U.S. Subsidiary vs. Branch Operations

A branch is not a separate legal entity. The foreign company itself enters contracts, employs personnel, opens accounts, leases premises, imports products, and assumes U.S. obligations. This can appear simpler at the outset because there is no new subsidiary to capitalize or govern. In practice, however, the foreign parent becomes directly visible within the U.S. legal, tax, employment, banking, regulatory, and litigation environment. It may need state registrations, U.S. tax filings, payroll arrangements, local insurance, and accounting support, while its U.S. activities can create taxable income and additional branch-level tax considerations.

A subsidiary is a separate U.S. company owned by the foreign parent. It requires incorporation, governance, banking, accounting, annual filings, intercompany agreements, and disciplined separation from the parent. Transactions between the companies—such as management services, product purchases, loans, intellectual-property use, or expense recharges—must be documented and priced appropriately. The additional administration is real, and incorporation does not automatically isolate every risk. Guarantees, inadequate corporate formalities, direct parent conduct, and contractual commitments can still expose the parent.

The subsidiary structure can nevertheless provide a clearer operating platform. Customers, employees, landlords, banks, distributors, and service providers contract with a domestic entity. Revenue, expenses, inventory, and operational responsibilities can be assigned more visibly, while insurance policies and certificates can be arranged around the entity conducting the U.S. activity. This may simplify product-liability and clinical-trial insurance discussions, particularly where an insurer, hospital, or research site expects a U.S. named insured or contracting party. Coverage must still reflect the actual manufacturer, sponsor, importer, distributor, and other exposed entities.

Clinical investigations may make the distinction especially important. FDA requires the sponsor of a U.S. Investigational Device Exemption study to be located in the United States; a foreign company must use a U.S. agent that assumes the sponsor responsibilities. A properly resourced U.S. subsidiary may provide that platform, but merely incorporating one is insufficient. It must be capable of performing sponsor oversight, monitoring, investigator management, reporting, recordkeeping, and device accountability, or contract qualified support while retaining sponsor responsibility.

There is no universally superior structure. The decision should be made with U.S. legal, tax, insurance, and accounting advisers after mapping the intended activities, contracts, personnel, inventory, clinical responsibilities, revenue flows, and risk allocation.

MDD Options can help define the operational model before advisers formalize the structure. We can map the roles that the parent, subsidiary, sponsor, importer, and distributor would perform, identify practical gaps, and provide a hybrid U.S. distribution and compliance platform where establishing a fully operational subsidiary would be premature or unnecessarily burdensome.