While the United States welcomes international business, U.S. subsidiary setup can be a complicated process. The process of setting up a subsidiary can vary based on several factors, including the state you choose as your company’s headquarters. Each state has unique legal requirements that you’ll need to keep track of in addition to the federal laws. Knowing what to expect as you set up a subsidiary can help you avoid fines and ensure that the process is as smooth as possible.
How to Set up a U.S. Subsidiary
To set up a subsidiary in the United States, you should take the following steps:
- Choose a business entity type: Decide whether you want your company to be a corporation or a limited liability company (LLC). Both types of entities come with advantages and setbacks, so it’s up to you to choose the one that makes the most sense for your ownership structure.
- Choose a state of incorporation: There are 50 states in the U.S., and some of them are more conducive to business than others. Each state has its own laws for businesses, so you should study up on what that means for your company before you set up a subsidiary.
- Establish a corporate bank account: It can be challenging for foreign businesses to set up a bank account in the United States, but it’s easier with a U.S. subsidiary. Partnering with a U.S. bank will make it less difficult for you to run payroll for your international team.
Accounting and tax laws in the U.S. are complicated, so most foreign businesses also hire an accountant during the process of setting up a subsidiary.
What Laws Exist for Setting up a Subsidiary in the United States?
U.S. subsidiary laws vary based on state and whether a company is a corporation or an LLC. However, some laws apply to all businesses and subsidiaries in the U.S. For example, every company is legally required to obtain a taxpayer identification number from the Internal Revenue Service (IRS).
In some states, businesses also need to comply with a variety of state and local laws and licensing regulations. You may need to register your subsidiary with the local tax authority.
As you can see, there are not many standard laws for subsidiaries across the United States. For this reason, many foreign businesses hire an attorney to help them comply with the legal requirements of setting up a U.S. subsidiary.
What Are the Benefits of Setting up a Subsidiary vs. Outsourcing?
When you set up a U.S. subsidiary, you’ll be fully in control of your business and the risks that come with it. As a result, establishing a subsidiary when you’re not familiar with the country’s laws can be challenging.
On the other hand, U.S. subsidiary outsourcing comes with several advantages for companies entering the U.S. market for the first time. When you partner with a global PEO that has an existing U.S. subsidiary, you can manage your business without the stress of trying to stay compliant with unfamiliar state and federal laws.
What Do You Need to Set up a Subsidiary in the United States?
It takes a considerable amount of time, money, and other resources to set up a subsidiary in an unfamiliar country, and the U.S. is no exception. You’ll need to register your business name and type of entity with the state. You’ll also have to open a corporate bank account in the U.S. and find and register a physical office space for your business.
The process of setting up a subsidiary in the U.S. could take months from start to finish. The process can be especially lengthy since you will have to work with several different entities at the local, state, and federal levels. For this reason, many foreign businesses prefer to partner with a global PEO that already has an established subsidiary in the United States.
Take the Stress out of Your Expansion With a Global PEO
If you’re ready to expand your company into the United States, Globalization Partners is here to help. We’ll hire your employees through our existing U.S. subsidiary and manage all of the risks so that you don’t have to. Contact us today to learn more.