With well over 300 million potential consumers and numerous global companies, it is no wonder that companies operating outside the US are eager to enter US markets. Following are five good reasons to make the creation of a US subsidiary your company’s first step.
Limited Liability
One of the biggest reasons to form a US subsidiary is to ensure limited liability for employees and executives. In general, when a US company takes on debts, its creditors only have access to company assets to cover those debts. The individual assets of employees or executives cannot be reached by company creditors. Because US companies may be unwilling to enter into contracts with foreign entities, absent a US entity, your corporate executives may be forced to sign contracts (such as office leases) in their individual capacity. What that means, is that should the company be unable to pay its bills, creditors could attempt to recover from the personal assets of the individual who signed the agreement.
Tax Efficiencies
The United States currently has the dubious distinction of having the highest tax rate of all major economies and the third highest general top marginal corporate income tax rate in the world (exceeded only by Chad and the United Arab Emirates). For a US subsidiary of a foreign parent, proper tax planning could result in some portion of the company’s revenues being allocated to the home country. Depending on factors that will include the tax rate of the home country and the amount of revenue generated by the business, this could result in dramatic savings. [Read more…]