How To Relocate Your Business?
Sometimes relocating your business can be a good solution. Indeed, offshoring has many advantages, both financial and legal.
What Is Offshoring?
Before getting to the heart of the matter, let’s first talk about offshoring and what it represents. Offshoring is for a company transferring part of its capital, goods, employees and activity to another country. The transfer often occurs from a country of origin to a foreign country.
Relocating your business can also be done within the same country, from an urban environment to a rural environment, for example. This strategic choice is not irreversible. Indeed, a company can relocate its business for any reason to change its mind and repatriate its activity to the country of origin; we then speak of relocation.
Why Relocate Your Business?
Relocating your business is not a choice made after short reflection; quite the contrary. Relocation takes place after much consultation and for various reasons.
- Relocate your company for economic reasons: this is the main reason companies relocate their activity. Indeed, it should be known that labor is much cheaper in other countries, and paying lower wages to its employees allows you to achieve significant savings. However, the quality of the work could be better, making the decision profitable on all points. Another economic reason pushing companies to relocate is bringing together raw materials. Transport costs also represent a specific cost for companies, which they can reduce by building factories not far from the raw materials.
- Relocate your company for legal reasons: some companies relocate because the regulations in force in certain countries are less strict. This gives them more freedom because they are less restricted by law.
- Relocate your company for technical reasons: finally, the last reason can be the desire to get closer to a foreign competitiveness cluster, such as Silicon Valley.
In any case, the company’s objective is to improve its competitiveness in this market which is always more competitive.
Which Country To Choose To Relocate Your Company To?
Whenever we talk about relocation, we think directly of China, India or Africa because the desire to reduce labor costs is the main reason companies relocate. However, you should know that more than half of French companies that relocate decide to stay in Europe. Each country has advantages and disadvantages depending on the company’s objectives. For example, England, particularly London, is a destination of choice for many companies. And this is for many reasons :
- Significant expertise in finance, FinTech and digital,
- Offers excellent credibility to the company that relocates there,
- An easily accessible workforce,
- A stable environment,
- Attractive taxation … _
The Advantages Of Relocating Your Business
The advantages we will discuss are in line with why relocating your business may be a good idea, but we are going to develop several points.
Relocating your business to certain countries can drastically reduce costs. And for a good reason, employees’ salaries can vary depending on the country. For example, in France, an employee is paid €10 gross per hour, while in India, he is only paid $1. This wage difference is the main reason for the cost difference between a country such as France and emerging countries.
Another reason is also the absence of social charges in some countries. The cost of an employee is higher than his salary, which means that an employee paid at the SMIC will cost more than the SMIC to his employer. By eliminating social charges, the company realizes even more savings. Finally, the last reason may be taxation. Some countries have more advantageous taxation, and relocating your business there makes it possible to pay fewer taxes and more expensive charges in France.
Depending on the country, labor regulations are different. In France, this regulation is considered very restrictive by employers. Relocating your company to countries with more flexible regulations allows companies to enjoy greater working flexibility. The disadvantages of business relocation Offshoring has several advantages, but some disadvantages remain.
Lower Quality Of Work
Because of lower wages, the quality of work of employees is lower. Indeed, French employees generally have good skills and knowledge, which is only sometimes the case in other countries. The lower quality of the product can, therefore, subsequently impact the final products.
Risk Of Counterfeiting
Due to the diversity of intermediaries between the country of production and the consumer market, the risks of counterfeiting are higher.
As the factories are far from the country of origin, the products must be transported. However, the goods may be recovered, damaged or late. These hazards can cause companies to lose money and slow them down.
What are the steps to take to relocate your business?
To relocate your company, the steps differ depending on the transfer of the headquarters:
- Transfer of the seat to a sector dependent on the same court: several documents must be filed with the court, such as the modification of the RCS, a document that certifies the transfer decision, and the update of the statutes. It is then necessary to publish the relocation in a newspaper of legal announcements.
- Transfer of the head office to a sector dependent on another court: in addition to the documents mentioned above, a document must be provided showing the previous head offices. The advertisement in the legal announcements newspaper is done in the old and the new geographical sectors.
It is also necessary, in both cases, to inform the tax office of the change of address and to file the tax declaration.
Relocate Outside Of France
It will be necessary to set up a legal file of establishment for the creation of the company, obtain commercial authorizations and visas, register with the local tax authorities, open a bank account, obtain a work permit etc.
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