Doing business in other jurisdictions: Overview, definition, and example
What is doing business in other jurisdictions?
Doing business in other jurisdictions refers to the practice of a company or individual conducting commercial activities outside of their home country or region. A jurisdiction is typically a legal area or territory, such as a state, country, or municipality, with its own laws, regulations, and government authorities. When a company operates in a jurisdiction different from where it is incorporated or registered, it must comply with the local legal and regulatory requirements of that jurisdiction.
For example, a U.S.-based tech company that opens a branch in Germany or sells its products in Canada is considered to be "doing business" in those foreign jurisdictions.
Why is doing business in other jurisdictions important?
Expanding business activities into other jurisdictions is important for growth and competitiveness. By entering new markets, companies can tap into a broader customer base, access new resources, and diversify their revenue streams. However, doing business in other jurisdictions also involves complying with local laws, which may differ significantly from those in the home country.
For businesses, understanding the legal, financial, and regulatory environment in each jurisdiction is critical to managing risks, avoiding fines or penalties, and ensuring compliance. For individuals or businesses expanding globally, understanding international regulations, taxes, and labor laws helps them succeed and grow while staying within legal boundaries.
Understanding doing business in other jurisdictions through an example
Imagine a U.S.-based e-commerce company that sells clothing online. The company decides to expand its market by starting to sell its products in the European Union. The company must now comply with various European laws, including consumer protection regulations, data privacy rules (such as GDPR), and tax laws, in order to legally operate in that jurisdiction.
In another example, a Canadian manufacturing company decides to open a subsidiary in Mexico to take advantage of lower production costs. The company must follow Mexican labor laws, environmental regulations, and corporate tax laws while doing business in the new jurisdiction.
An example of a doing business in other jurisdictions clause
Here’s how a doing business in other jurisdictions clause might appear in a business agreement or contract:
“The Company acknowledges that it may expand its operations to other jurisdictions and agrees to comply with all applicable local laws, regulations, and tax requirements in each jurisdiction in which it operates. The Company will ensure that it obtains the necessary licenses, permits, and approvals required to do business in these jurisdictions and will maintain compliance with all relevant legal obligations.”
Conclusion
Doing business in other jurisdictions is a key strategy for companies looking to expand internationally, access new markets, and increase revenue. However, it comes with the responsibility to understand and comply with the laws, regulations, and market conditions of each jurisdiction.
For businesses, understanding the legal requirements and risks involved in international operations is essential for success. By ensuring compliance with local laws and managing operational challenges effectively, companies can grow their global presence while minimizing legal or financial risks.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.