Subsidiary or branch? Taking your GmbH to the US.

Anyone expanding into the US with an existing business has three routes: the GmbH itself does business there, or it forms an LLC or a corporation as a subsidiary. The choice determines liability, tax in both countries, filings — and how seriously US institutions take the venture.

In brief

A GmbH (German limited liability company) can do business in the US as a branch or form a subsidiary. The branch is legally the GmbH itself: it is fully liable and declares its US profits on Form 1120-F. An LLC as a subsidiary separates liability but, without an election under Form 8832, is transparent for tax purposes — profits from US business are then likewise attributed to the GmbH. A corporation as a subsidiary is a separate taxable entity (21% federal tax); on dividends to the GmbH, the double taxation agreement limits withholding tax to 5 per cent and, under certain conditions, eliminates it entirely.

The three routes compared

Simplified overview. Classification in Germany follows the comparison with German legal forms (Typenvergleich) and may differ from the US classification.

Legal status · Branch: the GmbH itself, registered in the state · LLC as a subsidiary: a separate company · Corporation as a subsidiary: a separate company
Liability · Branch: the GmbH is fully liable · LLC as a subsidiary: limited to the LLC · Corporation as a subsidiary: limited to the corporation
US tax · Branch: the GmbH with Form 1120-F · LLC as a subsidiary: without an election: at the GmbH (Form 1120-F); with an election: like a corporation · Corporation as a subsidiary: its own return, Form 1120, 21% federal
Profits sent back home · Branch: Branch Profits Tax, limited by the agreement · LLC as a subsidiary: depending on the election, like a branch or a corporation · Corporation as a subsidiary: withholding tax on dividends, limited by the agreement
Filing · Branch: BOI report as a foreign company · LLC as a subsidiary: Form 5472 with pro forma 1120 · Corporation as a subsidiary: Form 5472 as an attachment to Form 1120
With US institutions · Branch: account for a foreign company · LLC as a subsidiary: account for a US company · Corporation as a subsidiary: account for a US company, the standard for loans

The branch: fast, but without a liability shield

The GmbH registers in the state as a foreign company (“foreign qualification”) and does business there under its own name. This is quick to set up but draws everything into the GmbH: contracts, liability, litigation in the US. The GmbH files Form 1120-F every year — deadline 15 April with an office in the US, otherwise 15 June. On profits of the branch that do not remain in the US, the US levies the Branch Profits Tax of 30 per cent; the agreement limits it to 5 per cent and excludes it for certain companies (Article 10, paragraphs 9 and 10). And unlike a US company, the GmbH, as a foreign company registered in a state, remains obliged to file a BOI report with FinCEN.

The LLC as a subsidiary: separate liability, transparent tax

If the LLC belongs to the GmbH, liability is separated: creditors of the LLC do not reach through to the GmbH as long as the separation is genuinely maintained. For tax purposes, without an election the LLC is not a separate taxable entity in the US — its profits from US business are attributed to the GmbH, which then files Form 1120-F as if it had a branch. Form 5472 with a pro forma 1120 is also due every year. An LLC that is disregarded for tax purposes does not file its own Florida return. If it is owned by a corporation — a German GmbH, for instance — the owner files a Florida return (Form F-1120). With Form 8832, the LLC can elect to be treated as a corporation. In Germany, the classification is decided separately, by comparison with German legal forms (Typenvergleich); if the classification differs between the two countries, special rules apply. This question belongs before formation.

The corporation as a subsidiary: the standard for larger ventures

The corporation is a separate taxable entity: it pays 21% federal tax on its profit plus state tax and files Form 1120, with Form 5472 for the GmbH as its shareholder. US institutions and investors know this form best — for loans, leasing and larger facilities it is often the simplest route. If the corporation distributes profits to the GmbH, the agreement limits the US withholding tax: 5 per cent if the GmbH holds at least 10 per cent of the voting rights; no withholding tax if it has held at least 80 per cent of the voting rights for twelve months and meets the requirements of the anti-abuse clause (Article 10, paragraph 3, and Article 28). How the dividend is treated for tax purposes at the level of the GmbH in Germany is governed by section 8b of the German Corporate Income Tax Act (KStG) — the tax adviser clarifies the details.

Transfer prices: what flows between the GmbH and the subsidiary

If the GmbH supplies goods, software or services to the subsidiary, the prices must be set as unrelated third parties would agree them. Both countries check this — the US under its own rules, Germany under the arm’s length principle (section 1 of the German Foreign Tax Act, AStG); the protocol to the agreement refers to the OECD guidelines. The subsidiary also reports each of these payments on Form 5472. Documenting this from the start spares you disputes in two countries.

How the decision is made

1. What do you plan to do in the US?: Sales from Europe, a team of your own on site, a warehouse, projects, investors — the more takes place in the US, the more likely it is that a subsidiary of your own will pay off.
2. Who bears the risk?: Contracts and liability in the US belong in a separate company if they could endanger the GmbH.
3. Where do the profits flow?: If they stay in the US, the tax there counts; if they flow back, withholding tax and the agreement count.
4. Who do you want to bring on board later?: US investors and larger loans usually require a corporation.
5. Review in both countries: The tax adviser at home and the US CPA review the structure together before formation.

How FIAON Global builds your US structure

For a business, US formation is a structural decision, not a formality. FIAON Global therefore begins with the review: before formation, our partner tax adviser clarifies how the subsidiary is classified in Germany and which notifications are required; our US CPA looks at the US side. Only then does our team in Miami form the company — with formation documents by our partner lawyer, EIN, registered agent, address and phone number. After that, we prepare the subsidiary’s account and cards, maintain its compliance calendar and, with Global Capital, build up the history and the key-figures file that a US bank wants to see for a loan. The capital is not tied to the US: your company can transfer funds to Europe or invest them in Europe — within the terms of the institution concerned. Our partner tax adviser clarifies with you in advance how transfers and investments are treated for tax purposes.

The package for businesses

Formation, review in both countries, account, card ladder and the documents for a bank loan — Global Capital.

What you need to know

A US company that is managed from Germany, Austria or Switzerland remains taxable there; its formation must be reported to the tax office (in Germany under section 138 of the German Fiscal Code, AO).
A subsidiary is only as strong as its separation from the GmbH: its own accounts, its own contracts, its own bookkeeping.
US business credit cards generally require a personal guarantee from the owner. The institution alone decides on the account, the card and the limit.

Frequently asked questions

Should my GmbH form an LLC or a corporation in the US?

For sales and smaller ventures, the LLC is often sufficient: it separates liability but, without an election, is transparent for tax purposes. For investors, larger loans and profits that are meant to stay in the US, the corporation is usually the clearer form. The decision belongs before formation — reviewed by the tax adviser and the US CPA.

What is the difference between a subsidiary and a branch in the US?

The branch is the GmbH itself, doing business in the US — it is fully liable. The subsidiary is a separate US company with its own liability, its own tax and its own filings.

What is the US withholding tax on dividends to a GmbH?

Under the agreement, 5 per cent if the GmbH holds at least 10 per cent of the voting rights, otherwise 15 per cent. If it has held at least 80 per cent for twelve months and meets the conditions of the anti-abuse clause, no withholding tax is due.

Does a branch in the US have to file a BOI report?

Yes. Since August 2026, only companies formed in the US are exempt; a GmbH that registers in a state remains obliged to report as a foreign company.

Do I have to report a US subsidiary to the German tax office?

Yes. The formation or acquisition of an interest in a foreign company must be notified in Germany under section 138 of the German Fiscal Code (AO) — together with the tax return.

Read on

The subsidiary in the US. For companies with real US business. – US subsidiary for SMEs: formation, EIN, account, compliance calendar in one place. With a partner tax adviser, lawyer and team on the ground. Fixed price.
LLC or corporation? The choice that shapes everything else. – LLC or C corporation: liability, taxation, investors, formalities and costs compared — and when each legal form suits your plans.
Your LLC’s US tax return. Which forms, which deadlines. – Pro forma 1120, 1040-NR, 1065, 1120-F, FBAR: which US returns your LLC must file, by structure — with deadlines and the double taxation agreement.
From Germany to the US. With everything the tax office needs to know. – A US LLC or corporation from Germany: tax at the place of management, the section 138 AO notification, how the LLC is classified — explained honestly.