A branch office is one of the manners in which a foreign company can extend its operations in another country. This business structure has a set of particularities that remain unchanged regardless of the jurisdiction chosen for incorporation. Understanding the advantages of opening a branch office, as well as its limitations, is important for business owners before they start the actual expansion process.
The advantages of the branch office
Companies that establish their branch in Singapore have access to a well developed market, a good business climate and the opportunity to access other surrounding markets from their base established in Singapore. Along with a low taxation regime, the process of opening a branch, in fact, the company incorporation process in general, is simplified in this jurisdiction.
Investors will find that opening a branch is a simple process, even in those locations where company formation is not as streamlined as in Singapore. This is because the branch generally has lower incorporation requirements compared to a registered company. The business will still need to be registered with the company register, however, the company will not need to draw up separate Articles of Incorporation. For branch registration, the Articles of the parent company will be provided.
When they set up a company in Germany, investors can also open a branch, especially if the main office of the parent company is located in another EU country. However, if they wish to maintain the autonomy of their company in another location, businesses can expand via a subsidiary rather than a branch.
The branch will engage in the same business activities as the parent company and will have the same business name.
Other particularities of the branch office
The branch has generally lower costs for incorporation and lower requirements for annual filing and reporting as well as auditing. Nevertheless, one characteristic is important for those companies that choose to expand in this manner: the parent company will be liable for the debts and obligations of its branch regardless of the jurisdiction in which it operates.
Although the branch is not a separate legal entity, it is a preferred manner in which businesses from certain business fields (for example banks) choose to expand to other markets.