Creation of a joint venture abroad

Goals of creating a joint venture

There are several reasons for this. The country where the joint venture operates serves the following purposes:

• saturates the market more densely with new products and services;
• attracts advanced technologies and innovative developments to the country;
• shares management experience and receives it from participants from other countries;
• attracts additional financial and material resources.

Companies are expanding their export base and also reducing imports of products. Conditions are being created for expanding the sales market and optimizing the taxation scheme.

Forms of joint ventures

The establishment of a company operating with the use of foreign investments is carried out in accordance with current legislation. We are talking about legal provisions regulating the conduct of business activities and the work of enterprises, business entities and partnerships themselves.

The choice of the organizational and legal form of such an organization is carried out depending on the type of business, assigned tasks, the amount of authorized capital, the number of founders, and so on. The formation of a commercial organization working with foreign investments is usually carried out as:

• business company;
• business partnership;
• subsidiary company.

An enterprise that was created in another country will be considered completely foreign. The advantage is to use simpler schemes for monitoring the organization’s work. It is noteworthy that here you do not have to share the profit received with someone else.

Stages of a joint venture

Opening a new organization requires the initiator to understand the specifics of the local market and conditions. However, in the current realities, the most popular is the acquisition of a ready-made local business. The investor has the opportunity to immediately begin servicing the client base and consult with local partners on issues related to the local market. Practical activities begin after re-registration. In some cases, if appropriate or necessary, part of the management functions can be delegated to an outsourcer located in the home country.

Cooperation is carried out on the basis of a formal agreement between the parties. The procedure for opening a joint venture itself is conditionally divided into several stages, within which the following procedures must be completed:

• evaluate goals;
• review the list of partners and select suitable ones;
• send notifications about the creation of a joint venture and begin negotiations, prepare a letter of intent;
• conduct a feasibility study;
• prepare a package of constituent documentation and deal with legal registration.

When setting goals, you need to take into account the specifics of the specific case of opening a company.

Franchise or joint venture?

When you want to get into business, franchises offer help getting you started and generating immediate income. On the other hand, a joint venture with a partner you trust may work better for some types of companies, especially those that use new ideas and that have not been franchised. Understanding the pitfalls and benefits of each approach will help you choose a working relationship that suits your personality, wallet and ambitions.

Franchise benefits

When you buy a franchise, the company you're buying from provides state-of-the-art equipment and processes to sell your product or service. Plus, you get instant brand recognition by using the parent company's logos, taglines, and advertising. With many franchises, you can get advice from experienced experts on everything from staffing levels to quality control procedures and operating hours.

Disadvantages of a franchise

You have to pay a monthly franchise fee, and this can make it difficult for you to generate income, especially in the beginning when customers may not have found you yet. In addition, you must follow strict rules set by the company offering the franchise. These rules can be quite detailed and may cover dress codes, cleaning procedures, quality control measures, and even greetings that customer service staff must use. Franchises require you to buy supplies, and you may not always get the best price because the parent company must cover its costs for ordering and shipping the supplies.

Benefits of a joint venture

A joint venture is an agreement between two companies to try to make money from a business idea. Each partner invests money in the enterprise and takes on the responsibilities that suit them best. Joint venture partners can exchange ideas and develop the venture as they see fit, relying on each other's experience and knowledge to take the venture in a new direction. You are not bound by any pre-existing procedures or standards, and when you order supplies and equipment, you do not have to purchase them from the parent company. If the business is successful, you can franchise it yourself.

Disadvantages of a Joint Venture

Since you do not have a proven company, you will not be able to anticipate various problems. If a franchisee can leverage the parent company's expertise, joint venture partners should be on the lookout for obstacles. If the venture fails, the partners must find buyers for the property and equipment because there is no franchisor waiting to buy them out. To generate revenue, a joint venture may also take longer to establish than a franchise because the initial investment may be spent on getting basic procedures and processes in place rather than on marketing. A business that is not functioning to its full potential will not be able to sell itself.

Sequence of actions when opening a joint venture

Once you are convinced that the creation of a joint venture will allow you to solve the tasks as efficiently as possible, you can begin the next stage - searching for partners. You can study the market yourself, or use the support of intermediaries.

Having decided on the list of potential partners, they need to be given a notice of the creation of a joint venture for their review, containing detailed information, including:

• project name;
• Total information;
• basic indicators;
• characteristics of the external and internal market;
• potential schemes for selling goods;
• expected amount of contribution from the partner.

Having made a final decision in favor of the chosen partner, you can begin negotiations and preparation of constituent documentation for registration activities.

conclusions

A joint business with the right and professional approach can develop very quickly. Let's try to make a small list of what is needed for this and summarize the information:

1. Before choosing a partner, think about whether you need it. Perhaps you can cope quite well without it.
2. If a partner is still necessary, then carefully approach his approach.
3. Draw up a partnership agreement. It can protect you from illegal actions and unnecessary costs.
4. Don't build a business with relatives. Business may collapse, and personal life will suffer first.
5. Discuss in advance with your partner the functional responsibilities of each.
6. Create additional legal documents that will protect you and your property in the event of failure.
7. Don't let things take their course. Be serious.

In this article we tried to consider all the positive and negative aspects of the partnership. We hope that this information will be useful to everyone who is thinking about creating a joint business.

Documents for opening a joint venture

Practice shows that after signing an agreement of intent and determining the detailed parameters of a joint business, an agreement is concluded between the parties regulating joint activities. Within the framework of this document, each party undertakes to open a business company, or to use alternative options for opening such structures. In some cases, they immediately begin to agree on the provisions of the charter and registration of the company.

To successfully complete the registration procedure, you must create a package of documents for submission for verification, the structure of which consists of the following papers:

• statements of the founders;
• notarized copies of constituent documentation (2 copies);
• a notarized copy of the decision of a domestic property owner to open an organization or a notarized copy of decisions made by authorized bodies;
• notarized copies of documentation from each legal entity from our country participating in the procedure;
• documentation confirming the solvency of the foreign partner, issued by its bank or other financial institution. It is important that the text of the document is translated into Russian and notarized;
• an extract obtained from the trade register of the country of origin, or alternative evidence confirming the legal status of the foreign partner in accordance with the provisions of its local legislation.

Information required for registering a joint venture

To register a joint venture, the client must provide the following information:

1) The full name of the Company, which must be in Russian (additionally indicate the abbreviated name in Russian and possibly indicate it in a foreign language);

2) The size of the authorized capital, distribution of shares between the founders and payment procedure;

3) Legal address of the company (if the premises are on the right of ownership, then it is necessary to provide a copy of the certificate of ownership, if on the right of lease, then it is necessary to provide a letter of guarantee on the provision of the premises + a copy of the certificate of ownership);

4) Taxation system (regular or simplified);

5) Types of activities of the joint venture (define the “main” OKVYD);

6) Composition of the founders and their data:

a) if the founders are Russian individuals, then the following must be provided: passport data, TIN Certificate (if available);

b) if the founders are Russian legal entities, then the details of the organization, a certificate of state registration, a certificate of registration, constituent documents, a decision (protocol) on the appointment of an executive body, a letter from the State Statistics Committee on the assignment of statistics codes, an extract from the Unified State Register of Legal Entities are provided;

c) if the founders are foreign individuals, then a copy of the passport, translated into Russian and certified by a notary, is provided;

d) if the founders are foreign legal entities, then the following package of documents is provided:

· an extract from the trade register of foreign legal entities of the corresponding country of origin (translated into Russian and certified by a Russian notary) or proof of equal legal force of the legal status of the foreign legal entity - founder;

· a document confirming the fact of registration of a foreign organization (Certificate of Registration or Certificate of Incorporation);

· charter (or other similar document provided for by the country of origin of the foreign company);

· certificate or certificate of tax residence confirming the tax number of a foreign organization;

· a document confirming the authority of the head of a foreign organization or another person who has the right to act on behalf of a foreign organization without a power of attorney and sign documents on the establishment of a joint venture;

Foreign documents for creating a joint venture must be submitted in the form of copies, translated into Russian and notarized.

7) Information about the sole executive body:

· if a Russian individual, then the passport data of the person performing the functions of the executive body and the TIN certificate (if available) are provided;

· if a foreign individual, then a copy of the passport translated into Russian and certified by a notary is provided.

Apostille

Apostille is a stamp issued by the competent authorities of the state of origin of documents, certifying the authenticity of the signature, the quality in which the person signing the document acted, and, in appropriate cases, the authenticity of the seal or stamp that affixes the document being provided. Apostille is affixed on original documents by authorized bodies of the state of origin of these documents (Ministry of Justice, tax authorities, judicial authorities, etc.).

Specialists are ready to develop draft constituent and other necessary documents that best take into account your rights and interests, in full compliance with the requirements of current legislation. By contacting us, you can be sure that the registration of your company will be carried out correctly and on time. Call the numbers listed on the website right now. Preliminary consultation is provided completely free of charge.

For detailed information on all questions, please call (495) 973-15-66

Specifics of taxation of joint ventures

New joint legal entities become full-fledged separate taxpayers. Already initially formed legal entities switch to the general taxation system. Payment of relevant taxes is carried out in accordance with the general procedure. At the same time, a transition to “simplified” is allowed. Choosing this method of taxation allows a company to legally refuse to pay VAT, property and profit taxes.

In situations where a company using the simplified system receives profits or dividends from transactions with certain categories of debt obligations, such income will still have to pay tax. By distributing profits received as a result of business activities among participants as dividends, they will be subject to income tax according to the general scheme. This rule applies to both the general and simplified tax systems.

As a result, when distributing profits, participants will be able to receive dividends minus income tax, the amount of which is:

• 13% for Russian organizations;
• 15% for any foreign company.

It is noteworthy that the rate may be different, depending on the existence of an international treaty and its provisions.

Tax rate reduction

International agreements concluded with a number of countries provide for reductions in income tax rates on dividends. It is important to clarify a few points:

1. Often, the size of the rates depends on how dense the foreign company’s share in the authorized capital is.
2. The taxation scheme for dividends paid by a foreign organization is determined depending on the presence of an operating permanent establishment.

Therefore, in the process of registering a new organization that involves the involvement of foreign partners, it is recommended to pay attention to the provisions specified in the international treaty (if one exists).

Risks of opening and operating a joint venture

The effectiveness of a joint venture may be impaired by certain factors, which are usually the result of differences in the economic models and thinking of foreign partners. The risks may be the following:

• partners do not always correctly understand tasks and goals, periodically conflict, and file complaints.
• the organization may face less freedom in making important decisions;
• it is possible to declassify the know-how of one of the partners;
• It is possible that the organization will be absorbed by a stronger company in the future.

All this is due to different principles and styles of doing business, and cultural differences. Know-how and developments, which are the subject of intellectual property of a joint company, can be used by partners to develop their business. If a manager makes mistakes in managing the company, the risk of losing personnel increases. At the same time, useful developments created and tested by the enterprise may fall into the possession of third parties due to leakage of internal information.

Goals and development of the joint venture for growth

It may happen that in order to continue to grow, the company will have to merge with another organization into a joint venture. By combining their efforts and assets, two JV companies can achieve growth that would not be possible if they operated separately. For example, one company is looking for an investor to bring a new product line to the market. At the same time, another company has free funds that it invests in promoting this new line in order to receive payments from sales in the future.

Typically, joint ventures share resources (not just financial) that one company has and the other does not. For example, a store does not have space to sell a popular product line that is in demand and in stock. Another similar store has space available, but does not have this product. Two stores form a joint venture, as a result of which the second store provides space to display the goods of the first, receiving a certain percentage of sales for this. Another example of a merger is a situation where one participant supplies a product, and the second uses a perfectly designed marketing policy to increase sales.