EOR vs. Global Entity: How G-P Can Help you Make the Right Choice

In the first post of our “EOR vs. Global Entity” series, we looked at the cost-saving benefits of partnering with an Employer of Record (EOR). And in the second post, we examined how winding down an entity and switching to an EOR can fire up new opportunities for a global company. However, there are cases when creating and managing a global entity can be a more strategic choice for companies with specific goals and long-term objectives. 

In our final post, we’ll look at the unique benefits and challenges that come with creating a new business entity, and how G-P’s advisory services can help with both the setup and ongoing management of a global entity. 

But before we dive into our advisory services, let’s take a look at why and when setting up an entity can be the right move for some companies. 

When should you set up your own global entity?

Setting up a global entity has its benefits in specific instances. For example, companies seeking more control over their operations — from HR processes to payroll and compliance — frequently opt to establish a global entity. This allows them to be more hands-on in pursuing long-term goals and implementing policies and procedures. 

Companies may also decide to set up a global entity if they have unique and specific needs that outgrow the offerings and capabilities of their EOR. In this instance, it often makes more sense financially to transition to their own entity. Some industries have regulatory or operational requirements that an owned entity can better meet as well. For example, companies operating in the financial sector face strict regulations regarding compliance, data security, and customer protection. Setting up their own entity allows them to better comply with these regulations and have greater control over their compliance processes.

What factors should you consider when setting up a global entity?

While setting up a global entity can give companies more control and autonomy, the financial cost and time drain associated with getting one off the ground are deterrents. Many legal and administrative pitfalls can also delay the creation of an entity. For instance, every country handles tax rules differently, so it often takes companies significant time and resources to ensure they’re adhering to country-specific laws before they can begin operations.

These laws include tax regulations like corporate tax rates, international treaties, transfer pricing regulations, and VAT — all of which will differ entirely from other countries where the company is currently doing business, requiring dedicated teams to understand and set up processes that ensure compliance with these rules. 

Obtaining the required permits and licenses is another key step when establishing an entity. This means understanding your business purpose and fulfilling important license requirements to avoid legal issues. A simple mistake in the application documents can lead to additional scrutiny from the local government. Another crucial step that requires careful planning and execution is opening a bank account in your target country. It can take up to 15 months to open a bank account in some countries, but without one, you cannot set up an entity.

How do you manage an entity after setting it up?

It’s not just setting up a global entity that requires substantial time and money. Managing the upkeep also requires a constant long-term commitment. Typical running costs include insurance, licenses, salaries, and corporate taxes.

Of course, constantly changing labor laws can make it challenging to maintain a successful global entity, making compliance an ever-present challenge for global companies. As mentioned in the first part of this series, labor laws consist of government and court laws and, sometimes, one can overrule the other. This requires companies to react quickly and adapt to new regulations as they emerge.

For instance, Germany has advised companies to expect up to 30 changes to their labor laws this year. This means companies managing a global entity will either have to work with third parties or build their own in-house legal and HR resources and expertise to ensure they maintain compliance with every business operation and task – while assuming all the risks of fines or penalties that come with noncompliance.

Whichever model you choose, G-P advisory services can help. 

Employment laws and tax regulations change daily around the globe, making entity setup an ongoing challenge, not a box to be checked. Whether you choose the efficiency and strategic flexibility of an EOR model or seek the direct control of a wholly owned entity, G-P can help. 

With a worldwide entity infrastructure and more than 11 years of experience, no one is more attuned to the challenges and opportunities of global entity setup and management than G-P. Our new advisory services are designed to guide companies through everything from selecting the most suitable legal structure and location and coordinating bank account setup to vendor payments and ongoing compliance with statutory laws, filings, bookkeeping, and other post-incorporations tasks.

Discover how G-P advisory services can help your company skip the complex and time-consuming entity setup and management process, or help you manage the risks and challenges if entity establishment is the best option for your business. Contact us today.