Subsidiary or branch
What could be chosen by investors to enlarge their foreign activity: a branch or a subsidiary?
The answer may depend on legal, politics and tax aspects.
Branch or Subsidiary: legal, politics and other considerations
To understand advantages and disadvantages about branch or subsidiary formation abroad, it seems necessary to define exactly the legal criteria of these entities.
Legally, the branch is not a corporation (entity) separate of its head office, as the mother and branch are the samesingle legal entity. The branch doesn't have any shareholders, board, stocks…
It is considered as a foreign extension of the head office.
So there is a real implication and liability of the head office in its foreign activity via its branch.
By opposition, the subsidiary is a corporation set-up, held and controlled by its head office. The subsidiary has its own existence, as it has its own board of directors, its own shareholders, Memorandum, stocks… Consequently, there is no implication and liability of the head office in its foreign activity via its subsidiary.
