Family Businesses with a US Subsidiary
The firm forms the US subsidiaries of Western European family companies, acts as their outside counsel, and plans the succession of the family’s shares on both sides of the Atlantic. The corporate work is done in-house.
Law stated as of October 2026
What the firm does for the company and the family
- Choice of entity and state
Corporation or limited liability company, the state of formation, and the classification for US tax.
- Formation
Articles, bylaws or operating agreement, the employer identification number, bank accounts and registrations.
- Outside counsel
Contracts with US customers and suppliers, employment, real estate leases, board and shareholder resolutions.
- Tax and reporting
Federal returns, Form 5472 on transactions with the foreign parent, and withholding on payments abroad.
- Succession
The family’s shares in the European company and in the US subsidiary, heirs in the United States, and US estate tax on US-situs shares.
Questions of the law of the parent company’s country stay with the lawyers, notaries and tax advisers the company and the family already work with there; the firm coordinates its work with theirs.
The choice of entity for a foreign parent
The comparison assumes a European parent company that owns the US entity outright.
| Corporation | Limited liability company | |
|---|---|---|
| US federal income tax | Corporate income tax on the subsidiary’s profits | Disregarded by default; the parent is taxed on its effectively connected income and files a US return |
| Profits sent to the parent | Dividends, with withholding at 30 percent or the treaty rate | The branch profits tax may apply to the parent |
| Reporting | Form 1120 and Form 5472 | Form 5472 with a pro forma Form 1120 |
| Classification | Fixed as a corporation | May elect to be taxed as a corporation on Form 8832 |
| Estate tax on the shares | US-situs property if held directly by an individual | Treatment of the membership interest not settled |
Topics for family companies
Forming the US subsidiary
Entity, state, capitalization and the first year of reporting.
Outside counsel in the United States
The contracts, resolutions and filings a subsidiary needs each year.
Succession across the Atlantic
Passing shares in the family company when heirs live in two countries.
Successors in the United States
A child who runs the US business, or who lives in the United States and inherits shares.
Holding and blocker structures
Holding US investments through a foreign or a US holding company.
Family governance
Shareholder agreements, family charters and preparing the next generation.
The same material in German, with a section for Unternehmerfamilien, is on Vermoegen-USA.com.
Vermoegen-USA.comFrench-speaking family groups and investors find the material in French on patrimoine-americain.com.
patrimoine-americain.comMaterial for family businesses
Plans, timing and the people involved
Where the parent is, what the US business will do, when it should start and who in the family is involved. The firm replies with a plan for the formation and how it would charge for the work.
