Setting Up a Subsidiary in the U.S. Key Steps Considerations for a Successful First Move

Establishing a Branch Office in the United States A Critical Step Toward Internationalization

For many companies, setting up a branch office in the United States represents a crucial step toward international expansion. As global economic integration accelerates, an increasing number of Chinese enterprises are choosing to expand into overseas markets. The U.S., as one of the world's largest economies, naturally becomes a top destination. However, due to the complexity of the American market environment, its rigorous legal system, and significant cultural differences, companies must conduct thorough planning and act cautiously to ensure a successful start.

1. Clarifying Strategic Positioning and Conducting Market Research

Before deciding to establish a U.S. branch, companies should first clarify their strategic objectives. Is the goal to expand sales, acquire technological resources, or enhance brand influence? Different objectives will directly influence the structure and operational strategy of the branch. Comprehensive market research is essential.

According to data released by the U.S. Department of Commerce in the first quarter of 2025, demand for high-quality products and services continues to grow in the American consumer market, particularly in fields such as technology, healthcare, and green energy. Companies should analyze the competitive landscape, consumer preferences, and potential risks in their target market, aligning these with their own industry characteristics to ensure feasibility and sustainability of their U.S. market entry.

2. Choosing the Right Company Structure

Common business structures for setting up operations in the U.S. include Branch Office, Subsidiary, Limited Liability Company LLC, and Joint Venture. For Chinese companies seeking a low-cost and rapid entry into the market, establishing a branch office is a frequently chosen option. Compared to a subsidiary, a branch does not require a separate legal entity, which simplifies the setup process and reduces initial investment.

However, it is important to note that the operations of a branch in the U.S. are considered part of the parent company. Therefore, the parent company assumes unlimited liability for the branch's debts and legal obligations. When selecting a business structure, companies should consider their risk tolerance and long-term plans. Consulting with legal and accounting professionals is highly recommended.

3. Registration Process and Legal Compliance

Setting up a U.S. branch typically involves the following steps

1. Choosing a State for Registration Each U.S. state has different laws. Companies should choose a state based on factors such as tax policies, business environment, and industry concentration. For example, Delaware is a popular choice due to its well-developed legal framework and business-friendly policies.

2. Registering the Company Name Ensure the name is not already registered in the chosen state and complies with local regulations.

3. Applying for an Employer Identification Number EIN This unique identifier issued by the IRS is required for tax reporting and opening a bank account.

4. Filing Registration Documents Submit documents such as articles of association, copies of the parent company's business license, and authorization letters, along with applicable fees.

5. Opening a Bank Account Establishing a local bank account is recommended to facilitate financial management and tax reporting.

Throughout the registration process, strict compliance with U.S. federal and state laws-including corporate, labor, and tax regulations-is essential. In recent years, compliance scrutiny for foreign firms has increased, particularly in areas such as data security and intellectual property protection. Companies should prepare for these requirements in advance.

4. Tax Planning and Financial Arrangements

The U.S. tax system is complex, featuring multiple layers including federal, state, and local taxes. According to IRS regulations, foreign companies operating through a U.S. branch are taxed on profits earned within the country. Additional considerations include transfer pricing and cross-border profit repatriation.

Before establishing a branch, companies should develop a reasonable tax planning strategy to minimize the tax burden. Hiring professional financial advisors or tax agents is advisable to assist with day-to-day financial operations and annual audits, ensuring transparency and compliance with U.S. financial regulations.

5. Human Resources and Localized Operations

Talent is a key factor in the success of any business. Setting up a U.S. branch requires not only sending core management personnel but also hiring local professionals with relevant expertise and market knowledge. U.S. labor laws are strict, and companies must ensure compliance with local regulations regarding employment, compensation, and benefits to avoid legal disputes.

Localized operations are crucial. Companies should respect U.S. business culture and focus on brand promotion and customer experience. For example, in recent years, many Chinese tech companies have established RD centers in the U.S., not only hiring local engineers but also collaborating with universities and research institutions to drive innovation and market growth.

6. Risk Management and Long-Term Development

Entering the U.S. market is not an overnight process. In the early stages, companies may face challenges such as low brand awareness, limited market influence, and high operational costs. Developing flexible market strategies to gradually build brand recognition and customer base is essential.

Companies should also establish a comprehensive risk management system, covering legal, financial, and operational risks. This ensures the ability to respond quickly to unexpected situations. With the fluctuating U.S.-China economic relationship, compliance and risk control have become even more critical. According to a 2025 Bloomberg report, more Chinese firms are adopting a gradual approach-starting with representative offices or collaborative projects to understand the market before increasing their investment. This strategy is worth considering.

Conclusion

Establishing a branch office in the U.S. is a vital component of a company’s international strategy. From strategic planning to legal registration, and from tax management to localized operations, each step requires careful planning and execution. Only by thoroughly understanding the U.S. market environment, complying with local laws, and efficiently allocating resources can a company take a successful first step and lay a solid foundation for future growth.