A foreign representative office (FRO) is a common type of entity in which foreign companies establish a presence in a foreign country. One benefit of setting up this office, which makes it a popular choice amongst business owners and investors, is the relatively short time it takes to register the entity anywhere in the world. The office is independent of the parent company and usually registered in the register of representative offices or the commercial register in some countries. Although a business entity, the foreign representative office cannot engage in commercial or economic activities unless stated otherwise in the Act. The timeframe for setting up this entity differs from country to country; in Latvia, it takes at most fifteen days to establish this office.
If you are a business owner thinking of expanding your business abroad, this article provides everything you need to know about a foreign representative office and how to register one anywhere in the world.
Pros of an RO
Setting up a foreign representative office gives foreign companies access to the market of the new country. The following are some benefits of establishing this office:
- A RO costs less than a new corporation to form
- The parent company is liable for all activities of the representative office
- It lets the parent business research and survey the new market
- Foreign corporations use representative offices to market their brand and build partnerships
Need for an RO
A foreign company that intends to expand abroad must establish an office. This could be a branch, subsidiary, or representative office. To carry out any of the following activities anywhere in the world, a company must set up a RO:
- Legally open an office with the company’s name on the signpost
- Employ local citizens
- Open a corporate bank account
- Use company business cards with local business address
- Import office equipment and supplies
- Import personal properties of company representatives in the country
As appealing as setting up a RO seem, it is limited in nature. The entity is only allowed to carry out activities within the business scope registered in the commercial register. Some of the types of activities within the business scope of a parent company that is permissible are.
- Engage in business liaison for the parent company
- Promotion of products
- Conducting market research
- RO can represent its parent company to conduct negotiations, etc.
Registering this form of entity is easy and takes a few days to process in most countries. Aside from the registration fee, one does not pay for anything else. The first step of the process is to register an office address; you do this by first verifying that the existing business name is not the same as any other registered business name in the country. Then, you can register the address where the office is located. Next, obtain the application form from the Enterprise Register, fill out the form and ensure all founding members sign it. Prepare the required documents such as the certificate of registration of the parent company, evidence of the decision to set up the office, etc. Having done that, pay the registration fee then submit your application with the documents attached. The application is processed after confirmation of payment.
Payment of registration fees
This payment can be made at any local bank within the country before the submission of the application form. The fee differs from country to country and the processing time.
Submission of required documents
To duly complete the registration, a company or fiscal agent must submit some required documents to the Register. These documents may include the following:
- Application form
- Certificate of registration (parent company)
- Document showing the decision to establish the office
- Proof of a power of attorney (for a representative), etc.