International Law Organization

International Law Organization

University of Phoenix

Michael A. Reyes

Law/531

September 9, 2015

Dr. Mark Pugatch BS, MBA, JD

Introduction

In this paper we will look at two ways to operate overseas, but looking closer at the one that would hopefully prevent the home office from liability. This paper will address a “branch office” and a “wholly owned subsidiary.” Both are optional in their own ways but at the end, the best way to prevent the headquarters in the US from liability is addressed. This paper will have the following format: introduction, scenario, main body, and conclusion.

Scenario

One of the goals of a business is to limit its "risk, liability, and dollar payouts."  An

American company is seeking to operate abroad in a foreign country. You are asked as to what

organizational form that foreign entity should take in order to not allow any liability incurred on

foreign soil to extend back to the corporate headquarters in the US. Would you set up a branch

office or a wholly owned subsidiary?

Main Body

As stated in the scenario, the goal of every organization is to avoid risk, liability and high dollar payouts. In establishing a sublet office overseas, we will look at the two offered ways in doing so, the branch office and the wholly owned subsidiary.

Branch Office

When reviewing the benefits of using a branch office overseas, the liability towards the home office in the U.S. would still be liable. According to what is a Branch Office and what is a Subsidiary, it states that a branch office is not a separate legal entity of the parent corporation (n.d.). The headquartered company continues to retain liability, risk and deep pockets when overseas.

Another way to look at this is from the perspective of taxes. Difference between Branch Office and a Subsidiary Company in Singapore writes, a branch office is not considered a local tax resident and is not eligle for tax rebates offered to subsidiaries companies, which are considered. This is because management and control of a branch office lies outside of Singapore (n.d.).

Wholly Owned Subsidiaries

The headquartered company looks for ways to save them from risk and as we looked at

the branch office approach, there was no safety from risk. The wholly owned subsidiary on the

other hand protects from liability at the headquarters. Mallor et al. writes American corporations

set up subsidiaries in Delaware to take advantage of its low taxes. Also, if a corporation wants to

engage in a risky new venture in a country with a volatile political climate, the corporation will