Introduction
A US branch can help a foreign company serve American customers, hire locally, work with US partners, or build a presence in a regulated market. Filing a registration is only one step. Most teams then struggle with the work that follows:
- Tax exposure and filings
- Bank onboarding
- Licensing
- Payroll
- Immigration
The central decision is whether to operate through the foreign parent as a branch or form a separate US subsidiary. That choice shapes liability, tax filings, bank onboarding and how regulators view you.
Requirements differ by state. This article is a planning checklist, not legal or tax advice. Get legal, tax, immigration and sector-specific advice before you file anything.
Key Takeaways
- A branch extends the foreign parent, so control is simpler but liability separation is weaker.
- Setup is state-based: documents, agent, registration, EIN, then tax and licence accounts.
- Model federal, state and home-country tax before money, staff or stock moves.
- Regulated firms should plan licensing before registration, not after.
Before Setting Up: Decide Whether a US Branch or Subsidiary Is Right
What a US branch actually is
A branch is generally an unincorporated extension of the foreign parent, not a separate legal person. The parent stays directly exposed to the branch's contracts, debts and lawsuits, according to Baker McKenzie's analysis. For US federal income tax, a foreign branch is generally treated as part of its owner.
"Foreign" also has two meanings in US law. Your overseas company registers as a foreign entity with a state. A company formed in Delaware is also "foreign" when it registers in Texas. Texas, for one, defines the status by where the entity was formed, not where its office sits.
Branch versus US subsidiary
| Dimension | Branch | US subsidiary |
|---|---|---|
| Legal status | Extension of the parent | Separate legal entity |
| Liability | Parent directly exposed | Generally contained in the subsidiary |
| Federal tax | May owe tax on effectively connected income, plus branch profits tax | Own corporate return and tax profile |
| State registration | Parent registers in each relevant state | Formed as a domestic entity; parent may still need to qualify |
| BOI reporting | Certain foreign-law entities registered by filing remain reporting companies | US-formed companies exempt under FinCEN's August 2026 final rule |
A subsidiary suits a company that needs liability separation, US investors or a standalone operating platform. A branch suits one that wants direct, parent-led control. Review the tax, liability and regulatory exposure before choosing it.
Decision checklist before filing
Map these out first:
- Business model and intended US activities
- Expected employees, locations and contracts
- Revenue flows and regulated products
- Investment plans and how long the US operation will run
Then model the home-country consequences too: treaty availability, profit repatriation, branch profits tax, parent liability, licensing and immigration needs. For money-transmitter licensing, customer location usually matters more than the state where an entity was incorporated.
How to Set Up a US Branch Step by Step
Step 1: Map the activities and states involved
Offices, employees, agents, warehouses, inventory and recurring services can all trigger state registration or tax duties. A branch may need to register in several states.
Separate the state of registration from the states of actual operation. For each, check the Secretary of State, Department of Revenue and any industry regulator for current rules. Texas, for example, says a bank account alone is not enough to require registration, yet tax nexus can arise at a lower activity level than the registration threshold.
Step 2: Obtain approval and prepare parent-company documents
Registrations commonly ask for:
- Formation records and governing documents
- A certificate of good standing or existence
- Proof of authorised representatives
- Board or shareholder approval
- Ownership information
- Certified translations where required
New York wants a certificate of existence dated within one year. California requires a current certificate of good standing. Formally authorise the branch, name who can sign contracts, and document the parent-branch relationship before filing.
Step 3: Select a name, registered agent and business address
Keep these distinct: the legal name, any assumed or trade name, the registered-agent address, a mailing address and the real operating address. Check name availability and trademark risk separately.
Most states require a registered agent. Don't present the agent's address as your operating location unless it is accurate. Texas, for instance, requires an agent that is an organisation or a Texas-resident individual with a Texas street address.
Step 4: File the required state registration
The filing goes by different names: application for authority, foreign registration, or certificate of authority. You will supply parent details, agent details, principal office, signer details and usually a good-standing certificate.
Published fees for foreign corporations vary widely:
| State | Filing | Fee |
|---|---|---|
| Texas | Form 301 | $750 |
| New York | Application for Authority | $225 |
| California | Statement and Designation | $100 |
| Florida | Filing plus agent designation | $70 |
Confirm fees, timing and renewal rules on official state pages. Recurring costs differ too: Florida charges a $150 annual report, and California requires a $25 Statement of Information.
Step 5: Obtain an EIN and complete related registrations
Use Form SS-4. Applicants without a US residence or principal place of business cannot use the online route.
According to IRS instructions, fax issuance is generally within four business days and mail takes about four weeks. The responsible party must generally be an individual, not the parent entity. EIN issuance is free.
Follow-on registrations may include:
- State tax and payroll accounts
- Unemployment insurance and workers' compensation
- Sales-tax permits
- Industry and local licences
- Qualification in further states
Tax, Licensing, and Compliance Obligations
Federal tax treatment of a branch
A foreign corporation engaged in a US trade or business is generally taxed on effectively connected income at 21%, reported on Form 1120-F. For a calendar-year company, the due date is the 15th day of the fourth month after year-end with a US office, or the sixth month without one.
Protective returns exist for limited activity, and late filing can affect deductions and credits.
Branch profits tax adds a separate 30% on the dividend-equivalent amount under IRC section 884. Treaties can cut it. Under the UK-US treaty, qualifying cases may fall to 5%, but limitation-on-benefits conditions mean it is not automatic for every UK parent.
FDAP income also faces 30% withholding unless an exception or treaty rate applies.
Registration does not remove cross-border tax exposure. Coordinate US and home-country advisers.
State and local tax exposure
State income, franchise, gross-receipts, sales, use and local taxes can apply based on staff, property, inventory, customers and revenue. Registration and nexus are separate analyses.
In South Dakota v. Wayfair (2018), the Supreme Court rejected a physical-presence rule for sales-tax nexus. Check every state where you hire, store goods or sell. Consequences of skipping registration vary: in Texas, an unregistered foreign entity cannot maintain a court action until it registers.
Payroll, sales tax and employment registrations
Hiring triggers withholding, unemployment insurance, workers' compensation, wage-and-hour and benefits duties. New York, for example, requires virtually all employers to carry workers' compensation. Selling taxable goods or services adds sales-tax collection and filing.
Related-party transactions and cross-border payments
Document these arrangements consistently across contracts, accounts, tax filings and bank records:
- Parent funding and loans
- Management fees and cost-sharing
- Royalties and IP arrangements
IRC section 482 lets the IRS reallocate income between related parties. Form 5472 applies to reportable related-party transactions of a foreign corporation engaged in a US trade or business. Take advice on transfer pricing, withholding and treaty positions.
Industry licensing and financial-services compliance
For fintech, crypto, payments and money transmission, branch registration authorises nothing regulated. Plan for:
- State money-transmitter licensing (31 states had enacted the MTMA in full or part as of September 2026, per CSBS)
- FinCEN MSB registration on Form 107
- A written risk-based AML programme with a designated compliance person
- Sanctions, UDAAP, privacy and cybersecurity controls
- Sponsor-bank due diligence
Fraxtional supports companies assessing US and cross-border operations with fractional CCO, CRO, BSA Officer, CAMLO or MLRO leadership, plus money-transmitter licensing from pre-filing strategy through post-filing compliance. This complements legal and tax counsel rather than replacing it.
Banking, Hiring, and Operational Readiness
Opening a US business bank account
Expect requests for registration documents, EIN confirmation, ownership and control details, signer identification, governing approvals and an explanation of payment flows. Banks must identify each individual owning 25% or more of a legal-entity customer, plus one controlling individual. Each bank runs its own process.
Prepare for questions on:
- Source of funds and parent ownership
- Customer types, jurisdictions and volumes
- Regulated activity
Keep answers consistent across bank applications, state filings, tax records and contracts.
Hiring employees and engaging contractors
Don't rely on contract labels. The IRS weighs behavioral control, financial control and the relationship between the parties. The DOL proposed an economic-reality rule in February 2026; confirm whether that proposal is in force before you classify workers. Every employer must complete Form I-9 for each hire.
At onboarding, set up:
- Payroll and workplace policies
- Confidentiality terms and IP assignments
- Required workplace notices
Building the operating infrastructure
Cover insurance, commercial contracts, IP ownership, data protection, customer terms, office or coworking arrangements, and expense and fund-transfer approvals. A branch isn't a separate entity, but keep separate operating records and a compliance calendar.
Immigration, Sector Requirements, and Ongoing Compliance
Ownership and immigration are separate questions
Owning a US business does not grant permission to work there. USCIS lists meetings and contract negotiations as B-1 activities, but not local employment. Possible routes include:
- L-1A: needs one continuous year abroad within the previous three years, and a new office needs sufficient premises
- E-2: needs treaty-country nationality and a substantial at-risk investment; the UK is on the State Department list
Check current USCIS and State Department rules for your nationality, role and structure.
Sector-specific and cross-border risk review
Financial services, payments, crypto, defence, telecoms, health, data, imports and government contracting may bring extra rules. Examples:
- CFIUS can review foreign investment based on the transaction, not the registration label
- BIS treats releasing controlled technology to a foreign person in the US as a deemed export
- CCPA thresholds may apply to data-heavy businesses
Identify the federal and state regulator for each activity. A general filing is never industry authorisation. Crypto firms, for example, face OFAC screening, Travel Rule and FinCEN registration questions.
Build an ongoing compliance calendar
Include:
- Annual or biennial state reports and agent renewals
- Federal and state tax, payroll and sales-tax deadlines
- Licence and insurance renewals
- Beneficial-ownership or state disclosure rules
- Corporate approvals and parent-branch reporting
Update it whenever you add staff, stock, an office, a state, a product, a regulated service or a new cross-border payment arrangement.
Frequently Asked Questions
How to establish a branch office?
Assess branch suitability, identify states, prepare parent documents, file state registration, obtain an EIN, complete tax and license registrations, then set up banking and compliance controls.
Can a foreign person own a US company?
Often yes. But ownership does not provide work authorization, eliminate tax-filing obligations, or satisfy industry licensing.
How much will it cost to register a company in the USA?
It varies by state and structure. Published state fees range from $70 to $750, before registered-agent services, advice, licensing, payroll and ongoing compliance. The EIN is free.
Can I get a US visa if I start a business?
Not automatically. Eligibility depends on nationality, ownership, investment, role and activities, so get current immigration advice.
Does a foreign company need a US subsidiary to do business in the United States?
Not always. Operating directly usually needs state registration and exposes the parent to US liability and tax. The right choice depends on your model and risk profile.
Does a US branch need an EIN?
Many do, for federal tax administration, banking and hiring. Confirm the requirement and application route with the IRS based on the parent's facts.
