There are many factors you, as a foreign business (e.g. businesses from Korea, Germany, China, India, etc.), must consider to make smart decisions to start your U.S. presence. Ultimately, you will want to decide on two things: what your U.S.-based business will be and where.
Most often, the decision of “what” comes down to a choice between a branch office and a subsidiary. A branch office is not an independent legal entity; it is just an office that you open under your current legal structure. A subsidiary is a separate legal entity, and you would own the ownership interest of that entity. The popular entity choices we see are a limited liability company, commonly referred as LLC, and corporation. But depending on your business, your needs may be better served by a different or more complicated structure.
Your choice of “what” will have consequences. Some of the most obvious consequences are how the U.S.-based entity’s liability will be treated and how its income is taxed, both within the U.S. and when the profit is then repatriated to the parent company’s country. Finally, in some cases, local laws and regulations of your originating nation may have a great influence on your choice of the U.S.-based business structure. You should note that these legal entities are created under state (such as Massachusetts, Pennsylvania, Delaware, New York, California, etc.) laws. Therefore, you will need to follow the state, and sometimes municipal, specific rules and regulations as well.
The question of “where” should be answered by considering where you plan your new U.S.-based business to be and the legal needs. You would likely be subject to where the U.S.-based entity operates and where the entity is incorporated or organized.
To make those two decisions, what and where, you must consider many factors. Of course, you will have thought about important business issues. They may be, among many others, the presence and location of your industry, resources, customers and costs to do business. To make more sophisticated decisions, you may also consider, among other issues, the following:
- What type of physical presence your business plans to have
- What type of business activities you plan to conduct
- How you plan on operating and funding the U.S.-based entity
- U.S. and state-specific legal issues
Depending on your presence in the United States, whether it is an office, factory, warehouse or sales force, you may be availing your U.S.-based business to the various state and federal laws, including tax laws. Likewise, depending on the type or nature of business you conduct here, you may also be availing the U.S.-based business to different state and federal laws.
You will also want to think about how you plan on funding the U.S.-based business. More importantly, you will want to decide how the profits of the U.S.-based business would be used or distributed back to you. The mechanics of it is based on many factors. Most often, there are federal statutes and treaties between the nations that govern it. Your choice of “what” may also have important consequences. Again, there may also be local laws and regulations of your originating nation you must follow.
Prior to making and acting on a decision, which may have legal consequences, please consult a lawyer as to the specifics of your own situation.