Contractors of all sizes are considering how to successfully perform construction beyond their historical footprint. The reasons for cross-border expansion range from supporting an existing customer’s request and acquiring a new business to participating in a joint venture and diversifying economic risks from a regional perspective. In any international expansion scenario, several key factors must be considered to improve the likelihood of success.

Global expansion requires careful planning and involves more than establishing a legal entity or a registered office. The contractor must work with its advisors to address the practical aspects of entering a new country. The details behind establishing foreign operations can have long-term consequences if not done properly.

Once a contractor has established the business objective associated with a cross-border expansion, a number of key questions must be considered. Where will the new business fit into the firm’s existing structure. What activities will be performed? How many people will be employed and with what authority? Where will key knowledge or intellectual property be located? How will the entity be funded?

Next, determine the optimum type of legal structure, including whether a representative office, branch, partnership or other legal form maximizes the long-term plans for expansion. This decision involves the legal and tax implications of the entity type, as well as how cash will move between entities and countries. In addition, local regulations could prohibit foreign ownership of certain types of entities, which can have long-term implications if not structured properly upfront.

It is critical to consider legal registration requirements and whether other foreign entities should be established to minimize risks and costs. The roles and responsibilities of shareholders, directors and officers are key in making this decision. For example, their physical presence or main meeting location can influence the contractor’s desired outcome. The tax, benefit plan and compensation plan implications of who the entity employs and whether to send key staff members overseas to run the expansion can last for many years.

The contractor should consider whether it needs to register for corporate income tax, business licensing, and payroll and employee registration. Other legal registration obligations could include environmental permits, data protection and local trading requirements. Understanding and preparing for these requirements helps eliminate delays and costs. It also triggers tax compliance matters, including registration for value-added tax or goods and services tax, corporate tax planning and related filings, as well as import duty planning. Any intercompany activity may require an appropriate transfer pricing policy. These are all unique to the country and to the type of entity under which the company operates.

To start activities, a local banking relationship should be established with appropriate controls put in place. Work permits must be obtained and immigration requirements must be met. Business insurances and bonding also must be secured and related coverage limits should be clearly understood. A mechanism to recruit employees and subcontractors to perform the work must be developed, and their complexity should not be underestimated. Additionally, a physical place of business must be secured to house operations, with appropriate security protocols for employees, technology, records and equipment.

It’s necessary to document risk management and proper operating procedures. For example, local customs in certain countries may be illegal in other nations. Therefore, it’s crucial to establish the operating protocols in writing and in advance, as well as to monitor compliance. In addition, controls over the cash management and treasury functions should be carefully developed. The same is true for the payroll, accounts payable and job cost cycles. Responsibilities for the preparation of management accounts, statutory reporting and annual parent company reporting also can be complicated. The local statutory reporting requirements may involve a different set of accounting principles, and related costs of compliance must be considered. In many cases, a local statutory audit is required in addition to the parent company audit.

Establishing foreign operations is very different from working in another state. An advisor can help a firm work out annual company secretarial and legal compliance, employer tax compliance or annual financial and tax reporting, and any audit requirements. Advisors also can provide guidance and contacts, including finding local legal counsel and payroll, bookkeeping or other service providers. Planning should include advice on local employment benefits, work permits, expatriate tax issues, shareholder and officer concerns, and the local country implications for employees who were covered under domestic employee benefit and incentive plans.

Kent Goetjen is the engineering and construction industry sector leader for PwC. For more information, email or follow @PwC_LLP.