When an existing business expands abroad, or a founder sets up in a new country, one of the earliest decisions is the legal shape the business will take there. The three options most people consider are a branch, a subsidiary or an entirely new, independent company. Each works differently, and the right choice depends on what you are trying to achieve.
A branch
A branch is usually an extension of an existing company into another country, rather than a separate legal person. In general terms:
- The parent company remains directly responsible for the branch's obligations.
- The branch normally registers locally and keeps local records, but is not a company in its own right.
- It can be a simpler way to test a market or support existing customers.
The main consideration is liability. Because the branch is part of the parent, problems abroad can reach the parent company directly. Some banks, customers and regulators also prefer to deal with a locally incorporated entity.
A subsidiary
A subsidiary is a separate company, formed in the new country and owned wholly or partly by the existing business. Generally:
- It is a legal person in its own right, with its own directors, accounts and filings.
- Liability is usually contained within the subsidiary, though this depends on how it is run and funded.
- It is often seen locally as a more permanent commitment, which can help with customers, hiring and banking.
Subsidiaries usually carry more administration, and transactions between the parent and the subsidiary need to be documented carefully.
A new, independent company
Sometimes the right answer is a new company that is not owned by an existing business at all, for example when a founder is starting fresh, when several people are coming together, or when a family wants a business held personally rather than through another company. This keeps things simple in some ways, but the founders take on the full responsibilities of ownership directly.
Questions that help decide
- Why are you there? Testing a market, serving existing clients and building a long-term operation point towards different structures.
- How much risk should stay abroad? Liability is often the deciding factor.
- Who needs to live there? Some immigration routes, such as intra-company transfers, depend on a link between businesses, while others favour a newly formed company.
- Will you raise investment? Investors usually prefer a clear, separate company.
- What will banks and customers expect? Local perception can matter more than founders anticipate.
- How will profits move? Different structures are taxed differently, and the details vary by country.
Tax and legal advice come first
The tax and legal consequences of each structure differ between countries, and sometimes between regions within a country. Treaties between countries can also affect the outcome. This is an area where general guidance runs out quickly, and decisions should always be confirmed with licensed local lawyers and tax advisers before anything is filed.
Changing course later
It is often possible to change structure later, for example by converting a branch into a subsidiary as the business grows. But changes take time and can carry their own costs and consequences, so it pays to choose with the next few years in mind.
Where Kaitu helps
We help founders and family businesses think through structure alongside residence, banking and the practicalities of the move, and we coordinate with licensed local partners for the legal and tax work. To discuss your plans, book a free consultation or start with our free company course at Kaitu Academy.
