The European Union (EU) is an economic and political union between 28 countries that, altogether, cover a large of the continent. Doing business in Europe is a natural path for any business entrepreneur who wish to expand business in a 746.4 million consumers market. The predecessor to the EU was the European Economic Community (EEC), which was created in 1958, focused on expanding economic cooperation between six countries: Belgium, Germany, France, Italy, Luxembourg, and the Netherlands. Since then, a further 22 nations have joined making 28.
The EU has the ability to make its own laws, and its treaties exist between members that guarantee common action in fields like human rights, agriculture, the environment, and foreign and security policy.
The EU promotes the free movement of goods, services, and workers and operates a harmonized legal regime designed to guarantee consistency between its Member States’ laws.
Doing Business in the European Union
Having established that the EU is an appealing market for your product, what is the best way of accessing this market? That will depend, partially, on what the most important factor for the exporter is, boosting customer satisfaction through short delivery times and a wide range of products, minimizing expenses in order to keep selling prices low, limiting the administrative burden and reporting requirements, or a combination of all of these.
Picking the right Member State for your business requires careful consideration of many factors, including the ones described below:
Choosing the Right Corporate Structure and launch strategy in Europe
At the beginning phase, the business will need to decide which entity or structure will best accommodate its EU needs and expansion plans.
Here is a list of entities you need to consider when starting a company in the EU. Thanks to our large area of expertise at Damalion, we can help you with every one of them.
- Limited Liability Company which is preferred for small and medium-sized businesses. The owner must have at least a partner and an authorized manager, who can be a non-resident.
- Societas Europaea- a category of a limited liability company, which is also suitable for medium and small size businesses. The advantage it provides is that you’ll be able to operate the company in various European countries using the same guidelines.
- A Joint Stock Company- a perfect choice for large businesses, although it requires large investors.
- Representative offices- it permits you for a limited functioning of the office in the new country. However, they do not allow you to carry out direct business activities as representative offices do not have the status of legal entities so you will be required to appoint a local manager who will represent the parent company’s interests and perform obligations as needs be.
- Branch offices are convenient options for those who wish to expand the existing business into the new market.
Passporting
As a non-resident services company doing business across the EU, the passporting system facilitates utilizing a regulatory license from one EU country across the whole EU. Once you have acquired your financial services licenses with one of the national regulators, no further license is required to offer the same services in other EU nations, therefore, eliminating the burden and costs of extra regulatory approvals in other EU countries.
Raising finance and tax
Every Member State can present various difficulties when raising equity and debt finance, and the ease with which local finance can be raised will be a particularly significant consideration. Additionally, the impact of local tax regimes will be very vital as numerous establishment decisions are tax-driven. And in addition to VAT and sales taxes, businesses need to understand how local tax regimes impact corporate profits, income, capital gains, securities or real estate, and equity incentives. The availability of local tax relief should likewise be explored.
Regulatory changes
Understanding the regulatory environment applicable to your business is a significant consideration.
Several areas are heavily regulated in the EU and the rules in place frequently vary from other countries’ regulations, especially in the fields of healthcare, financial services, chemicals, food, product safety, and consumer data and protection. Ensure that you comprehend the regulatory environment of new markets that you are entering and monitor your areas applicable regulations periodically in order to carry out any necessary change in due time.
Employment
As a general rule, employment regulations in the EU tend to be less employer-friendly in the EU than in other countries, with termination at will clauses not usually permitted and collective bargaining agreements common in some countries. While handling your business in the EU, ensure that your employment agreements are compliant with the local legislation as each EU Member State has its own set of rules regarding various aspects.
GDPR (General Data Protection Regulation) compliance
Complying with the GDPR requirements is a key for all businesses operating within the EU. Ensure your business is taking proper steps to comply with the regulation and consider auditing your data protection policies, in addition to your data processing agreements, and appoint a data protection officer in order to ensure compliance with the GDPR because the breach of the GDPR provisions are likely to lead to considerable fines.
IP registration
Ensure that you register your Intellectual Property (IP) in overseas jurisdictions and review its portfolio to ensure it is up to date with registrations and expiration dates.
Also, review your current license agreements because they generally cover the EU as a single licensing territory and the use of your IP might be irrelevant in each Member State so you may want to reconsider a more local approach in order to facilitate their monitoring and mitigate challenges from third parties.
An important component of any business’s IP strategy will be the protection of trade secrets and the EU Trade Secret Directive was intended to harmonize trade secret protection across the EU.
Choosing the right distribution model for your European business growth
- Selling Direct to Customers is by far, the easiest method for the supplier, however, this transfers the administrative burden of importing to the customer and in addition, duty and import VAT will need to be paid by the customer, thus increasing the advertised selling price and not giving the best client experience ; or;
- Using Agents and distributors which offer a relatively low-risk, cost-effective means of expansion into new markets, such as the EU, since they can be a mutually beneficial means of subcontracting elements of the commercial function of a business. However, sales growth might be slow. Even though a single market exists, marketing challenges exist because of the many different languages spoken and the several societies within the EU.
The European market is a solid, promising, and attractive option for starting a new business. With numerous countries to choose from and access to a single European market, you cannot go wrong when choosing Europe as your investment or business option. Contact Damalion to find out more about your future steps involving doing business in the European Union (EU). We assist you to setup companies, to open bank accounts, to recruit staff members, to identify strategic partners,
