A common question for a European expansion is to determine the best type of legal structure to use. Each country has its own variation on partnerships and limited liability companies and various things in between.
For the UK for example we are often asked about branches versus full subsidiary entities. In theory branches carry the attraction that they are easier to close if a business fails to reach expectations but this isn’t necessarily always the case.
UK branches are subject to Corporation tax on the profit attributable to that branch, whereas a subsidiary is taxed on all income within its operations worldwide.
The issue often boils down to appearances, with subsidiaries offering more substance to a longer term commitment to a jurisdiction which is important not just to customers but equally to employees from a recruitment and retention standpoint.
Michael Clarke
CFO