An alternative to company formation is to establish a branch in a foreign country which gives the company physical presence in that country from which to operate. Having a physical branch in a new country is often seen as beneficial as its customers will trust more a company based in that country. Branch establishment can be also seen as cautious first step into a new territory with a subsidiary later incorporated as business grows.
Branch Establishment vs. Company Formation
A branch is often referred to as an extension of the parent company and whilst it has an element of independence from its parent it is not separate as in the case of setting up a subsidiary (separate legal entity). Legal liability can differ from country to country but usually the parent company has full or shared legal responsibility for its branch whereas a subsidiary is a separate legal entity and retains full legal personality.
The branch generally forms part of the assets of the parent company and the business owner and as a result the accounts of the branch are merged into the accounts of the parent. Starting up a branch can usually be more cost effective and should the branch cease to trade there is usually no costly liquidation process to follow as the branch would simply de-register and stop operating. Taxation also needs to be taken into consideration when setting up a branch and the different rules in place in comparison to incorporating a company.
There are several factors to take into consideration before setting up a branch as often there are legal, regulatory, fiscal and tax implications and these should be clear before the branch is set up and business is conducted. Contact us using the form below and will reach out to schedule a call as soon as possible. If you require more technical information, we can arrange for a local expert to be on the call.