Clayton & McKervey shareholder offers 6 targeted questions for businesses considering overseas expansion

Southfield, Mich.—July 29, 2019—Susan Tuson, CPA, a shareholder with Clayton & McKervey, a certified public accounting and business advisory firm helping growth-driven companies compete in the global marketplace, encourages U.S. manufacturers and entrepreneurs to know their options when it comes to overseas business expansion.

“When the idea of expanding a business overseas is considered, the first questions are typically, ‘What’s the best way to start?’ ‘Should I set up an office immediately or use an independent contractor familiar with the country?’ As with all business decisions, the answer depends on the nature of the business goals,” Tuson said.
Tuson addresses the following questions when determining how to best approach an overseas business expansion analysis:
• Is the expansion to service an existing customer?
• Is the expansion to reach a new population of customers?
• Does the expansion serve a marketing purpose, such as the ability to say, “We have manufacturing in country X a low-cost jurisdiction?”
“The business goals will drive the process,” Tuson said. “Sometimes a company is looking for a way to test market conditions prior to making a substantial investment. They may do this by considering the use of an independent contractor in the target country. The advantage is there are very little, if any, capital investment or administrative compliance costs to hiring an independent contractor. However, many of the independent contractor issues that exist in the U.S. are similar overseas.”
Tuson outlines three key considerations when using independent contractors to test the waters overseas.
• What are the duties of the independent representative/distributor?
“Many countries have rules similar to the U.S. that would examine whether the ‘independent’ contractor is truly independent. If not, the independent contractor could be considered an employee, thereby making the U.S. company subject to all the employment laws, taxes, and payments of an employer in the jurisdiction,” Tuson said.
• What type of authority does the independent contractor have? Can they execute contracts on behalf of the U.S. Company?
“If an agent regularly exercises the authority to enter into contracts, they are likely to be creating a taxable presence in countries where the U.S. has an income tax treaty. The threshold may be lower for non-treaty countries,” Tuson said.
• Will you have enough control over an independent contractor to protect your brand and customer list? “It is important to understand the local laws related to the status and rights of an independent contractor/distributor. An iron clad contract should be in place that protects the company and supports its subcontractor versus employee status, as well as the rights and obligations of each party,” Tuson said.

If, after the exploration process has been completed and it is determined to move forward with overseas expansion, Tuson urges business owners to use international tax and accounting specialists and legal counsel well-versed in global business operations.

About Clayton & McKervey
Clayton & McKervey is a full-service CPA firm helping middle-market entrepreneurial companies compete in the global marketplace. The firm is headquartered in metro Detroit and services clients throughout the world. To learn more, visit claytonmckervey.com.

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Regional CEOs Tackle Innovation, Cybersecurity and Challenges for the Middle Market

By Daniel Lai

In today’s fast-paced world of instant gratification, innovation is not always easy but it is necessary if businesses are going to succeed in the marketplace. That was the message that kicked off the annual Middle Market CEO Summit hosted by Bank of America, Deloitte and the Detroit Regional Chamber last Thursday.

“Innovation is not born from freedom, it is born from constraint,” said Jeff DeGraff, professor of business administration at University of Michigan’s Ross School of Business. “The worst growth strategy for any business is to have an increasing share of a decreasing market. The risk-takers who reimagine their industry, who anticipate and feel their way towards the future will be the ones who survive and thrive in new environments.”

Regardless of size, DeGraff said business leaders can spark innovation among employees by following a few simple steps:

  • Find, develop and connect the best people
  • Establish a sustainable high-performing culture
  • Engage a wide array of expertise and capability
  • Create a collaborative learning environment

The message resonated with the audience of more than 60 CEOs and C-level professionals who gathered at MotorCity Casino Hotel for a half-day Summit focused on issues and solutions for the middle market. Topics ranged from cybersecurity and protecting data from both inside and outside the organization, to the importance of cultivating a strong CEO and CFO relationship.

“(The Summit) is about creating a lasting and influential conversation amongst our middle market leaders on what is needed to grow their companies and the obstacles they may face on that journey,” said Mark Davidoff, Michigan managing partner for Deloitte and Chamber Board member.

Other topics throughout the day focused on the national water infrastructure crisis and how Michigan can lead the way in building healthy communities through public and private collaboration, as well as the 2016 presidential election and its potential impact on business.

In addition to DeGraff, keynote speakers and panelists included: Quicken Loans’ John Fikany, EHIM Inc.’s Mindi Fynke, Deloitte’s Frank Friedman, George Hawkins of D.C. Water, Henry Ford Health System’s Wright Lassiter III, Nexcare Health Systems’ Mike Perry, Walbridge’s John Rakolta Jr., Paul Rodgers of TARDEC, Joan Rose from the Center for Water Sciences, Kelly Rossman-McKinney and John Truscott of Truscott Rossman, Rush Group’s Andra Rush, and Bank of America’s James Scopis.

Additional coverage from the Middle Market CEO Summit:

Business Leaders are Called On to Help Heal the Country When the Election is Over

Cybersecurity Starts at the Top: Why Middle Market CEOs Must Lead

Jeff DeGraff: Don’t Wait for the Next Best Thing to Pass You By, Innovate