Rivermate | Product owner - Andrew Simon

Global Work Glossary

What is an owned entity and its significance?

An owned entity refers to a legally distinct business structure established by a company in a foreign country, wholly owned and controlled by the parent company. It operates independently, adhering to local regulations and taxation standards. Examples include subsidiaries, branch offices, and representative offices.

Reasons for Establishing Owned Entities

Businesses consider owned entities for various reasons: Operational Control: Ownership ensures direct execution of strategies and decisions, aligning global vision with local operations. Market Presence: Physical presence fosters trust, credibility, and better engagement with local customers. Access to Talent: Local employees provide cultural understanding and insights crucial for tailoring products and services. Risk Mitigation: Compliance with local regulations reduces legal and regulatory risks. Strategic Agility: Ownership allows swift adaptation to changing market dynamics and emerging trends.

Key Challenges of Owned Entities

Challenges in establishing owned entities include: Complex Setup: Navigating legal, financial, and administrative intricacies can be time-consuming. Time and Cost: Setup requires significant time and financial resources for legal consultations, permits, and operational setup. Local Compliance Burden: Adhering to diverse local laws, labor regulations, and tax codes demands dedicated effort. Limited Flexibility: Exiting or scaling down operations may involve complex legal and financial processes.

Best Practices for Establishing Owned Entities

Implementing best practices can help owned entities thrive: Thorough Market Research: Identify suitable markets based on demand, competition, and regulatory ease. Seek Legal and Financial Counsel: Navigate local complexities and ensure compliance. Develop Tailored HR Strategy: Align with local labor laws, cultural nuances, and talent needs. Create Realistic Budget: Consider setup costs, ongoing expenses, and potential challenges. Ensure Coordination: Maintain consistency and shared objectives between headquarters and the owned entity.

Alternatives to Owned Entities

Consider alternatives if owned entities are not feasible: Partnering with Local Entities: Gain insights, share resources, and reduce financial risks. Hiring Local Contractors: Benefit from local expertise without setting up a physical entity. Leveraging Employer of Record (EOR): Operate in a foreign market without ownership, with the EOR handling legal, payroll, and compliance aspects.

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