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Expanding Your Company’s Base of Operations

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During the Great Recession, many companies hunkered down in an attempt to keep the doors open and the lights one. Layoffs and production cuts were common; many companies gave little or no consideration to expansion. However, as the recovery has continued, many companies have begun transitioning out of survival mode – ramping up production and even expanding their operations.

Companies in this fortunate position have much to feel positive about. However, a decision to expand the base of operations for a business involves more than hanging the company shingle at a new location and hiring new workers. There are marketing, logistical and even legal considerations that must be taken into account.

Legal Considerations

“If a contractor is looking to expand into other states or jurisdictions, there are a few careful considerations that must be made as every state has different laws and regulations when it comes to doing business within its boundaries,” stated Jennifer Friedman, Vice President and Chief Marketing Officer for CT Corporation, a 120 year old company acquired by Wolters Klewer and based in New York City.

According to Friedman, company owners wishing to conduct business across state lines have two options: incorporation and foreign qualification. Incorporation involves setting up a physical base of operations – either a corporation or a limited liability company (LLC) in the new state. Foreign qualification us a relatively simple process for all states, Friedman stated.

“Business owners generally pay a fee and file a document with the relevant authorities. Once approved, the business owner receives a Certificate of Authority that allows the entity to legally conduct business as a foreign entity in that state,” she explained.

Incorporation is potentially more complex, requiring the company to establish a separate legal entity, either a corporation or LLC, in the new jurisdiction. However, this strategy has the advantage of allowing the newly-formed company to operate as a domestic entity in that location, according to Friedman.

Regardless of which approach a company chooses for expansion across state lines, there are local, county, state and even federal laws affecting the relevant jurisdiction which must be considered. For instance, a company may be required to obtain a local or state business license, comply with municipal signage regulations, file relevant sales tax forms or incorporate specifically mandated recycling and waste disposal methods in its new location.

Logistical Considerations

In many ways, logistical considerations associated with expansion are closely aligned with the laws and regulations of the locations under consideration. Local zoning laws, for instance, may determine where in a given city or town a company’s expanded operations may be located, especially for companies that maintain large inventories or an extensive fleet of vehicles. Materials distribution centers and supply chains also potentially pose logistical and legal challenges, especially for companies that obtain or supply materials or goods across state lines or from overseas. Weight restrictions may even limit where a company’s vehicles may be driven in town.

“The key to remaining in good standing is to find and work with a good registered agentwho can keep you up-to-date on the compliance requirements in every state in which you conduct business,” Friedman insisted.

Marketing and Promotions

Along with legal and logistical challenges an expanding company must consider how to get the word out and generate new business. In the age of the Internet, incorporating social media into a marketing approach is a given. Platforms like Twitter, Facebook, Instagram and YouTube allow a company to communicate its message to potentially enormous audiences for little or no money. However, it is unrealistic to rely on a viral ad campaign alone, especially if the company’s new base of operations is located in an area that is culturally different from its present location.

A marketing approach that the locals in one location may consider awesome may completely flop elsewhere. In extreme situations, a company’s marketing or promotional efforts may be viewed as insensitive or even offensive by locals. One way to avoid this stumbling block is to form a strategic alliance or even an active partnership with one or more local actors. This approach provides companies with a shortcut of sorts to establish themselves as known quantities and gain acceptance among potential customers and clients in a new location.

Expanding a Company’s Reach and Presence

None of the above is intended to discourage a company from expanding its operations, either across town or across the country. Instead, by remaining mindful of potential pitfalls associated with expansion, businesses can experience growth and expansion with a minimum of growing pains.

Audrey Henderson

Posted In: Management

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