International Businesses

Expanding to the US: How to Effectively Manage Your US Subsidiary

Posted on August 5, 2021 by

Teresa Gordon

Teresa Gordon

Share This

Establishing a U.S.-based subsidiary is a challenge unlike any other. Managing it is a close second. Subsidiaries are assets to their parent companies—they enhance group value, build gross revenue and allow entrance into a new market. There is, however, one risk that is common among all parent organizations and their subsidiaries: poor management. The most difficult part of managing a subsidiary is finding the correct balance between oversight by the parent and oversight by the subsidiary.

Here are some key considerations for managing your U.S. operations:

Management Team

Start by deciding whether the team responsible for the start-up and growth of your U.S. operation will be based in the U.S. or abroad at the parent company. Keep in mind that if you find someone who is already in the U.S. to manage your subsidiary, they will require training. Alternatively, if you send an experienced expatriate employee from your parent company, they will require an immigration visa. As your company grows, determine when it makes sense for your U.S. subsidiary to have their own management structure.

Financial

During early expansion, consider outsourcing U.S. accounting to allow key U.S. and parent company resources to focus on operational growth in the U.S. You should also determine who needs access to the U.S. accounting software, who the authorized signers for your U.S. bank account will be and what type of reporting is required. Make sure your U.S. team, parent company management and outside accountants are aware who is responsible for approving customer invoices, paying vendors and processing U.S. payroll.

Taxes

You can minimize your risk of exposure to tax adjustments and penalties for U.S. federal and state income requirements when you work with an accountant with foreign direct investment experience, but you must also have a U.S. corporate officer review and sign the U.S. tax filings. It’s important to coordinate documentation and execution of group pricing policies for your U.S. company’s transactions with foreign affiliates. You should also identify the key U.S. and foreign contacts who will coordinate information and decisions for the group’s domestic and global tax positions.

Operational

Since payroll requirements are different in the U.S., consider outsourcing the HR function of your U.S. subsidiary. It’s important to manage this area correctly from the start of operations, even if you only have a few employees. The location of your employees and customers determines where you are required to register for and pay U.S. income tax, sales tax and payroll tax so make sure you properly track activity throughout the year. Cyber security is another operational area to pay attention to, especially due to the recent increase in cyber security threats. Your U.S. systems and processes must be set up to protect your company from losses to the greatest extent possible.

Contact Us

If you need support managing your U.S. subsidiary, we can help. As a leader in global expansion consulting, we can add great value to your expansion planning process. Contact us today to learn more. We look forward to speaking with you soon.

Share This

Teresa Gordon

Shareholder, International

Teresa leads the firm's international group and supports global businesses through all phases of growth as they expand to and from the U.S.

Related Insights

Executive Guide to Global Expansion in the US for UK Businesses

The U.S. market can be an attractive expansion target for small to medium-sized enterprises headquartered in the U.K. U.S. market advantages such as a skilled workforce, a large and data-rich consumer base, and a thriving entrepreneurial and investment culture can lead to significant new profit potential. Before expanding to the U.S., it is important to consider the related tax, labor, legal, funding, entity structure, and timing implications outlined in this guide.

by Teresa Gordon

Important Filing Requirement for Foreign-Owned U.S. Companies

The last thing any business wants to receive is an audit notice from the Internal Revenue Service (IRS).  Your first reaction will naturally be panic or fear.  So, what protective measures can a business or business owner put in place?

by Nina Wang

2023 SelectUSA Investment Summit Highlights

I was excited to be back in Washington, D.C. for the 2023 SelectUSA Investment Summit earlier this month (May 1-4, 2023). My last time attending this informative and engaging international conference was in 2019 before the pandemic. It was great to connect with old friends and meet people from different countries all around the world.  

by Nina Wang

The Sound of Automation Podcast

Industrial automation businesses are the driving force behind Industry 4.0, and Clayton & McKervey is here to help.

Skip to content