Managing Legal and Contract Challenges in International Business
As more small businesses expand across borders—whether through manufacturing, hiring, or selling—questions around legal compliance and enforceability become much more complex. The legal environment shifts significantly from one country to another, and what works in one place may not hold up in another.
Employment Laws Are Not One-Size-Fits-All
When hiring employees in multiple countries, it’s not enough to apply a single set of policies. Each country (and sometimes even individual states or provinces) has its own employment laws. For example, a U.S.-based business employing staff in another country will need separate employee handbooks to comply with local labor rules.
Tax and Regulatory Requirements Vary
Tax laws and other business regulations differ across jurisdictions. Ignoring these differences can lead to fines or restrictions that hurt your operations. Staying compliant requires both awareness and legal guidance in each location.
Choosing Which Law Governs
One major decision is whether to base your contracts on U.S. law or the law of the other country involved. Think about where you’d want to enforce the contract if something goes wrong. If a dispute arises—like a failure to pay—having a U.S. court rule in your favor won’t mean much if the foreign party has no assets in the U.S.
Enforceability of Judgments
Even if you win a lawsuit in a U.S. court, collecting that judgment in another country may be nearly impossible without a treaty in place. Countries like China, Russia, and North Korea are especially difficult to work with in this regard. In such cases, it’s often better to draft contracts under local law, giving you a better chance to enforce them where the other party is located.
When You Need Legal Help in Multiple Places
The same principles apply even within the United States. Employment laws in California differ significantly from those in Texas. Companies operating in both places usually retain lawyers in each state to avoid missteps that could lead to lawsuits or penalties.
Ecommerce and Sales Across States
On the other hand, if you’re simply selling into other states through an online store, the legal exposure is lower. You might not need a lawyer in every state unless you’re building a physical presence or entering contracts with higher risk.
What Small Business Owners Can Do
-
Work with attorneys who understand the laws in each place you operate. A single lawyer likely won’t cover international or multistate differences.
-
Draft contracts based on the jurisdiction where you would enforce them. This boosts your chances of success in case of a dispute.
-
Keep compliance documentation separate and specific for each location. Don’t reuse U.S.-based materials abroad.
Expanding your business beyond borders can offer new revenue and reach, but it also brings added legal layers. Handling them well starts with the right legal structure and guidance in every region where you’re active.
Video Transcript
Legal Considerations for International Business Operations
I think that will be relevant to a lot of other topics on people’s minds because there are a number of companies these days that are dealing with international issues. The issue might be trademark, like using a brand name in multiple countries. It might be other intellectual property. It might be employment law, so if you are employing people in different places.
Creating Separate Employee Handbooks
Here is how I would think about it. First, it is important to maintain legal compliance in both countries. So, for example, if you are hiring employees in both countries, you will need one employee handbook for your state in the United States here and then one there, because they will have a whole different set of laws.
Managing Tax and Local Compliance
Likewise, for tax reasons and other compliance stuff. You will be thinking about, “How do I comply with the locality where I am located?” But then there is the contract question.
Choosing the Right Legal Jurisdiction
And should the contracts be based in US law or whatever country the others are located in? And I would ask yourself this. “If there is a problem in the relationship, where the other party to the contract doesn’t do what they are supposed to do, where would you like to be able to enforce that? Or in which court and in which country would you want to enforce it?”
Example of Manufacturing Dispute
For example, let’s say you have somebody paying you the equivalent of a hundred thousand dollars to manufacture a machine in another country. And that, let’s say, for example, they promise to pay it, you develop the machine, and when you are ready to deliver it, they don’t pay, and they don’t have the money. If you sue them in US court and get a judgment here where the judge says, “Hey, you win, you are owed the money,” it could be a
Transferring Judgments from the US
challenge to transfer that US judgment to another country.
Now, often you can do that if the United States has treaties with those countries, but it usually is far more efficient to do a lawsuit in that country. And that raises another practical question here of, “How likely are you to win, and how can we avoid lawsuits all together and keep leverage?” But practically speaking to answer your question, if it is in another country where you want to enforce the law, I would have the contract drafted there in accordance with their laws so that you can sue there. That is especially important in countries where we don’t have great treaties with the US.
Considerations for Specific Regions
So, in particular, I am thinking China, Russia, and North Korea. If you get a judgment here in the United States against a company in one of those countries, it is very difficult to enforce. Likewise with some of the African countries, but if you can get a contract that is enforceable there, it is going to be easier to go after that.
Why You Might Need Multiple Attorneys
By the way, this somewhat even happens in multiple states. For example, let’s say you have a business with operations in Texas and California, and many companies want an attorney in both states so that you can comply with employment laws in California, which are very different from employment laws in Texas.
When to Prioritize Legal Representation
So when you are in multiple jurisdictions and have a prominent presence there or significant risk about getting paid there. That is when it is really important to have an attorney in both places. If you are say located in, let’s just say in New York, and you happen to be selling into multiple states in an ecommerce store, it is not as important to have an attorney in all of those states. But yeah, in your situation, I think you are doing the right thing; have an attorney in both jurisdictions.