With more than 12,000 startups operating in Brazil and an increasingly globalized market, it is necessary to look beyond the home environment and identify opportunities in new areas of work. This means internationalizing your startup and bringing it to the world's largest consumer and investor market, the United States.
"Since we launched the Founder Institute in Brazil in 2015, we've learned a lot about the Brazilian market and the challenges faced by the early stage startups in the region. Since then, while helping a couple of hundred founders launch fast-growing companies, we've come to realize some of the particular difficulties faced by these companies, especially when it comes to looking at international markets." says Nima Kazerooni, Executive Director of the Founder Institute in Brazil, that has led up FI's expansion efforts to launch new accelerator program cohorts across 12+ Brazilian cities, most recently in Florianopolis.
According to Kazerooni, "Via the Start Local Go Global program, we're building an exclusive program focused on finding and helping founders with global ideas who will eventually perhaps look to scale internationally, based on the successful foundation of the Founder Institute now across 12+ Brazilian cities and a network of 800+ mentors, mostlyfounders & C-level execs of successful companies. We're looking to reduce the cost of building a global business from day one, by removing the traditional barriers to entry - founders don't have to leave Brazil and spend tons of time and money to validate the initial premises of their global ideas. Thanks to globally positioned program partners like Drummond Advisors, we're now able to deliver exceptional value to founders looking to launch, build, and scale their startups starting locally in Brazil while validating and preparing the foundation for global business."
Drummond Advisors, in partnership with the US Department of Commerce, has produced a road map with key points to consider during the internationalization process. The Go Global: Establish your business in the United States ebook has up-to-date information on the legal, accounting, and tax steps to establish a successful business in the US, and can be downloaded free of charge here.
Pedro Drummond, partner at Drummond Advisors and one of the authors of the ebook, explains,
Internationalization doesn’t follow a strict recipe, there is no ‘one size fits all’ model. But there are good practices and points of attention; our roadmap is organized in a step-by-step model, the steps don’t always follow a set sequence exactly. Each company has an evolutionary path to follow.
In the following paragraphs, we will explore some important steps in the internationalization process for startups, with the goal of helping those who intend to march towards new horizons.
STEP 1: Study the market
First of all, study the consumer market you intend to explore and find out what are your business needs and possibilities. In a different culture, you will certainly need to make some adjustments to the service you provide and products you sell.
“North American consumers have very different needs, expectations, and demands when compared to those that you have identified among your Brazilian customers. Understanding the the market and responding in an appropriate way is fundamental to the success of a global startup,” says Drummond.
STEP 2: Plan Ahead – The Importante of Tax Planning
Owners of Brazilian startups are already accustomed to the high tax rates in their home country. As they know, careful planning can substantially reduce costs, avoid errors and guide future company decisions, maximizing results and minimizing risks. This is why tax planning becomes so important for startups looking to explore other markets.
The Internal Revenue Service (IRS) is the body responsible for tax collection and enforcement of the Internal Revenue Code, the US tax law code. The main taxes due are:
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Federal Income Tax
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State Income Tax (state-specific income tax)
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Estate Tax
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Sales Tax
STEP 3: Register your trademark
This can be done even before start planning to move your operations to the US. There are two ways to register your trademark in the US: actual use and intent to use. In the first case, the trademark is already in use in commerce and is then registered. In the second, a the trademark will soon be put in commerce and a registration is secured in advance. With the registration completed, the trademark is protected for 10 years.
With Brazil's entry into the Madrid Protocol, the trademark application can be made directly in the startup's home country.
US lawrequires a licensed attorney that practices law in the US to represent the Brazilian company applying for trademark registration in the United States has come into force.
STEP 4: Pay attention to transfer price
An international startup will be subject to complex rules that affect the global strategy of the company, its subsidiaries and its supply chain.
An example is the transfer price. Transfer price is the rule for price control of companies in the same business group located in different countries that trade intangible goods, services or properties. In the United States, the transfer price is regulated by the Internal Revenue Code Chapter 482.
Individuals or legal entities located in Brazil and engaged in transactions with individuals or legal entities located abroad, considered to be commonly controlled, are required to determine the transfer price. We recommend that you look for a CPA (“Certified Public Accountants” in the United States) to guide and plan transfer pricing processes.
STEP 5: Structure your business properly
You will come across countless decisions and a variety of structure options to take this important step with your startup. You must be aware of the corporate options and their corresponding tax implications; this is essential to reduce costs, increase profits and avoid problems.
Among several other factors, the decision must take into consideration the interest of the entrepreneurs, the number of partners, the risks to be assumed and the tax structure of the company. The most common corporate entities are: Limited Partnership, Corporation, Limited Liability Company (LLC), Limited Liability Partnership (LLP).
The internationalization process of a startup can be quite complex, but the advantages of having a global business is what has motivated a large number of Brazilians to take their companies to the US market.
To better understand this the challenges and opportunities involved in the process, download the Go Global ebook, prepared by Drummond Advisors professionals in partnership with SelectUSA, a program created by the US Department of Commerce to support foreign companies interested in investing in the country.
About Drummond
Drummond Advisors provides international consulting services to Brazilian and American companies, focusing on the legal, accounting, tax and business development areas. Founded in Boston, the consulting firm has expanded its presence and is now in seven major cities in Brazil and the United States. Drummond Advisors works to ensure that legal, bureaucratic and cultural barriers are not an impediment to successful business.
About Start Local Go Global
Start Local Go Global is a special edition of the Founder Institute’s pre-seed acceleration program, in partnership with JUPTER, which is geared towards aspiring entrepreneurs and startup founders looking to build global companies.
Apply to launch a global company with us from right here in Brazil: https://Fi.co/join/StartGlobal
