Learn how to establish US subsidiary or branch for L-1 transfer. Step-by-step guide on entity formation, ownership structure, and compliance requirements.
Before you can transfer to America on an L-1 visa, you need to set up US subsidiary for L-1 purposes or establish another qualifying entity structure. The USCIS requires a formal business relationship between your foreign company and US operation. You can't just decide to open an office and apply for L-1. The corporate structure must exist first, properly documented and legally established according to US laws.
The qualifying relationship can take several forms. A subsidiary means your foreign company owns the US company. A branch means the US office is part of the foreign company itself, not a separate legal entity. An affiliate means both companies share common ownership by the same parent. A sister company relationship exists when both entities are owned by the same individuals or organizations. Each structure has different legal, tax, and operational implications you need to understand before choosing.
Most international founders choose the subsidiary route because it provides liability protection. If something goes wrong with your US operations, your foreign company's assets remain protected. The US subsidiary operates as a separate legal entity. This separation matters enormously for risk management and future business growth in America.
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The L-1 branch vs subsidiary decision affects your liability exposure, tax obligations, and operational flexibility significantly. A branch is simpler to establish initially. You're just extending your foreign company into the US market. File a foreign entity registration in your state of operations. Open a US bank account under your foreign company name. Start doing business. The branch approach costs less upfront and requires less paperwork.
However, branches offer no liability protection. Your entire foreign company stands behind all US operations legally. If someone sues your US branch, they can pursue your foreign company's assets. For many founders, this risk outweighs the simplicity benefits. Branches also face complex tax situations. The IRS may tax your entire foreign company's income, not just US profits. International tax treaties can help but the accounting gets complicated quickly.
Subsidiaries provide clean separation. Your US corporation is a distinct legal entity from your foreign parent. Liability stays contained within the US subsidiary generally. Tax treatment is clearer - the US subsidiary pays tax only on US income. You can bring in US investors more easily with a subsidiary structure. Most venture capitalists and angel investors prefer investing in Delaware C-corporations, not foreign company branches. The subsidiary route requires more initial setup but provides better long-term flexibility and protection.
Confused about branch versus subsidiary structures? Beyond Border explains the legal and tax implications of each option clearly.
Creating a proper parent-subsidiary relationship L-1 requires careful attention to ownership percentages and documentation. Your foreign company must own at least 51 percent of the US subsidiary for USCIS to recognize the qualifying relationship. Majority ownership proves control and establishes the parent-subsidiary structure immigration authorities require. Many founders choose 100 percent ownership initially to keep things simple.
File articles of incorporation with your chosen state, typically Delaware for its business-friendly laws. Designate your foreign company as the sole shareholder or majority shareholder. Issue stock certificates documenting the ownership. Create corporate bylaws outlining how the US subsidiary will operate. Appoint initial directors and officers. Hold organizational meetings and document decisions in corporate minutes. These formalities matter for both legal compliance and visa applications.
The US entity formation L-1 visa process also requires obtaining a Federal Employer Identification Number from the IRS. This EIN functions like a social security number for your business. You'll need it to open bank accounts, hire employees, and file taxes. Apply online through the IRS website - the process takes about 15 minutes for international applicants. Keep your EIN confirmation letter safe as you'll reference it constantly.
Ready to establish your US subsidiary properly? Beyond Border guides you through incorporation and ownership structuring.
Your qualifying relationship L-1 visa application requires extensive documentation proving the connection between entities. Start with corporate documents. Gather articles of incorporation for both your foreign parent company and US subsidiary. Include certificates of good standing from both jurisdictions. Provide stock certificates showing ownership percentages. Submit shareholder agreements if multiple owners exist.
Organizational charts help immigration officers visualize your corporate structure quickly. Create a simple diagram showing your foreign parent company at the top, with lines connecting to your US subsidiary below. Include ownership percentages, names of key officers, and the nature of the relationship. If you have multiple entities in different countries, show how they all connect. The chart should make the qualifying relationship obvious at a glance.
Financial relationships between entities need documentation too. If your parent company funded the US subsidiary through capital contributions, show wire transfer records and corporate resolutions approving the funding. If you used loans instead of equity, provide loan agreements with repayment terms. Any intercompany transactions, service agreements, or intellectual property licenses should be documented clearly. The goal is proving these aren't independent companies coincidentally owned by the same people - they're related entities operating as part of an integrated business structure.
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Once you set up US subsidiary for L-1 purposes, you must maintain proper corporate formalities throughout your visa period. This means holding regular board meetings, documenting decisions in minutes, filing annual reports with your state, and keeping corporate records organized. Failure to maintain corporate formalities can result in "piercing the corporate veil" where courts disregard the separate entity status. This defeats the liability protection purpose of having a subsidiary.
The corporate structure L-1 transfer depends on must continue for your entire visa validity. If ownership changes significantly, you might need to notify USCIS and potentially file amendments. If your parent company sells the US subsidiary to unrelated buyers, your L-1 status likely ends because the qualifying relationship no longer exists. Major corporate changes require consultation with immigration attorneys before finalizing deals.
State compliance requirements vary but typically include filing annual reports, paying franchise taxes, and maintaining a registered agent. Delaware requires an annual report and $300 franchise tax minimum. Other states have different fees and deadlines. Missing these filings can result in your company being dissolved administratively. An inactive or dissolved company can't support L-1 status. Set calendar reminders for all compliance deadlines or hire a corporate services company to handle filings automatically.
Struggling with ongoing corporate compliance? Beyond Border provides compliance monitoring and ensures you meet all requirements.
The new office category of L-1 visa has additional considerations for your US entity formation L-1 visa strategy. You need to show physical office space secured before applying. This can be a lease agreement, purchase contract, or letter from a property owner confirming space availability. Coworking spaces work in some cases but USCIS increasingly scrutinizes these arrangements. Dedicated private office space strengthens your case significantly.
Your business plan must demonstrate how the US operation will grow beyond initial setup. Show projected hiring timelines, revenue targets, and operational milestones. The plan proves your US subsidiary will become a substantial operation, not just a token presence. Include market research showing demand for your products or services in America. Explain your competitive advantages and growth strategy clearly.
Financial projections for the first three years of operations matter greatly. Show realistic revenue growth, expense management, and path to profitability. You don't need to project profits immediately but you must show the business is viable and will support multiple employees. Include funding commitments from your parent company demonstrating financial capacity to support US operations through the startup phase. Bank statements or financial reports from your foreign company prove you have resources to invest in US expansion.
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What type of US entity do I need for L-1 visa? You can use a subsidiary (separate US corporation owned by foreign parent), branch (extension of foreign company), or affiliate structure, with subsidiaries being most common for liability protection.
How long does it take to set up US subsidiary for L-1? US subsidiary formation takes 1-3 weeks for incorporation, then additional time for EIN application, bank account opening, and office space securing before filing L-1 petition.
Can I form my US subsidiary after L-1 approval? No, the qualifying relationship must exist before filing L-1 petition, meaning your US entity must be properly formed and documented prior to application submission.
What ownership percentage does parent company need for L-1? Parent company must own at least 51% of US subsidiary for qualifying relationship, though many founders maintain 100% ownership initially for simplicity and control.
