Legal Barriers.

Certain types of distributorship arrangements may be hard

to set up in a particular country. Before you set foot in any new market, you'd
better check its tax laws, customs regulations, import restrictions, corporate
organization requirements and agency/liability laws. In such countries as
Korea, Taiwan and Brazil, for example, technology transfer and foreign
investment laws can turn the business relationship you had intended to be a
master-franchise or license agreement into, in effect, a joint venture.

Government Barriers. Some governments are not receptive to foreign

investment or to certain types of distribution relationships. Before you make
business commitments in any foreign country, check out its history of
expropriation, government restrictions, tariffs and limitations on currency
repatriation. Any one of those factors may prove decisive in determining
whether your proposed venture can prosper. Ask legal advisors who have
experience in international matters to determine which tax treaties will affect
your plans. Your lawyer may recommend establishing a liaison with legal
counsel in the country where you want to do business. You may need to seek
assistance from the U.S. Trade Representative or the International Trade
Administration.

Set a Reasonable Pricing Structure. When young businesses first venture

into international markets, many have overblown expectations about the
prices overseas partners ought to pay for the right to distribute their goods
and services, license their technologies or serve as franchisers. Reality and
patience are key. If you overprice, you'll discourage qualified candidates
and/or leave your new partner with insufficient capital to develop the market. If
you set your prices too low, you'll forfeit your ability to provide adequate
resources and incentives for quality training and ongoing support. Your fee
structure should be a fair and realistic reflection of how you and your partner
divide responsibilities, and it should account for such issues as currency
exchange, taxes, pricing strategies, market trends and who provides the
necessary

human

and

other

resources.

Don't be surprised if you need more patience than a domestic venture

demands. An overseas expansion takes time to yield a satisfying return on
investment and profits. In addition to the normal economic cycles to which all

businesses are subject, certain countries dictate legal structures that are, in
effect, forced joint ventures, and they impose restrictions that make it difficult
to take capital beyond national borders. When you are ready to make an
agreement, carefully consider the structure, term and scope of your
relationship and any non-disclosure and non-compete clauses. Such
provisions and their enforceability are extremely important, especially in
relationships complicated by distance and divergent legal systems. When you
define the financial provisions of your agreement, you may find it tempting to
mitigate potential losses by elevating the initial fee, but you'd be better
advised to consider a more balanced approach to fees and ongoing royalties.

Legal Barriers. The company or its counsel must research tax laws, customs
laws, import restrictions, corporate organization, and agency/liability laws.
Domestic registration needs to be examined as well for issues arising under
labor law, immigration law, customs law, tax law, agency law, and other
producer/distributor liability provisions.