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Nonprofits should look before leaping abroad

September 14, 2016

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Many not-for-profits today look beyond U.S. borders to recruit members, sell products, promote conferences and solicit donations. But before you “raise your flag” in a foreign country, do your research on the following critical issues:

The market for your services and products. Make sure that the need for your nonprofit’s offerings is robust enough to justify the costs of doing business in the target country. For example, what will the competition be like?

Laws and regulations. Research the country’s relevant laws and regulations, including sales and tax issues. If the country engages in free trade, you may find it easy to do business there. If it doesn’t, high tariffs or taxes may prove prohibitive.

Relationships. To develop insights into the new market and its people, set up an advisory committee that includes expatriates from your target country. If English isn’t the spoken language there, bring your own translator during your initial visits. This person should understand the nuances of the other culture and have your interests in mind.

Representation. Consider appointing a member from the target country to your board. Board meetings are likely to continue to be held at U.S. headquarters, but collaborative software can allow members to securely access documents from any location. Skype can be used to visually include international board members.

Currency exchange. Look into the value of the U.S. dollar compared to the target nation’s currency. If U.S. currency is weak, it could work to your advantage in selling products and services, but a strong dollar will go further in all your business transactions in that country. Also consider the practical issue of how potential customers will pay or make donations. Many nonprofits now use services such as PayPal to handle foreign payments. And some accounting software can make currency conversions.

Impact on U.S. donors and tax-exempt status. Foreign activities could possibly jeopardize your contributors’ tax deductions and even your organization’s tax-exempt status. So it’s critical to assess the potential impact before engaging in activities outside the U.S.

Finally, discuss any international expansion plans with your legal and financial advisors. We can help you explore the possibilities — and potential pitfalls — of crossing borders.

© 2016

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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