US Subsidiary vs Branch Office: Which Structure Is Better for Non-Residents?

If you are a founder outside the US and you want a real presence there, you have two main options. Set up a US subsidiary, or run a branch office.

This guide walks through both, with a focus on what actually matters for non-resident founders and Indian companies: getting an EIN without a Social Security Number, US branch profits tax, banking from abroad, and FEMA rules for Indian companies.

US Subsidiary vs Branch: The Difference in One Minute

Understanding the difference between a US subsidiary vs branch is important for non-resident founders and Indian companies planning to expand into the United States.

	US Subsidiary	US Branch
Legal status	Separate US company	Extension of your foreign company
Liability	Generally stays with the subsidiary	Generally falls on the parent company
US taxation	Depends on LLC or C-Corp choice	Taxed as a foreign corporation, plus branch profits tax
Getting money out	Dividends or distributions	Branch remittances
Best for	Founders planning long term US operations	A direct extension of an existing foreign business

A subsidiary, usually an LLC or a C-Corp, is its own legal entity registered in a US state. A branch is not separate. It is your existing foreign company operating directly in the US, so the parent stays on the hook for what the branch does.

For most non-resident founders and Indian companies entering the US, a subsidiary is the more common route. A true branch office is rare outside large multinational operations, mainly because of the branch profits tax explained below.

Can You Set Up a US Company Without an SSN?

Yes. You do not need a Social Security Number to form a US LLC or corporation. Company formation and getting a tax ID are two separate steps.

How US Subsidiary vs Branch Structures Affect EIN Requirements

Every US business needs an EIN (Employer Identification Number) from the IRS. It works like a tax ID for your company.

If you have an SSN or ITIN, you can apply online and get the EIN in minutes. If you do not, you apply using Form SS-4, and the IRS processes it by fax or mail. This takes a few weeks, so plan for it if you are working around a launch date or an investor deadline.

EIN vs ITIN vs SSN

ID	Who it is for	Main use
SSN	US citizens and eligible residents	Personal tax and identity
ITIN	Individuals not eligible for an SSN	Filing personal US tax returns
EIN	Businesses	Business tax filing, banking, payroll

You need an EIN for your company. You do not automatically need an ITIN as a founder, though you may need one later depending on how you are taxed personally.

IRS procedures change, so check the IRS EIN page for the current process before you apply.

Opening a US Bank Account From Abroad

Forming your US company does not automatically get you a US bank account. Banking eligibility is a separate decision made by each bank or fintech provider, and it depends on your nationality, your documents, and sometimes your business activity.

Traditional US banks often expect you to walk into a branch. Fintech platforms built for this situation, such as Mercury, Relay, and Wise Business, are usually a faster path, though approval still varies by provider and by country.

You will typically be asked for:

●       Your EIN confirmation letter

●       Formation documents (Articles of Organization or Incorporation)

●       Passport

●       Proof of address

●       Details of who owns the company

●       Basic information about what your business does

For a deeper walkthrough, including which providers tend to work for which countries, see our guide to US bank accounts for non-residents and our comparison of the best business bank accounts for non-US residents.

US Branch Profits Tax

If a foreign company operates in the US through a branch instead of a subsidiary, the IRS can tax it twice.

1.   Regular US federal corporate tax, currently 21%, on income connected to the US business.

2.   On top of that, a branch profits tax under IRC Section 884, at a statutory rate of 30%, on profits that are not reinvested back into the branch.

This second layer exists because the IRS taxes a foreign company's US branch roughly the way it would tax a US subsidiary paying dividends to a foreign parent. Some US tax treaties reduce this 30% rate. Whether the India-US treaty gives you a reduced rate depends on the specific facts of your business, so check this with a cross-border tax advisor before choosing a branch structure.

A US subsidiary does not face this second layer of tax the same way. It is taxed as its own entity, and profits move to the parent through dividends or distributions instead.

US Subsidiary Taxation: LLC vs C-Corporation

If the Subsidiary Is an LLC

A foreign-owned single-member LLC does not pay US corporate income tax by default. But that does not mean there is no US filing. A foreign-owned LLC still has to file Form 5472 along with a pro forma Form 1120 every year, purely for reporting. Skipping this carries steep penalties.

If the Subsidiary Is a C-Corporation

A C-Corp pays US corporate tax on its profits. When it later pays dividends to a foreign parent, those dividends face US withholding tax, which a tax treaty may reduce. This is corporate tax first, then withholding on dividends, but investors are usually more comfortable with a C-Corp than an LLC.

LLC or C-Corp

Factor	Foreign-owned LLC	C-Corp
Pass-through taxation	Often, depending on classification	No
Filing complexity	Simple to run, but Form 5472 is mandatory	More formal, standard corporate filings
Raising US investment	Rarely used by VCs	Standard structure investors expect
Good fit for	Freelancers, consultants, small service businesses	Startups planning to raise, larger operations

A Worked Example: $500,000 in US Profit

Say an Indian company earns $500,000 in profit through its US business in a year. These are simplified numbers, not tax advice, since your actual figures depend on deductions, state taxes, and treaty position.

Branch: Federal corporate tax at 21% takes the profit down to roughly $395,000. Branch profits tax at the full 30% statutory rate could take a further chunk off that, before any treaty relief. State tax may apply too, depending on where the branch operates.

C-Corp subsidiary: Corporate tax at 21% leaves about $395,000. If that amount is distributed as a dividend to the Indian parent, US withholding tax applies, reduced under the India-US treaty depending on ownership and eligibility.

LLC subsidiary: No US corporate tax at the entity level in most foreign-owned single-member setups, but this is not zero tax overall. How the income is ultimately taxed depends on classification, the owner's US tax position, and Indian tax rules on that income. Form 5472 reporting is mandatory regardless.

The branch route is usually the most expensive once both tax layers apply, which is why it is uncommon for non-resident founders.

India-US Tax Treaty

If money is moving between a US subsidiary and an Indian parent, the India-US tax treaty affects several pieces:

●       Dividend withholding. The treaty can reduce the default US withholding rate on dividends paid to an Indian parent, subject to ownership and eligibility conditions.

●       Interest and royalty payments. These have treaty-specific rates that differ from the default statutory rate.

●       Permanent establishment. Running a US branch can raise the question of whether that activity creates a taxable presence in ways that affect both US and Indian tax treatment.

●       Double taxation relief. India generally allows a foreign tax credit for US tax already paid, but claiming it needs proper documentation.

Treat this as a starting point for a conversation with a tax advisor, since these rules apply based on specific facts.

FEMA and RBI Rules for Indian Companies

If an Indian company, not just an individual founder, is putting capital into a US subsidiary or opening a US branch, FEMA rules on Overseas Direct Investment apply. This is separate from personal LRS limits that apply to individuals.

This generally means routing the investment through an Authorized Dealer bank, filing the required RBI reporting, and staying within applicable financial limits and conditions. The rules differ depending on whether an individual is forming the US company personally or whether an existing Indian company is investing in it. Check the RBI's FEMA overseas investment page and your bank's international division for the current requirements before transferring funds.

Branch Office vs Foreign Qualification

“Branch office” and “operating in another US state” are not the same thing.

Most non-resident founders form an LLC or C-Corp in a state like Wyoming or Delaware, then register as a foreign entity in whichever state they actually do business in. This is called foreign qualification, and it has nothing to do with the branch structure described earlier. It just means your Wyoming LLC needs to register in California too, if that is where you are actually operating.

Forming in Delaware or Wyoming does not mean you can ignore where your business is really based. If you have a physical office, employees, or regular operations in another state, you likely need to register there as well.

For more on choosing a formation state, see our comparison for Indian SaaS founders, and for ongoing compliance once your entity is formed, our BOI reporting guide.

Which Structure Fits Your Situation

●       Freelancer or consultant billing US clients: A single-member LLC, paired with an EIN and a fintech bank account.

●       SaaS or tech startup: An LLC early on, with a Delaware C-Corp conversion planned if you intend to raise from US investors.

●       E-commerce business: An LLC, with attention to state sales tax registration where you have nexus.

●       Established Indian company expanding into the US: Usually a subsidiary, evaluated alongside FEMA/ODI requirements before the capital moves.

●       Company planning to raise US venture capital: A Delaware C-Corp, since most US investors expect this structure from day one.

A branch office fits a company with an existing, profitable foreign operation that wants direct, temporary US activity without setting up a separate entity, and even then, the branch profits tax needs to be modeled first.

Common Mistakes to Avoid

1.   Assuming you need an SSN to form a US company.

2.   Expecting the EIN to arrive instantly online, when non-residents must apply by fax or mail.

3.   Assuming incorporation automatically means bank approval.

4.   Believing a branch avoids US tax obligations.

5.   Ignoring the branch profits tax when comparing structures.

6.   Treating an LLC as “no US tax,” while skipping mandatory Form 5472 filing.

7.   Forming in Delaware or Wyoming and forgetting to register in the state where the business actually operates.

8.   Skipping FEMA/ODI checks when an Indian company, not just an individual, is investing.

9.   Comparing US and India tax rates on paper without factoring in the treaty.

10.          Choosing a structure before deciding how profits will actually be repatriated.

Frequently Asked Questions

Can a non-resident open a US subsidiary without an SSN?

Yes. Company formation does not require an SSN. You will need an EIN for the company, which non-residents apply for using Form SS-4.

Can an Indian citizen open a US LLC from India?

Yes, this can be done fully remotely, without traveling to the US.

What is the US branch profits tax?

It is an additional 30% federal tax under IRC Section 884 on a foreign corporation's US branch profits, on top of the regular 21% corporate tax, unless a treaty reduces it.

Is a US subsidiary better than a branch for an Indian company?

For most Indian founders and companies, yes, mainly because of the branch profits tax and the liability protection a subsidiary offers.

Can I open a US business bank account without visiting the USA?

Yes, through several fintech platforms, though approval depends on your documents and the provider's current policy.

Does a foreign-owned US LLC have to file Form 5472?

Yes, this is mandatory even when the LLC owes no US corporate tax.

Does forming a Delaware LLC mean I can operate anywhere in the US?

No. If you operate in another state, you typically need to register there too, through foreign qualification.

Do Indian companies need RBI approval to invest in a US subsidiary?

Indian company investment into a US entity generally falls under FEMA's Overseas Direct Investment rules, which is different from individual LRS limits. Check current RBI requirements before transferring funds.

Should a non-resident choose an LLC or a C-Corp?

An LLC suits most freelancers, consultants, and early-stage businesses not raising US capital. A C-Corp fits founders planning to raise from US investors.

Final Takeaway

If you are a non-resident founder, start with the entity structure, the EIN, and the bank account. If you are an Indian company, add US tax exposure, the India-US treaty, and FEMA/ODI before you move capital. If you are planning a long-term US expansion, the decision points are liability, state registration, taxation, and how you plan to bring profits home.

Internation Corpus can help you work through the right structure, EIN application, banking, and ongoing compliance for your US expansion.