Establishment (branch) vs LTD company start-up in the Great Britain: expanding your business into the United Kingdom is obviously a desirable move for many firms looking to deal with British or Europe-based clients or trading partners, and there are two main ways of doing this. You can either register the establishment, which will effectively act as your a branch for your main business, or you can register a subsidiary company, which will be a separate entity to your main activity.
There are advantages and disadvantages to both options, but to be really sure you're making the right choice, why not give us at Coddan a call and benefit from our vast knowledge and understanding of limited company registration. We've been in the business for several years and know how to make the relevant application process as efficient as possible.
A UK establishment cannot do business by itself. It can only represent the interests of its parent company, who will be liable for it if it fails. Because of this, it comes under less legal scrutiny, there's less administrative work to be done and it will only be subject to corporation tax if it is recognised as a permanent private company. Even then it will only be taxed on trade that has been carried out in the United Kingdom.
Separate accounts do not need to be filed for the establishment, but the parent firm will probably have to file theirs. Their accounts should be filed according to parent accounting law, or international accounting standards (IAS). On the down side, given that the corporate structure may be unfamiliar to other businesses and it may be harder to assess its creditworthiness, customers may be more wary of trading with the establishment, than they would be of trading with a subsidiary.
The subsidiary company is a more recognisable and permanent structure. It can do business by itself, file its own accounts and limit the risk for the parent company, given that a subsidiary can be ring-fenced and liability contained within it. If it fails or incurs debt, the parent company won't be drawn into it. It will only be liable for any share capital that remains unpaid.
It will be subject to corporation tax on global profits, but it is likely to attract more trade from UK and European-based businesses given its transparent compliance with English law and more structured permanence. Unlike with the establishment, any losses of an subsidiary cannot be set off against the other profits of the overseas company.