Establishing a Subsidiary Company in the US

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Is your company considering expanding its business operations to the US?  There are a number of ways for non-US companies to enter the US market, including distribution arrangements, establishing a joint venture between a non-US and US company, and establishing a US wholly-owned subsidiary of a foreign parent.  If you decide to establish a US subsidiary, there are a number of considerations up front:

Tax considerations: Consult experienced accountants or tax counsel who can advise on the tax implications of establishing a subsidiary in the US.  For tax reasons, often a corporation is preferred, rather than “pass-through” entities such as partnerships or limited liability companies

What is your industry?  A start-up technology company that may need to access investors will have different needs to a mature services business.

Where should you establish the US subsidiary?

  • US companies are created under state law not federal law, and therefore will be organized in one of the 50 states.
  • US subsidiaries of foreign companies are often established in Delaware, even though the company may not otherwise do business in Delaware, because of its sophisticated and management-friendly corporate law, and the familiarity of investors and the business community with Delaware corporations.
  • The US subsidiary will need to qualify as a “foreign corporation” in each state in which it does business, usually determined based on the location of offices, employees and any owned real estate. This is often a point of confusion for people not familiar with the US system, as a “foreign corporation” refers here to a corporation established in another state.  So, for example, if you form a corporation in Delaware, and have an office and employees in California, the Delaware corporation would qualify as a “foreign corporation” in California.

Technology Startups: In the case of startup technology companies, US investors would often invest only in a Delaware Corporation, which may require not only the formation of a Delaware corporation, but also a “flip” transaction, by which the Delaware corporation becomes the parent of the non-US corporation.

Licensing:  The US subsidiary will need to obtain all licenses required to operate, including industry licenses (federal, state or local) and business licenses.

Structure:  In certain circumstances, it may be optimal to set up multiple companies, e.g. a holding company in Delaware, and a US subsidiary underneath it organized in each state where the company has significant operations.

Please contact Edward Grenville (; +415 279 0779) if you would like further information about establishing a subsidiary in the US.