What is a Branch Office and What is a Subsidiary? Abranch ofce is nol a soparate legal ent ofthe parent corporalion, Accordingly, operating @ branch office is actualy just having the foreign parent corporation operating in the U.S. For the reasons mentioned in What Constutes Doing Business nthe United States, this isnotan ideal arrangement. Although this isa simple structure, this structure, a sated in What Constitutes Doing Business inthe Unt Stats, general aubjcts the parent carparation to taxaton on ts ant corperate income (rather than just the branch's income, although there may be allocaton schemes tat lw for inter-county allocations), and this stuctre doesnot shield the parent corporation fom lability incurred a the branch lvel. Thus, fabilly inthe U.S. a the branch level would expose the foreign parent ‘corporation to abity. Therefore, using @ US. subsidy ~ ciscussed below ~ isa advantageous bot for controling ax and adiy ‘subsidiary is a separate legal ently fom the parent, though owned by te paront corporation. Usually, the subsidiary is wholly-owned by the parent corporation, Thera sno requirement inthe U.S. to have alocal rector. All ofthe directors ofthe subsidiary could be in the home county, For reasons discussed elsewhere on tis site, tis easier to manage the subsidiary to have ofcers (not necessary doctors) inthe U.S. to manage tho subsidiary, but in today’s wold of email, tis que manageable o have the ultima docision-makors for ne subsidary be based at the home ace of re parent company. Al matters forthe boara can usually be hancled by email, and ‘sanned copie of signed documents almost always are adequate inthe United States. Unlike many foreign counts tat have forma procedures, with orginal signatures, and notarizatons, such formal requirements have largely been repealed in he U.S. [Asubsiiary can be formed as any typ of separate logal enti, bu the most common forms are corporations and tniteslabity ‘companies. Taxation of he subsiciary is on the subsidianys income alone, and when properly structured and operated the litltes of {he subsidiary are not attibutable to te parent corporation. ‘An LLC can be formes for about $500 to $1,500 or los assuming tha he parent corporation uses @ general LLG operating agrooment ‘The LLC should, after being formed, fle aan election tobe taxed asa caparation in the US. Fallire to make this election would ‘liminate te tax benefits of having a U.S. subsidlary (but would not eliminate the Habit insulation). The reason for hs that an LLC ‘owned by one erty in his case the forelgn parent) is for U.S. tax purposes “ésrogarded” unloss the election Isobe taxed asa ne enty means the U.S. subsidiary would be just a branch af the frsign parent company.‘The Ofernee tue Branca» Steir Sting Up U8. Branch Ofcat Because an LLC doos nt by salute have a board of rectors or officers (rather thas by statute ether a manager ots owner a its anager) i2corporate-tike structure is desied forthe LLC, the drafting ofthe LLC operating agreement with special provisions that ‘make tie LLC look ke a corporation can cost generally between $6,000 and $7,500. Pease contnue on fr aeiscussion about using a regular corporate onty inthe US. rather tan an LLC. POWERED BY