What are the differences between Foreign Subsidiary, Branch, Representative Office and which legal form of business running to choose?
Representative office is a business unit of a foreign legal company which located away from its principal place of business and representing its interests. The representative office is controlled by the parent organisation. Cannot import and sale. Representative office is easier from the view of currency control, migration laws and easy way to entry the market with no sale function. The cost of the representative office registration is higher than the LLC registration due to state duties. BUT: If you plan to hire only one Russian citizen then there are more suitable structures to achieving the same result at a much lower cost and overhead basis. Find an information below.
Branch is a subdivision of a foreign company which performs all functions, including receiving income from commercial activity. Branches can only provide services - not import and sale products. That is why for importers it is better to open a LLC. The branch is controlled by the foreign enterprise. You need to find out if your clients are ready to work with this legal format. Some aspects of obtaining a visa are easier. You should understand that buyers of products and services will sign a contract with the parent company. Thus, for warranties and contracts, all the contracts will be cross-border and affected by the host country’s laws. Russian buyers might want more clarity and work only according to Russian law, buy in Russia, under the standard Russian contract, and have delivery according to Russian rules.
Subsidiary (LLC) is an independent legal entity that owns separate assets and is fully liable for the debts of its property. Its operations are designed to receive profit. Shareholders control the subsidiary. General Director is the head of the company. Risk is enclosed in the LLC. Subsidiary is standard format to have a functioning business in Russia. The company can perform all aspects of business. If the license and certificates are needed to run the business, then LLC most of the time is the only organisation form that suitable to get those documents. The rights of the General Director cannot be limited.