If you already own a company abroad and you are thinking about applying for an E-1 visa, you may be thinking whether you should set up a branch or a subsidiary in the U.S. Please note that it is not required for the E-1 visa that you set up a business entity/branch in the U.S. at all, but in some cases it may be advisable. Please see our blog post on this when you click here.
What is a branch?
Branch is an office of a company abroad that is in a different location than other operating divisions of the company. A branch is not a separate business entity, so if a foreign corporation wanted to open a branch in the U.S, they would not have to incorporate a U.S. entity, although the foreign company would need to register in the state where the branch office will operate.
To measure the trade for the E-1 visa, the government will look at the trade conducted by the entire entity of which the branch is a part of (as the U.S. branch is not a separate legal entity).
You own 100% in your Canadian company and the company now wants to set up a branch in the U.S. and you want to apply for an E-1 visa. The Consulate will look at the trade conducted by the entire legal entity (the Canadian company) when considering whether you meet the E-1 visa requirements. For example, if the trade of the Canadian entity last year was 100 million dollars and the Canadian entity had 500 clients, it would meet the substantiality requirement even if the trade and number of clients of the U.S. branch was much lower.
One thing to keep in mind when registering a branch is that you will have to meet the requirement that more than 50% of the total volume of international trade is between the U.S. and a treaty country. In case of a branch, the Consulate will look at the international trade conducted by the Canadian entity and the U.S. branch. Therefore, you will have to keep in mind that if for example you are exporting goods to the U.S., more than 50% of the international trade of the Canadian entity always has to be with the U.S. Therefore, if in the future you get a big client from for example the U.K. and the Canadian entity will start exporting more than 50% to the U.K., you would no longer meet the E-1 requirement. In such case, it would be advisable to set up a subsidiary in the U.S., and that entity could start importing the goods to the U.S.
What is a subsidiary?
Subsidiary is a separate legal entity that is owned and controlled by a parent company (the parent company must own at least 50% in the subsidiary).
You own a company in Canada and the company now wants to set up a subsidiary (e.g. a limited liability company) in the U.S. In this case, the Consulate would only look at the trade conducted by the U.S. subsidiary when analyzing whether it meets the E-1 requirements, as it is a separate legal entity. It would not matter if the Canadian entity’s trade last year was 100 million, and only the trade of the U.S. entity would be relevant.
Please see all the E-1 requirements when you click here.
Please read our blog post on whether it is better to apply for an E-1 or E-2 visa when you click here.
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