Foreign Parent + U.S. Sub = Legal Firewall
I have helped dozens of foreign companies establish subsidiaries here. Sometimes, the foreign company asks, “Do we really need to form a separate company in the U.S.? Can’t we just hire some people in the U.S. to work for our existing overseas entity?”
In responding, I make the following points:
- There is no requirement that a separate U.S. entity be formed.
- However, starting a new U.S. business is risky. There certainly will be financial obligations, and unexpected legal liabilities can arise. (Regrettably, anyone can sue anyone else for any reason at any time – and even if you win, there is a substantial likelihood you will have to pay your own legal fees.) So long as the U.S. entity complies with applicable formalities (please see Beware Your Alter Ego), it will act as a legal firewall to separate those obligations and liabilities from the foreign parent.
- Foreign Company Alert: Obtaining an EIN may be your Biggest Challenge in the U.S.
- Ten Tips for Success in the U.S.
Photo credit: Sharon Austin via stock.xchng
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Business Entities, International, Litigation, Startup