USA Entity Set Up

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USA Subsidiary Entity Set Up 

Global expansion into the US generally means that you need to set up an in-country entity. However, by partnering with us you create the possibility to bypass this process and utilize our American entity. By using our PEO-service we take care of the complicated paperwork.

Expanding into a new country is always an adventure, but we believe this adventure should be exciting instead of just frustrating and time-consuming. Therefore, we have been supporting companies in over a hundred countries with their expansion plans.

In this guide, we will share which documents you need to establish an entity in Italy, but also where you will need to register your business address and company’s name. We will also break down the advantages and disadvantages of setting up an entity in the USA.

How to set up a US Subsidiary

The first step to setting up a subsidiary in the US would be to choose the company type, which most typically will be a Limited Liability Company (LLC), with other options being the C Corporation or S Corporation.

Careful consideration must go into the choice of subsidiary vehicle, as each attracts different taxation regulations. These are some of the boxes that need to be ticked at the outset:

  • Select a state to locate the new company, which does not have to be the same state where the subsidiary is incorporated.
  • Select a unique name for the company, confirm the business address.
  • File the new business via the Secretary of State’s office, download and complete authorized templates for Articles of Association and pay the due fees.
  • There is no legal requirement for this, but you have the option transfer funds from the parent company as share capital.
  • Compile an agreement indemnifying management from company liabilities. Specify how the parent company can appoint or change directors of the subsidiary, prohibiting changes without the parent company’s permission.
  • Draw up the Operating Agreement and install the manager or directors who will manage the subsidiary as an independent entity.

What you need to set up a US Subsidiary

The following documents are needed to register the subsidiary:

  • Documentation confirming status of the parent company, including its address in the home country.
  • An extract from that country’s trade register or equivalent, confirming the parent company’s commercial operation in the home country.
  • Articles of Association with full information concerning the owners, board or managers, the company’s planned activities, the business address, and the registered official for dealing with official correspondence.
  • The Operating Agreement detailing the responsibilities of the owners.
  • The Employer Identification Number (EIN) enabling the company to pay taxes to the Internal Revenue Service (IRS) in the chosen state of operation.
  • Opening a company bank account by presenting all the company’s legal documents.

Different governance regulations apply to individual states. For example, in Delaware foreign companies can benefit from an accommodating tax regime without needing a physical business address or bank account as it can conduct financial operations from abroad.

Benefits of setting up a US subsidiary

Among the legal advantages of setting up a US subsidiary is that the shareholders and directors of the parent company have limited liability and the parent company itself is not liable for the activities, responsibilities, or debts of the subsidiary.

The subsidiary also has the freedom to engage independently in more types of business than the parent company.

Opening a subsidiary makes a statement of a company’s commitment to expanding into foreign markets. The US is a popular target for expansion as the world’s most powerful economy, with a vibrant business culture. Geographically, the US’s location is another plus for further expansion with Pacific and Atlantic coastlines, plus cross-border access to Canada and Central and South America.

Using a global Professional Employer Organization (PEO) such as Bradford Jacobs means staff can be sourced, placed in their roles, and be up-and-running within days, rather than months, and with all the difficulties of payroll, taxation, and compliance under control thanks to our Employer of Record (EOR) services.

US Subsidiary Laws

The US Constitution allows companies to incorporate in any state of their choice, regardless of where their headquarters are based. Federal law lays down minimum requirements for trading and governance, generally based on the 1933 Securities Act and the 1934 Securities and Exchange Act.

However, states and local authorities also have their own corporate laws, adding to the complexities of launching a subsidiary. The typical choice is to form a limited liability company, which follows these general guidelines:

Registration and Documentation

  • Select a unique name for the company, confirm the business address.
  • File the new business via the Secretary of State’s office, download and complete authorized templates for Articles of Association and pay the due fees.
  • Compile an agreement indemnifying management from company liabilities. Specify how the parent company can appoint or change directors of the subsidiary, prohibiting changes without the parent company’s permission.
  • Documentation confirming status of the parent company, including its address in the home country.
  • An extract from that country’s trade register or equivalent, confirming the parent company’s commercial operation in the home country.
  • Articles of Association with full information concerning the owners, board or managers, the companies planned activities, the business address, and the registered official for dealing with official correspondence.
  • The Operating Agreement detailing the responsibilities of the owners.
  • The Employer Identification Number (EIN) enabling the company to pay taxes to the Internal Revenue Service (IRS) in the chosen state of operation.
  • Opening a company bank account by presenting all the company’s legal documents.

Accounts and Taxation

  • Company must obtain an Employer Identification Number (EIN) from the Internal Revenue Service for both paying taxes and remitting tax due that is withheld from employees’ salaries.
  • There are also likely to be tax liabilities from the state where the company is incorporated.
  • There is no minimum requirement for a limited liability company, or corporation, to deposit share capital.
  • Corporate profits of the shareholders of an LLC are ‘passed through’ to be taxed as income unless the LLC elects to be taxed as a corporation. Different taxation rules apply to C and S Corporations.

Management

  • Unlimited number of members who generally have no liability beyond their share contributions.
  • Operating Agreement sets out how the business is to be managed.
  • Manager can be designated to handle day-to-day operations.
  • No requirement for annual meetings of members or managers, whose activities are defined by the Operating Agreement. Corporations are required to hold shareholder annual meetings.

Take a faster route into the US economy

The cost-effective and time-saving alternative to the expensive and lengthy process of establishing your subsidiary in the US is to work alongside a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs.

We have over 20 years’ global experience and our in-country specialists will steer you through the complexities of setting up operations by locating and onboarding new employees, then ensuring compliance with all employment and tax regulations.

You retain day-to-day control of your staff – who are in place and operational within days rather than the months it could take to incorporate a legal entity. There is no reason for international borders to stand in the way of your international expansion. Call us today for more information.