Many foreign companies seek to operate in the United States, but sometimes they are not very clear about the process they have to follow. On Hispanic Entrepreneurs we tell you What is needed to open a branch in the USA?
What is a branch?
A branch is a commercial or industrial company that depends on a parent company that can be established within or outside the same country. In other words, it is an expansion of the business with the idea of making it grow and obtaining a better position in the market.
They are generally used as a mechanism to open new markets in the same country or enter international markets.
It must follow the statutes of the parent company, it has limited decision-making capacity, but it keeps its own accounting. You can also hire staff, invoice, collect, record accounting operations. As well as sales and credit processes, purchases from suppliers and product transformation. They also receive products and money from the parent company.
What does it take to open a branch in the USA?
To set up a branch in the United States, the company has to comply with its tax and liability laws. The first thing is to apply for a business license in the state where you will operate.
This is relatively easily granted as long as you do not do business under the same trade name as another established company, and of course you do not violate state laws.
Usually they must fill out an application, cancel a registration fee and deliver a copy of the notarized and legalized statutes of the parent company. All this in the Commercial Directorate of the Secretary of State where it is going to be installed.
These documents must also include the information of the branch, name of the owners, the board of directors and business address. It is necessary to appoint a Registrar Agent and Fiscal Address in the USA, who can operate, open bank accounts, etc. It can be a person or another company but with residence in the state.
You must file Form 1120-F of the Internal Revenue Service (IRS), which is the income tax return of a foreign corporation. You must report it to report your income, earnings, deductions, and credits on US soil.
In addition to calculating your tax liability like the rest of the companies in the country. You must first have your employer identification number (EIN) with the IRS.
Tax rates for a branch
If it does not do so, the business is penalized with 5% of the unpaid tax up to a maximum of 25%. By having a branch there is no limited liability, that is, the company is directly responsible for the actions of its subsidiary in the USA.
They may be exempt from tax if the United States has signed a double tax treaty with the country where the branch comes from.
The federal corporate tax rate is currently a fixed 21% on business or business income. For this reason some experts do not recommend opening a branch, but rather a subsidiary.
On the other hand, if the branch is in several states, it is necessary that they register in the revenue department of each one. Also take into account county records.
Branches and L visas
Foreigners who open a branch of their business in the United States can transfer some employees to work there as a business visa. Specifically under the L visa for non-migrant temporary work.
These workers are obliged to comply with all the required requirements. The companies qualified to make use of this option are limited companies, partnerships, exclusive holdings and corporations.
The L visa has a maximum duration of 7 years and it has been specially created for managers, executives and employees specialized in the business. They must be one year old in a 3-year period prior to the petition date.
It should be noted that the L1-A visa is granted in principle for 3 years if the company has been operating for at least one year, with extensions of 2 years until reaching 7. The L1-B is granted for one year if the company is new and for three years if it has been in operation for more than one year, it is renewed for periods of two years until reaching 5.
If you are determined to open your branch in Hispanos Emprendedores we have articles that can help you, for example how to finance your company in the USA, where you can surely get more relevant information.
