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Branch offices A branch is a unit of a parent company that is in a foreign market or otherwise separate location with the aim of doing business. A branch is not a separate entity in a legal or functional sense - it is established as an extension of the parent company, which is responsible for its liabilities and taxes. Branch office activities As branch offices are extensions of the parent company, they can be used to perform all of the same activities, including but not limited to: Selling goods and services Manufacturing products Storing products Collecting data Performing market research Launching advertising campaigns In other words, a branch office acts as an agent of the parent company although physically separate from the main office. This aspect of physical presence in a foreign or otherwise remote market is the main benefit of a branch office. It provides a tangible presence and also acts as a base or hub in the parent company’s logistics network. Another major role of a branch office is to serve as a contact point for customers. In addition to selling a product or service, a branch office, depending on what the company produces, can be used to perform repairs, store goods for on-the-spot transactions (i.e. act as a retail store) and generally serve as a customer support centre. Furthermore, a branch office is an important element in a company’s market research and business expansion strategy. A branch office may hire local residents to gain insight into the culture and environment of a foreign market, as well as to draw on knowledge of the market itself. The parent company’s home office cannot do this, and would require mediators or consultation with experts on the foreign market. Depending on its distance from the home office, a branch may also be advantageous when reacting to certain business-related events, as it is likely to receive information sooner. Advantages of a branch office A branch office has several advantages over other forms of company representation in a foreign market: Scope of activities A branch office can perform all of the same activities as the home office, while offering better access to local resources and information. Local presence A branch office is able to access local suppliers and clients without the need to set up a delivery and supply network, increasing the overall effectiveness of the company’s services as well as negating the effect of the distance between the foreign market and the home office, which can discourage potential partners. Service adjustability As a branch office is a separate structure, its activities can be adjusted to the needs of a foreign market without overhauling the structure of the whole company — location-specific products, service types, etc. can be assigned to the branch to manage, rather than the home office. Disadvantages of a branch office A branch office also has certain disadvantages: Incorporation requirements As a branch office is an extension of the parent company, with an equal scope of activity, most jurisdictions impose stricter regulations on the registration and management of branches. Legal status A branch office is not a separate entity in a legal sense, which is why liabilities and tax burdens remain the responsibility of the parent company; if a branch office fails, the parent company will need to cover all the related expenses (this may vary depending on the jurisdiction). Incorporation costs As branch offices are usually incorporated as fully fledged extensions of the parent company (otherwise their original purpose would be lost), they require more resources and a well-established network of connections to the home office to ensure that they are able to function properly. If you would like to find out if a branch office is a suitable choice for expanding your business, please do not hesitate to contact us. http://www.confiduss.com/en/services/incorporation/structure/branch-office/
