From the onset, business owners and entrepreneurs are faced with a host of pressing decisions that come with a wide variety of potential tax implications. In the midst of considering their products and services, finding locations and personnel, and securing funding and purchasing equipment, business leaders must decide upon the type of business structure that best suits their entity. This decision has a cascade of consequences.
The phrase “legal entity” and “subsidiary management” conjures many questions – even to general counsels who are have been working in entity management for some time. It feels like the embodiment of legalese – somehow both vague and specific, with multiple meanings and no meaning at all. Overall business structure can affect how you manage each of the entities in your control. The important takeaway is that any kind of company that has tax filings is a legal entity. This is an oversimplification in some ways, but finding a common thread will aid in the understanding of what a legal entity is.
One of the unique challenges in running a global business is that different districts, regions or countries can provide different benefits to a corporation. There are a host of reasons why companies might want to set up a headquarters or a subsidiary in one country over another such as taking advantage of low corporate tax rates to stable, pro-business economies centered in geographically advantageous locations. But with these benefits come a number of regulations and stipulations that one must navigate in order to keep your company compliant with local governance.