Why Top CFOs Are Shuttering Foreign Subsidiaries To Deliver Global Growth

Global expansion doesn’t always mean setting up more legal entities. In fact, some of the world’s most strategic CFOs are doing the opposite—simplifying their structures to reduce cost, increase flexibility, and scale smarter.

The Shift: From Entity Proliferation to Strategic Streamlining

For years, setting up a local entity was the default move when expanding into a new market. But as CFOs face increasing pressure to control costs, mitigate risk, and stay agile, many are reconsidering that approach. Instead, they’re closing down underused or overly complex subsidiaries—and turning to more flexible models like Employer of Record (EOR).

In this webinar, Omnipresent’s CFO Catherine Kellett and Co-General Counsel James Mallett break down why more finance leaders are making this pivot, and how it can help organizations remain globally competitive without drowning in legal and administrative overhead.

When Entities Make Sense—and When They Don’t

James Mallett outlines the classic benefits of setting up a foreign subsidiary:

• Local tax optimization: Taking advantage of favorable tax regimes, R&D credits, or economic zones.
  
• Legal risk ring-fencing: Limiting liability at the entity level, protecting the parent company.
  
• Compliance necessity: In some cases, permanent establishment thresholds or local activity require an entity by law.
  

But those advantages come with hidden costs and operational burdens. Catherine Kellett adds the CFO’s view:

• Cost of setup and maintenance: Entity setup can cost $50K+ upfront, with $100K+/year in running costs.
  
• FX risk: Currency mismatches can complicate forecasting unless operations are fully localized.
  
• Audit and reporting overhead: More entities mean more audits, financial controls, and regulatory filings.
  

In short: entities can enable growth—but only when the business case is clear, sustained, and justifies the cost.

The Hidden Costs CFOs Are Reassessing

Entities often create more complexity than they solve. Some of the most common hidden costs and risks include:

• Slow time-to-hire due to incorporation delays.
  
• Legal fees tied to employment disputes, severance, and local labor laws.
  
• Hard-to-quantify internal drag on finance, legal, and HR teams.
  
• Ongoing maintenance even for dormant entities (e.g., accounting, payroll, audits).
  
• Reputational risks from non-compliance or late filings.
  

As Catherine puts it, "The costs aren’t just financial—they’re organizational. It’s not just money, it’s focus."

So Why Are CFOs Shutting Entities Down?

According to Omnipresent’s panel:

• Global cost pressure is forcing tough decisions on ROI by region.
  
• Inflation and talent costs have made entity overhead harder to justify.
  
• Shifting business strategy may no longer require in-country operations.
  
• Regulatory changes are adding new layers of complexity and risk.
  

In many cases, a foreign entity that made sense during a growth phase no longer aligns with the company’s current needs. Rather than keep paying for that structure, CFOs are pulling the plug—and reallocating those resources where they’ll matter more.

What Happens to the People?

This is where many leaders hesitate. Shutting down an entity sounds easy—until you consider the impact on staff. But as James explains, there are ways to preserve continuity:

• Rehiring via EOR: Transition employees through an Employer of Record to maintain employment and compliance.
  
• Avoiding misclassification: EOR ensures legal employment, avoiding the risks of using contractors.
  
• Smooth transitions: Expert-led offboarding and rehiring minimizes disruption.
  

In short: You don’t have to lose talent just because you close an entity.

Why EOR Is Gaining Ground

For CFOs, EOR represents a middle ground between full incorporation and informal contracting:

• Faster market entry (no need to wait for entity setup)
  
• Lower total cost (no incorporation or long-term fixed costs)
  
• Easier exit strategy (offboarding without liquidation)
  
• Fully compliant hiring in 160+ countries
  

EOR gives finance leaders a way to say yes to global hiring without saying yes to legal complexity.

What to Consider Before Making the Switch

If you're evaluating whether to keep an entity open or move to EOR, the panel recommends weighing:

• Volume of expected hiring in that market
  
• Cost and time of incorporation vs. EOR
  
• Industry-specific regulatory needs
  
• IP and transfer pricing complexity
  
• Cash flow impact and resource bandwidth
  

The rule of thumb: If you need a scalable, compliant hiring option—and you’re not planning to build a long-term presence—EOR is likely the better path.

Final Thoughts

In uncertain markets, flexibility matters more than ever. Top CFOs are realizing that global scale doesn’t always require global infrastructure—and that agility, speed, and compliance can be more valuable than ownership.

If you’re sitting on underused entities—or struggling with the overhead of maintaining them—it may be time to reevaluate. There’s a faster, smarter way to build a global team.