What’s involved in setting up a subsidiary?
Companies with operations abroad often want to set up subsidiaries in the United States. These companies may elect to do this for several reasons. Perhaps the company seeks a tax benefit for the parent company. Perhaps the company sees a new potential revenue stream.
Whatever the reason may be, setting up a subsidiary in the United States can have a slew of benefits. But how do you set one up?
Each situation is different, and the first thing that needs to be looked at is what country is the parent company located in. Each country has its own unique legal relationship with the United States. A company will need to look at the U.S. tax treaty with that country, which will then determine how they can set up their subsidiary.
The next step is to find an experienced tax attorney to navigate you through the process. A lot of moving parts need to be considered when setting up a subsidiary in the United States. An experienced U.S. tax attorney can ensure that everything is above board and in order. They can guide matters such as transfers between entities like loans and dividends. Your tax attorney can look to the treaty and figure out what can and cannot be done as you set up your U.S. subsidiary. The other aspect that needs to be considered is what state you plan to conduct business in. The laws of New York differ from the laws in California, and an experienced tax attorney can help guide you through the state law aspect of your subsidiary.
Setting up a subsidiary in the United States can get tricky for foreign companies. However, by understanding the treaty between the parent company’s home country and consulting with an experienced tax attorney based in the United States, the process will become much easier.