PKF Texas – The Entrepreneur’s Playbook: Misconceptions of Expanding Internationally Part 2

Note: Running most Fridays in FromGregsHead.com, is a continuing series of tips brought to you by Greg Price. These run Saturday mornings during the BusinessMaker’s Radio Show on KPRC 950AM. Audio files can be found on the Entrepreneur’s Playbook page of the PKF Texas website.

Houston is a booming international marketplace. Any business expansion has pitfalls. International expansions can be tricky. Last week you heard the first of several common complications and surprises faced by international entrepreneurs. Here’s another:

If you don’t have a hybrid – get one.

Hybrids are foreign companies that can be treated as corporations in the foreign country and partnerships in the US. They are important because the US differs  from many other countries in that here corporate business profits are taxed twice – first to the corporation and second to the owners when the profits are paid out as dividends. That’s why so many US businesses are run as partnerships or subchapter S corporations. Unlike the U.S., many foreign countries do not have this double taxation. Generally, those countries exempt shareholders from dividend taxation under the principle that the taxes on that income have been paid once, and that once is enough. Therefore, partnerships are not as commonly accepted as a way to do business in many countries. Hybrids can help US entrepreneurs operate effectively in the foreign country and use taxes paid there to offset their taxes in the US.