Global legal hurdles faced by Modern MNCs
Today, 1 in 5 U.S. businesses are classified as multinational corporations (MNCs). This figure encompasses not only large enterprises but also small- and medium-sized businesses (SMBs). Advancements in technology and the rise of remote work have enabled a growing number of businesses to operate globally from their inception. These companies spread their operations across multiple jurisdictions, focusing on accessing international markets from day one. This shift has expanded the definition of an MNC to encompass these "born global" enterprises, which now face the same complex legal and regulatory challenges as their corporate counterparts.
As the global business landscape evolves, modern MNCs must navigate legal complexities that larger corporations often easily overcome. The days when MNCs were defined solely by their size and scope are gone; now, businesses of all sizes can expand beyond jurisdictional borders. However, in a VUCA world—volatile, uncertain, complex, and ambiguous—rife with both competition and opportunity, MNCs must tackle a myriad of regulatory hurdles, compliance requirements, and strategic decisions. Understanding and addressing these challenges is crucial for any business aiming to thrive on the global stage, underscoring the growing need for flexible legal solutions tailored to both established global SMEs and emerging global players.
In this piece, we're going to address:
- Why we think the traditional definition of a multinational corporation (MNC) needs to be expanded.
- What the key legal and regulatory challenges are for modern MNCs going global.
- How Legal Nodes is pioneering a new approach to bridge the gap in services that cater the new type of MNCs.
Redefining MNCs: a diverse spectrum of global players
Traditionally, a multinational corporation (MNC) is defined as an organization that owns or controls the production of goods or services in at least one country outside its home nation. The hallmark of MNCs is the control they exert over foreign operations. These corporations employ various operational models. Centralized MNCs manage all operations from headquarters, while regional MNCs delegate oversight to offices in different regions. Multinational models, in contrast, grant more autonomy to foreign subsidiaries. According to the OECD, the top 500 MNCs collectively operate over 124,000 subsidiaries across 222 countries. The Bureau of Economic Analysis (BEA) reported that, in 2022, U.S. MNCs alone employed 44.3 million workers globally.
“The biggest companies with subsidiaries globally are in the tech and finance sectors. To support the global businesses of tomorrow, we have to start by looking at the needs of small and emerging global businesses of today.” Nestor Dubnevych, Co-founder, Legal Nodes.
Source: Investment Monitor
Expanding the definition of MNCs
At Legal Nodes, we're expanding the definition of multinational company ("MNC") to include micro-, small, and medium-size enterprises (MSMEs) that operate globally from inception. Given how the tools to start and operate a business across borders have evolved in recent years, we think it's crucial to acknowledge that many more companies are now de facto multinational in the early stages of their growth, long before they open any fully-fledged subsidiaries in other countries.
A May 2024 McKinsey Global Institute Report highlights the economic importance of MSMEs, which account for 60 and 80% of business employment in advanced and emerging economies, respectively. However, compared to their larger counterparts, these smaller enterprises often struggle to access global markets effectively. The report particularly notes that software development MSMEs are often "born global," creating products for international markets from the start. It is these businesses in particular that require specialized legal support across multiple jurisdictions and areas of law, tax, and compliance.
The global legal gap
Cross-border challenges faced by modern MNCs
Global businesses, regardless of size, face numerous regulatory challenges when operating across borders. These include navigating financial regulations, tax laws, consumer protection, copyright, and data privacy issues in different countries. While large companies like Stripe, Shopify, and Spotify can invest millions in legal expertise to manage these complex frameworks, early-stage startups and SMEs often lack the resources to do so.
According to a World Economic Forum report, SMEs create close to 70% of jobs and GDP worldwide. However, these businesses face significant barriers when accessing global markets, including complex legal requirements, ambiguous regulations, and high costs for compliance and certifications. The challenges are particularly acute for modern MNCs—smaller, often tech-driven companies that aim to operate globally from inception.
Despite facing similar challenges as traditional MNCs, these modern global businesses find themselves underserved by existing legal and consulting services. Most providers focus on mega-corporations, leaving smaller entities without adequate support for their international operations. This gap in services creates a significant hurdle for emerging MNCs looking to establish resilient, dynamic legal structures that can support their global ambitions.
Modern MNCs look like… a small tech company navigating global product launches and fundraising
In today's interconnected landscape, modern MNCs often take the form of innovative tech startups. Consider a small tech company founded by an entrepreneur in Europe and preparing to launch a cutting-edge software product aimed at North American and Southeast Asian markets. This scenario perfectly illustrates the complexities faced by many modern MNCs trying to navigate global expansion and fundraising efforts. The ultimate goal is the creation of an efficient global corporate legal structure that is compliant, dynamic, and fit for purpose.
Creating a corporate legal structure for a globally-spread team
As the founder collaborates with a diverse team spread across various regions, the legal challenges become increasingly intricate. The business must establish the right legal structures and comply with varying regulatory requirements in each target market. For instance, while the U.S. and Singapore are attractive markets due to their robust tech ecosystems, the business must understand the distinct regulatory environments of each jurisdiction to avoid potential legal pitfalls.
Registering legal entities for jurisdiction-specific market launches
To facilitate a successful product launch, the company may need to register separate legal entities in strategic locations, such as the US, Estonia, or Singapore, depending on their growth strategy. A myriad of questions arise over the best entity type, the best locations, and the trade-offs that come with different choices. Securing industry-specific licenses is essential, especially if the software falls under regulated activities like fintech. Compliance with data protection laws such as GDPR in the EU and CCPA in the U.S. is critical to safeguarding customer data and building trust.
Preparing for global investments
As the business prepares to attract global investments to support product launch, the legal intricacies of fundraising come into play. The company must identify investor-friendly jurisdictions, weighing factors like setup costs and operational regulations. They might consider forming a private limited company in Estonia or a C-corporation in Delaware, each offering distinct advantages for attracting international investors. For a project working on product development and fundraising at the same time, the choice might be simplified or complicated based on whether one entity can be used for both product development and distribution, and fundraising.
Complying with AML, KYC and CFT laws
To optimize their fundraising efforts, the company must also ensure compliance with local laws, implementing robust Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures to verify investor identities and observe AML laws. Simultaneously, efforts must be made to meticulously structure the capitalization table and plan for potential dilution, so that the business can maintain control while appealing to a diverse range of investors. To ensure all-encompassing compliance when distributing the product to end-users, projects must also evaluate the needs for compliance with local consumer protection and data protection laws.
Integrating and aligning their cross-border corporate structure
With plenty of moving parts and entities subject to differing regulations, the ultimate goal is to ensure every decision is taken with the bigger picture in mind. Each decision, from choosing where to register a company and what type of company to picking the right fundraising documents and agreements, must be taken with caution. Businesses must make all decisions with a holistic view of all the compliance requirements that apply, across all the different jurisdictions that the business touches. Ultimately, the various corporate legal structures must talk to each other across border and be set up to operate in collaboration with each other. This will help reduce the likelihood of business activities grinding to a halt over avoidable compliance issues.
Bridging the legal gap for MNCs
The legal gap for smaller MNCs encompasses several key challenges, including creating corporate structures for globally-spread teams, registering entities for jurisdiction-specific market launches, preparing for global investments, complying with AML, KYC, and CFT laws across multiple jurisdictions, and integrating cross-border corporate structures. These challenges are particularly acute for smaller MNCs, as they often lack the resources and expertise to navigate these complex legal landscapes effectively, highlighting the need for tailored legal solutions that can address the unique needs of modern, globally-oriented businesses regardless of their size.
“Our ultimate goal is to make “Big4 level” support accessible to tech companies of all sizes.” Margaryta Sivakova, Co-founder & CEO, Legal Nodes.
Legal Nodes is pioneering a solution to bridge the support gap for multinational corporations of all sizes and stages. Our globally integrated platform caters to a diverse range of MNCs, from established businesses to aspiring founders who haven't yet registered their first legal entity. We understand that in today's interconnected world, MNCs can originate from anywhere, with founders often spread across different countries forced to tackle the legal intricacies of international expansion themselves.
We support emerging MNCs in several key ways:
- Setting up and maintaining robust and optimal corporate structures: We assist businesses in establishing robust corporate structures that lay the foundation for future growth. This involves choosing the right jurisdictions and entity types that align with business goals and thinking about the broader global options available.
- Integrating new entities as businesses expand: For mid-sized tech companies looking to enter new markets, we provide tailored guidance on incorporating additional entities into existing corporate structures. This ensures compliance with local regulations and optimizes operational efficiency.
- Ongoing corporate structure maintenance and compliance: Our support extends beyond setup; we help MNCs maintain their corporate structures and meet ongoing compliance requirements. This includes monitoring regulatory changes and providing timely guidance to avoid pitfalls.
- Flexible and cost-effective solutions tailored to each business need: We offer monthly plans and a transparent credit billing system that cover ongoing guidance and support. We use a pay-as-you-go model for services provided by our vetted experts in our global network. By using the credit billing system, clients can pay for legal sessions with industry experts and pay for project management support provided by Virtual Legal Officers. Our unique billing model is built to fit emerging global technology businesses: no more expensive hourly billing, costly retainers, or surprise invoices.
Our approach aims to make “Big4 level” support that is available to large MNCs accessible to companies of all stages and sizes. Through our distributed network of service providers across key jurisdictions, we connect MNCs with top industry expertise on flexible, usage-based pricing. By democratizing access to high-quality legal and compliance services, Legal Nodes empowers MNPs to navigate the choppy waters of global regulation, enabling them to focus on innovation and growth.
Holistic solutions led by industry expertise
Legal Nodes leverages industry expertise through Virtual Legal Officers (VLOs), who coordinate legal activities across jurisdictions. Our team of VLOs and in-house industry and legal experts serves diverse international clients, including:
- Cross-border technology businesses (SaaS, eCommerce, agencies)
- Web3 projects (DeFi, SocialFi, GameFi, RWA)
We stay current on global regulations in data protection, cryptocurrency, and corporate structuring by collaborating with vetted experts worldwide.
Support from a vetted network of locally-licensed experts
Legal Nodes offers a comprehensive global support network, featuring over 60 vetted service providers across 20+ countries. This diverse ecosystem covers 10+ areas of expertise, including:
- Legal solutions and tax advisory services
- GDPR and regulatory compliance
- Corporate structuring and accounting
- Intellectual property and employment law
By connecting clients with jurisdiction-specific experts, Legal Nodes streamlines international legal and professional services. Whether it's tax advice in Estonia or corporate structuring in Singapore, businesses can access tailored solutions without having to source and manage multiple international relationships themselves.
Our innovative pricing model
Legal Nodes has revolutionized the traditional legal services pricing structure with a flexible, usage-based approach that prioritizes transparency and cost-effectiveness. This innovative model is designed to make high-quality legal support more accessible and affordable for businesses of all sizes, particularly catering to the needs of emerging global technology companies.
The Legal Nodes pricing model consists of three key components:
- Flexible Plans: Offering ongoing guidance and support via a dedicated online platform that centralizes and streamlines all global tasks into one easy-to-manage location.
- Credits-based Pay-As-You-Go system: Credits act as a universal currency that clients can use for specific services, such as booking expert legal sessions and requesting document templates. Clients can also purchase Virtual Legal Officer (VLO) support, which includes project management, conducting legal research, and receiving tailored offers for specific project requests from third-party service providers. Our flexible plans include some credits each month, and clients can also top up when they need more credits to handle additional requests.
- Additional Service Provider Costs: If a client selects an external service provider from our network to execute a request, additional costs for the provider’s work will need to be covered separately. As our network contains over 60 service providers in 20 jurisdictions and 10 professional areas, prices vary and are available on a Pay-As-You-Go model.
This streamlined approach offers key advantages compared to traditional legal solutions:
- Experience better budget control and cost predictability and don’t have to commit to costly retainers
- Have a lot more clarity over legal project management and administration costs, with the transparent credit-based billing system for legal structuring guidance and VLO support.
- Lastly, businesses don’t need to sacrifice quality when choosing pay-as-you-go services offered by the global network of locally-licensed professionals.
Legal Nodes' pricing model provides accurate upfront cost estimates by breaking down projects into specific tasks and assigning credit values. This transparency enables businesses to:
- Plan and spend their legal budgets effectively
- Avoid unexpected costs and reduce risks of receiving fines and penalties for non-compliance
- Prioritize legal, tax, and compliance tasks efficiently
- Legal Nodes' pricing model is particularly well-suited for emerging global technology businesses, which often require varied legal support but may not have the resources for traditional law firm retainers.
Our Impact
Expanding the definition of MNCs to be more inclusive
By broadening the concept of MNCs to encompass multinational projects, Legal Nodes recognizes that in today's interconnected world, even small businesses and startups can have global reach and impact, allowing for the inclusion of digital-first companies with remote teams, recognition of project-based international collaborations, and support for businesses with a global customer base but localized operations.
Leveling the playing field
Legal Nodes' mission is to provide businesses of all sizes with the same level of global legal and operational support traditionally reserved for large corporations, achieved through access to a network of international legal experts, streamlined project management via the Legal Nodes Platform, and cost-effective pricing models tailored to smaller businesses.
Fostering global innovation
By making it easier for businesses to operate across borders, Legal Nodes is contributing to global innovation by enabling startups to enter new markets more easily, facilitating international collaborations and partnerships, and reducing legal barriers to global expansion for SMEs. Legal Nodes has also consulted government bodies and aims to positively impact global business policy in the future.
Economic impact
The democratization of global business operations has far-reaching economic implications, including increased competition in international markets, more diverse and resilient global supply chains, creation of new job opportunities across borders, and increased people, capital, and business mobility.
Empowering entrepreneurs and small business owners
Legal Nodes' approach is particularly beneficial for entrepreneurs and small business owners, reducing the complexity of international operations, providing access to expert advice on global compliance issues, and offering scalable solutions that grow with the business.
Transforming legal solutions for the modern business landscape
Legal Nodes is at the forefront of reimagining legal services for the modern, globalized business landscape. We're not just providing services; we're pioneering a new approach to multinational legal support that's more accessible, flexible, and tailored to the needs of businesses of all sizes and life stages.
This is just the beginning of our journey to democratize high-quality legal services for multinational projects. We're continuously innovating and expanding our offerings to meet the evolving needs of global businesses in an increasingly interconnected world.
We invite you to join us on this exciting journey:
- As a client: Experience a new way of managing your global legal needs. Get started here.
- As a service provider: Become part of our growing network of expert legal professionals. Contact us at hello@legalnodes.com.
- As an investor: Support our mission to transform the landscape of international legal services. Reach out to our CEO, Margaryta, on Linkedin.
Your feedback is invaluable as we continue to refine and improve our services. If you have thoughts, suggestions, or experiences to share, we'd love to hear from you. Together, we can reshape the future of legal support for multinational projects.
Join us in building a more accessible, efficient, and innovative global legal ecosystem.
