Post-Entity Setup Compliance: 4 Ongoing Challenges To Manage

After establishing a foreign legal entity, CEOs often face ongoing regulatory, tax, employment, and data protection challenges that can slow down global expansion. From constantly changing labor laws and complex financial reporting to strict data protection requirements, compliance quickly becomes overwhelming.

At Deel, we understand these hurdles. That’s why we’ve built solutions to simplify international growth. Whether through Entity Setup and Management services—for companies that want to operate their own entities without the full compliance burden—or by transitioning to Deel’s Employer of Record (EOR) for faster, risk-free market entry, we provide the infrastructure and expertise to keep you compliant.

This article explores the compliance challenges that arise after entity establishment and shows how Deel helps businesses overcome them, avoid costly penalties, and accelerate their path to sustainable global growth.

1. Ongoing legal and regulatory requirements

When opening an entity in a foreign market, you must adhere to local labor tax and corporate laws, business licensing requirements, and similar regulations within the applicable legal framework.

As laws and regulations frequently evolve, they require constant vigilance to ensure full compliance. For most companies, the main challenge is the lack of local expertise in all countries they operate, which exposes them to non-compliance risks.

For example, the government in the Netherlands recently made working from home a legal right. The UK government recently approved flexible working as a “day one right” through the Flexible Working Act. Minimum wages in Mexico increased by 20% as of January 2024.

Failing to inform yourself and follow local laws can lead to substantial fines, legal complications, damaged brand reputation, or even business closure and criminal liability in extreme cases.

The complexity and variability of employment and tax laws across different regions and countries can be overwhelming. You’ll likely need to hire legal and financial professionals to navigate new jurisdictions which can be financially burdensome for organizations.

How Deel helps

Deel’s platform includes a built-in Compliance Hub, backed by a global team of legal experts and the world’s largest compliance knowledge base. This ensures you stay ahead of evolving labor, tax, and employment laws so your entity remains compliant in every market.

With thousands of laws changing worldwide each year—over 60,000 updates across 190 countries in 2022 alone—Deel’s always-on Compliance Hub monitors and adapts in real time, removing the burden of tracking and implementing these changes yourself.

Discover how Cake saved +$3k per hire in compliance costs with Deel.

See also: The Key to Continuous Company Compliance in Today’s Global Landscape

2. Ongoing financial compliance

When operating in a foreign country, your organization must also ensure compliance with local tax laws, adhere to local accounting standards, and ensure accurate and timely financial reporting.

Understanding and meeting tax obligations, such as income tax, VAT, or payroll taxes, can be complex and vary based on business type and location. Maintaining ongoing payroll and tax compliance can even vary within one country, between different jurisdictions, like in the US.

For instance, all LLCs set up in the European Union (EU) must monitor their business health through financial statements, ensuring “a true and fair view of their financial performance and financial position” and consistent financial reports across the EU.

Setting up efficient tracking of income, expenses, and financial transactions while maintaining records compliant with local regulations requires hiring at least one local expert to ensure deadlines and requirements are always met.

How Deel helps

With Deel Payroll, you get access to in-house experts with local tax knowledge and robust financial systems that ensure accurate calculations, deductions, and filings—reducing errors, compliance risks, and potential penalties.

Our team conducts regular audits and maintains precise records, streamlining reporting in line with local accounting standards.

Deel also takes full responsibility for compliance, including:

• Payroll taxes, social contributions, and government fees
• Mandatory benefits such as health insurance and pensions
• End-to-end payroll, payslips, and HR admin—so you can stay focused on growing your business

Discover how Mixtiles stays compliant globally and gets a clear view of all things payroll with Deel.

3. Evolving employment laws

When hiring local talent in a new country, you need to ensure that every employment contract you sign reflects applicable local laws regarding:

• Worker classification
• Minimum wages
• Working hours
• Statutory employee benefits (social security and health insurance)
• Termination
• Leave policies
• Intellectual property rights and more

Administering payroll, benefits, and contributions in compliance with local regulations can be intricate and time-consuming. You must follow specific guidelines regarding payroll schedules, deadlines, and more for each country you operate in.

Correct worker classification is one of the most complex questions in global employment. Definitions of employees and independent contractors vary by country. There are usually strict penalties for misclassifying employees as independent contractors, ranging from a few thousand dollars to even jail time if an audit proves the misclassification happened intentionally.

Many companies have paid hefty fines for breaking worker classification laws.

The US Department of Labor (DOL) investigated Holland Services in 2021. The company misclassified 700 employees, which led to around $43,277,000 owed in back wages and damages.

In 2023, the DOL investigated Arise Virtual Solutions and filed one of the most prominent misclassification cases in its history. The ongoing case alleges that the outsourced customer center service provider hired more than 22,000 workers as independent contractors but did not provide them full autonomy in their work.

Read more about California independent contractor laws.

Adopting the proper hiring practices and contracts is crucial for employment compliance and maintaining a positive working environment that protects and supports local workers.

How Deel helps

Deel HR makes it easy for HR teams to stay compliant across borders. With built-in tools and guidance, you can confidently manage global employment challenges:

• AI Worker Classifier to ensure correct worker classification and avoid misclassification risks
• Salary Insights and Compensation Management to benchmark pay across countries
• Smart contract generation that automatically flags country-specific worker entitlements and requirements
• Benefits administration to offer compliant, competitive benefits packages tailored to each market
• Policy and NDA creation features to align contracts with local norms and protect your business

For a hands-off hiring experience, you can leverage Deel’s Employer of Record (EOR) and Contractor of Record (COR) models. Deel assumes legal responsibility as the official employer of your international employees and ensures compliant engagement of contractors—minimizing misclassification and employment law risks.

Discover how Exnaton uses Deel EOR and Contractor solutions to scale its global team.

And for companies that want to operate their own entities without taking on the full compliance burden, Deel’s Entity Management services provide the infrastructure, compliance oversight, and administrative support needed to keep operations running smoothly in new markets.

See also: How to Hire International Employees Anywhere (Without a Local Entity)

4. Data protection and privacy

Protecting company, employee, and customer data per all applicable laws can be a significant challenge when expanding overseas. Navigating diverse data protection laws across regions, each with its own requirements and compliance standards is no easy task.

One such example is the GDPR in Europe, which requires robust data protection measures, explicit consent, and strict data handling procedures. Not to mention keeping company, employee, and customer data safe from cyber threats and ensuring robust data security measures.

How Deel helps

Deel stays updated with local data protection regulations, ensuring that data handling practices, including storage, processing, and transfer, follow these laws.

Deel also establishes processes aligned with GDPR requirements, ensuring that personal data is collected and processed lawfully, transparently, and securely.

To protect your sensitive information, such as employee personal data, Deel implements robust cybersecurity measures, including encryption and regular security audits, to protect data from potential breaches.

Maintain compliance effortlessly with Deel

Managing entity compliance is an ongoing responsibility, requiring constant due diligence across tax laws, payroll regulations, labor policies, and data protection rules. If this article has made you reconsider setting up an entity, that’s completely understandable. But there’s no need for concern—Deel supports businesses at every stage of global expansion.

Whether you choose to:

• Establish and manage your own entity with Deel’s Entity Setup and Management services
• Leverage Deel EOR to hire globally and build a local presence quickly
• Or engage independent contractors compliantly with Deel Contractor or Deel Contractor of Record

Deel is here to support your compliance efforts every step of the way.

Our global platform and in-house compliance team streamline compliance management, global payroll, and workforce hiring in 150+ countries—helping you expand quickly and confidently.

Learn why 20,000+ businesses trust us to power their global expansion. Book a demo to see how Deel can support your growth.