02/27/2007
Cross Border Commentary: Tapping the Brazilian Market: Sales Agent or Distributor?
A variety of business structures are available for gaining access to international markets, including sales made via foreign distributors, sales agents or a direct sales force. Many factors come into play in determining which structure is the most appropriate, such as legal and tax issues, the business and cultural environment of the target market and the US company's degree of familiarity with that environment. Selecting the proper structure requires balancing considerations of cost, control, risk and reward. In general, business structures that provide significant control over foreign operations require a significant commitment of resources and involve more risk. For example, sales made through a locally appointed sales agent lend a degree of control over the foreign sales process but require compliance with various foreign legal, tax and other requirements in order to avoid inadvertently creating an employment relationship and triggering other liabilities. By contrast, structures that involve a lower level of commitment usually provide less control for the US company and, perhaps, less potential for profit. If foreign sales are made through a distributor, little additional investment may be necessary but the US seller may retain little or no control over the ultimate disposition of its products in the foreign market and the potential for profit on overseas sales will be shared with the distributor. This article highlights some of the issues that should be considered with respect to the appointment of a sales agent or a distributor in Brazil and highlights some key issues that should be addressed in every foreign jurisdiction where the US company intends to do business.
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* In July 2009, this was the Award-Winning Contributor Article In Brazil on Mondaq.