which corporate structure you will select Consider how to report an offshore business and earnings Look into deductions and exclusions to lower US taxes Are there any other expense deductions you can make? Getting an international business account with Wise

Consider seeking the right financial help

With approximately 82% of small businesses failing due to cash-flow problems, securing the right financial help can help overcome these challenges and set a strong foundation for success.² Conduct thorough research on different funding options, lenders, and interest rates to find one that complements your business needs.

Developing a robust financial strategy isn't a one-size-fits-all approach, so it’s a smart idea to consult with financial advisors, experienced mentors, or industry experts to get valuable insights and advice tailored to your business.

What kind of business are you starting?

Imagine trying to assemble a jigsaw puzzle without knowing the final image – that's what it's like doing business overseas without identifying its type first. A clear understanding of your business type sets the stage for big decisions regarding funding, structure, and marketing strategies.

In fact, among the over 33 million small businesses in the US, 81.7% are sole proprietorships, and 18.3% have paid employees.³ To kick off your brainstorming process, consider the following business categories:

• Product-based: Engage in the sale of tangible or digital items, such as trendy clothing, electronics, or practical software that solves everyday problems.
• Service-based: Maybe you have a knack for consulting, a flair for design, or the eye of a skilled photographer. Turn your expertise into a service-oriented business that helps clients achieve their goals.
• Manufacturing: If you enjoy the process of creating products from scratch, consider entering the world of manufacturing. Build anything from artisanal goods to large-scale industrial items.
• Ecommerce: Join the ever-growing digital space with an online business, either through your own platform or by using established marketplaces like Amazon or Etsy.
• Brick-and-mortar: Go the traditional route of a physical storefront to cater to customers seeking personalized interaction and a hands-on shopping experience.

In which country will you start your business overseas?

Choosing the right country when starting a business abroad can make all the difference. A strong potential market, a robust economy, and a favorable business environment are just some of the most important factors to consider. According to the World Bank's Ease of Doing Business index, New Zealand, Singapore, and Hong Kong frequently top the list for their business-friendly regulations and procedures.⁴

There are two things you’ll want to do to help you figure things out: research potential markets that align with your product or service offerings and understand each country’s laws, regulations, and cultural nuances. Doing this will help you determine what countries hold the most promise for your business.

Decide which corporate structure you will select

The legal structure you select influences aspects like taxation, personal liability, and administrative requirements. For instance, the US Small Business Administration reports that corporations are subject to double taxation, whereas limited liability companies (LLCs) have pass-through taxation (where owners report tax information on their individual tax returns and bypass corporate income taxes).

These are some of the most common structures business owners choose:

• Sole Proprietorship: A simple structure if you’re starting a solo business, but one where you’ll assume full responsibility for debts and liabilities along the way.
• Partnership: Shared ownership between two or more individuals with joint responsibility for the company's debts, taxes, and legal matters.
• Corporation: A legal entity separate from its owners, offering limited liability protection and having the ability to raise capital through selling shares.
• Limited Liability Company (LLC): A hybrid structure combining the benefits of corporations and partnerships, offering limited liability protection and pass-through taxation.

The choice of corporate structure largely depends on your preferences, business goals, and the level of risk you're willing to take on. Since managing corporate structures can be confusing, consulting with legal and financial experts in the target country will give you valuable information about the specific requirements and implications when you incorporate overseas.

Consider how to report an offshore business and earnings

Keeping track of your offshore business and earnings is like tending a garden—you need to nurture it and care for it. In other words, you need to remain in compliance with tax and regulatory requirements both in your home country and abroad. This not only helps you avoid penalties and fines, but also fosters a sense of trust with local authorities and customers.

To maintain proper reporting, seek out local accounting professionals or consider using accounting software tailored for international businesses. Familiarize yourself with the tax and reporting obligations specific to your target country, as well as your home turf’s regulations for overseas income.

For example, the US follows a legal system rooted in common law. Its business framework is clear-cut, and there’s a strong emphasis on intellectual property rights. In other countries, you will find that the business landscape may involve stricter rules for foreign ownership, have different cultural standards and customs guiding business transactions.

Look into deductions and exclusions to lower US taxes

When venturing into international business, it's smart to explore deductions and exclusions that can lower your US taxes – just like discovering hidden discounts while shopping. Take the Foreign Earned Income Exclusion (FEIE), for example.⁵ It allows eligible US citizens and residents working abroad to exclude a certain chunk of their foreign-earned income from US income tax.

Another example is the Foreign Tax Credit, which provides a dollar-for-dollar reduction on your US tax bill based on the foreign income taxes you've already paid.⁶ Investigating these options and working with a tax professional experienced in international business can help you maximize your potential savings while staying compliant.

Are there any other expense deductions you can make?

Don't forget to think about other expense deductions that can help keep more money in your pocket. These potential deductions can add value to your overseas venture.

Eligible business expenses like operating costs, professional fees, and travel expenses can usually be deducted to reduce your overall taxable income. Maybe you've spent on advertising, bought equipment, or used the services of local accountants and lawyers – these expenses might be tax-deductible.

Each country may have different rules, so be sure to team up with a savvy tax professional who’ll help you dig up every possible deduction.

Getting an international business account with Wise

No matter which platform you decide to use for your freelance work, Wise Business can help you save on outgoing and incoming payments.

A recent study has shown that Wise Business can help users save 19x when sending payments compared to PayPal. And with our local account details feature, you can get paid in 9+ currencies, such as USD, GBP, EUR, CAD, AUD, and more for free after paying a one-time payment of 31 USD. You’ll see your savings adding up in no time!

With our business accounts and debit cards, you can get the real mid-market rate when transferring between different currencies. This means that more of your hard-earned money stays in your pocket.

Some other features Wise Business users love
Account Software Integration: QuickBooks, Xero, Sage, and Wave
Batch Payment Tools: Pay up to 1,000 invoice in one instance
The Most International Account: Hold 40+ currencies at once
Transparency: Wise Business is trying to get rid of all your business account fees

Looking to save while managing your international business needs?

Send and receive
overseas payments >>

Trustpilot: 4.3/5 average rating - Excellent¹
No minimum balance required and no monthly fees
Hold 40+ currencies

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Sources:

1. https://www.trustpilot.com/review/wise.com
2. https://www.entrepreneur.com/starting-a-business/10-critical-cash-flow-rules/187366
3. https://advocacy.sba.gov/wp-content/uploads/2023/03/Frequently-Asked-Questions-About-Small-Business-March-2023-508c.pdf
4. https://archive.doingbusiness.org/en/rankings
5. https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion
6. https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit