Which business model should you choose for your international expansion?When you have made the decision to expand globally, you need to consider what the best legal structure for your enterprise might look like in the new country. You should consider whether to:
In this article, we are looking at these last two options. We examine when it might be a good idea to switch your business model from a global PEO arrangement to a brand new entity.
What does a global PEO do?
So, what is a global PEO (sometimes referred to as an ‘international PEO’)? It is a specialist human resources (HR), payroll and employment company, which operates in the new country you intend to expand into. It acts as the ‘employer of record’ for your workforce in the new country, and takes on many legal and compliance obligations in that country. To clarify the liabilities and obligations of both parties, the enterprise (‘the client company’), enters into an agreement for services with the global PEO. Global PEOs carry out a range of functions, including:
When does a global PEO make sense?
As part of your expansion strategy, you have likely identified the new country as an excellent business opportunity for your enterprise. But there are still no guarantees. Mitigating risk by using a global PEO makes a lot of sense in many cases. Advantages include:
When does setting up a new legal entity makes sense?
It is sometimes thought that there are disadvantages to global PEO solutions: But this is not really true. It would be more accurate to say that there are some situations where other international expansion models are more appropriate. In some cases, it will make sense to set up a legal entity in the country in question. This might, for example, be a subsidiary company of the enterprise, or some other legal form, such as a trust. While every case differs, when might this be sensible?