top of page
Search

When to Transition from BPO to Your Own Legal Entity

Updated: Nov 10, 2025

For scaling businesses, the shift from Business Process Outsourcing (BPO) to establishing a local entity is a pivotal growth decision. While BPO offers speed and flexibility for market entry, owning your entity unlocks control, credibility, and long-term value—if timed correctly. Below, we outline key triggers, trade-offs, and transition strategies.


BPO vs. Entity: Core Trade-Offs



4 Triggers to Transition to an Entity


1. Team Size > 50 Employees in One Market


BPO margins become costly at scale. Entities reduce per-employee expenses and unlock local tax incentives.


Example: A 100-person team in Poland may save 30%+ annually vs. BPO fees.


2. Need for Unrestricted Business Activities


BPO restricts core activities (e.g., direct sales, manufacturing, IP ownership).

Entities enable:

  • Full revenue-cycle control

  • Local contracts & banking

  • Asset ownership


3. Brand Authority & Customer Trust Demands


Local entities signal market commitment, bypassing the "outsourced" stigma.

Critical for:

  • B2B partnerships

  • Government contracts

  • High-value consumer services.


4. Long-Term Market Commitment (5+ Years)


Entities require $15K–$200K+ upfront and 3-12 months for setup. ROI justifies only with sustained operations.


Entity Risks & Mitigation


Transitioning unprepared invites:


  • Compliance Landmines: Misinterpreting local labor laws or tax codes risks fines up to 200% of back wages.

  • Operational Delays: Bank setups, permits, and registrations stall revenue if mismanaged.

  • Exit Complexity: Shutting down an entity takes 6+ months with legal/financial penalties.


Mitigation Strategy: Partner with local experts for:


  • Legal structure selection (GmbH, SAS, Sp. z o.o.).

  • Tax / VAT / social security registrations.

  • Payroll / HR system deployment.

  • Ongoing compliance audits.


 The Transition Playbook


  1. Audit BPO Costs & Gaps: Compare vendor fees vs. projected entity costs (incorporation, accounting, payroll).

  2. Select a Launch Country: Prioritize stable regulatory hubs (e.g., Switzerland, Poland, Portugal).

  3. Engage Local Partners: Use entity-specialized firms (not generic BPOs) for turnkey setup.

  4. Phase Critical Functions: Migrate payroll/finance first; retain BPO for non-core tasks temporarily.


The Verdict

When to Transition from BPO to Your Own Legal Entity?


  • With 50+ localized employees

  • Requiring full operational control

  • Committed to a market long-term.


For sub-10-person teams or market tests, BPO remains ideal. For scale, own your entity—fast. Solutions like Sommet Global’s 48-hour entity setup streamline this shift, turning compliance and payroll burdens into competitive leverage.


Transition when operational control, regulatory risk, or cost inefficiency outweigh BPO flexibility:


  1. Western Europe: Entity non-negotiable for regulated sectors (finance/health) post-€2M revenue.

  2. Eastern Europe: Trigger at 50 FTEs + IP creation needs—leverage 9-15% CIT rates.

  3. North Africa: Essential for manufacturing/export; use Tunisian Code d'Incitation for 10-year tax holidays.


Final Strategic Insight

In 2025’s fragmented regulatory landscape, entities are no longer cost centers but compliance assets. Early transition in strategic markets (e.g., Polish FinTech hub, Moroccan industrial zones) unlocks embedded incentives while mitigating BPO’s hidden risks—from GDPR fines to IP leakage.

bottom of page