French subsidiary or branch: which to choose for a US LLC

Quick answer. A subsidiary is a French company (SAS or SARL) with its own legal personality, which shields the US LLC behind limited liability. A branch is a mere extension of the LLC, with no separate legal personality: commitments made in France flow straight back to the parent. Both pay French corporate income tax on their French-source result.

A US group that wants to sell, hire or sign in France almost always asks the same thing: should it set up a French subsidiary or open a branch of the existing LLC? The difference looks technical, but it decides who answers for the debts, how the bank will view you, and how readable your structure is for your French clients.

This article settles that choice from the angle of a US LLC. We compare liability, taxation, VAT, cost and image, then point out which option suits which situation. The goal is to give you a clear decision grid before you start the formalities.

It all starts with a simple legal point. The subsidiary is a fully fledged French company, registered, with its own legal personality and its own assets. The branch has no legal personality separate from the LLC: it has no separate assets and its commitments are those of the US parent.

This distinction is not just a lawyer's subtlety. It governs liability. With a subsidiary, a French dispute remains in principle confined to the subsidiary's assets. With a branch, the French creditor can in principle pursue the LLC directly, because the branch is only its extension in France.

Our reading. For a US LLC that wants a lasting presence in France, the subsidiary is almost always the clearest route. It draws a firm line between the French activity and the parent, which protects the group and reassures third parties. The branch keeps an appeal for a limited operating presence or a test phase, when setting up a company looks premature.

This grid sums up the trade-off. The subsidiary isolates the risk and clarifies the structure; the branch is more direct to open but exposes the parent more and sometimes complicates the relationship with French banks and clients.

A common belief holds that the branch escapes French tax. That is wrong. France taxes profits made in businesses operated in France. A branch that constitutes a permanent establishment is therefore subject to corporate income tax in France on its French-source result, just as a subsidiary is on its entire result.

The standard corporate tax rate is 25%. A reduced rate of 15% exists on the portion of profit up to or equal to 42,500 euros, but it is conditional (French Tax Code art. 219, I-b): it targets SMEs whose pre-tax turnover is below 10 million euros and whose capital, fully paid up, is held to at least 75% by individuals.

The underestimated risk. Many founders build the 15% rate into their forecast without checking the ownership chain. A subsidiary held by an LLC, which is a legal person, does not in principle meet the condition of 75% ownership by individuals. The consequence is direct: the profit is in principle taxed at the standard rate of 25%. Build your forecast on 25% and treat any reduced rate as a possibility to confirm, never as a given.

VAT is one of the topics where confusion costs the most time. The two structures must be distinguished.

The French subsidiary is a French company: it registers for VAT directly, obtains an intra-EU number, and invoices, collects and deducts VAT under ordinary rules, with no tax representative. The basic exemption remains possible within the applicable thresholds: 37,500 euros for services and 85,000 euros for goods, the single 25,000-euro threshold having been dropped by Law no. 2025-1044 of 3 November 2025.

For the branch, or for an LLC operating directly without a registered presence, the tax representative question deserves close attention. A company established outside the European Union that carries out taxable operations in France must in principle appoint a tax representative (French Tax Code art. 289 A). A point often misunderstood: the existence of a tax treaty between France and the United States does not exempt a company from this obligation when it is liable for VAT in France. The VAT position of a duly registered branch is assessed case by case; we detail this mechanism in our article on the tax representative of a foreign company.

Trade-off. The branch may look faster to open, but it often leaves open the question of the tax representative and the accounting boundary with the LLC. The subsidiary adds a structure and a set of accounts, but it durably simplifies the VAT chain and the relationship with French clients. The right choice depends on the volume of activity planned in France and on how lasting it is.

The subsidiary keeps a single set of official accounts, under the general accounting plan (ANC regulation 2014-03), and prepares its annual accounts and French tax return package. The consolidation reporting to the US parent, usually under US GAAP, is a management adjustment built from those French accounts, not a second set of official books. We detail this aspect in our article on the accounting, VAT and corporate tax of the French subsidiary of a US LLC.

The branch must also keep French accounts for its activity in France and file certain documents, while remaining attached to the LLC's accounts. The boundary between what belongs to the branch and what belongs to the parent is precisely the point that requires the most rigour at year-end.

On the formalities side, both options go through the single business formalities portal. The single business formalities portal, operated by the INPI, has been mandatory for all formalities of creation, modification and cessation since 1 January 2023. The continuity procedure, that is, the backup solution via Infogreffe, ended on 31 December 2024: since then, the single portal is the only filing channel. Setting up a subsidiary requires articles of association, capital and registration; opening a branch requires registering the establishment of the foreign company with the trade and companies register, without creating a new company.

Whatever form is chosen, a taxable business established in France falls within the scope of the electronic invoicing reform. The receipt of electronic invoices becomes mandatory for all taxable businesses from 1 September 2026. For issuance, the timetable is staggered: 1 September 2026 for large enterprises and mid-sized companies, 1 September 2027 for SMEs, very small businesses and micro-businesses.

Watch points 2026. A foreign group structure is sometimes tied to a US invoicing tool that does not handle the formats and transmission expected in France. Check early whether your invoicing chain is compatible, because rebuilding a compliant circuit can take several weeks of configuration.

The subsidiary pays dividends after corporate tax. These payments fall under the withholding tax applicable to non-residents: the domestic rate is 30% for a company, reduced by the tax treaty between France and the United States (15% in principle, 5% if the LLC holds at least 10% of the capital, 0% if it holds at least 80% of the voting rights for 12 months). Applying the treaty requires gathering specific supporting documents.

The branch, having no separate legal personality, does not pay dividends in the strict sense: its French-source result is attached to the LLC after taxation in France. The treatment of the flows and their interaction with the tax treaty must be framed upstream, because the US tax characterization of the LLC affects the fate of these results.

We supported a Delaware LLC that hesitated between opening a branch to move fast and setting up a subsidiary to structure its arrival in France. The project involved hiring and framework contracts with French clients. The branch exposed the US parent to commitments made in France and complicated the opening of the business bank account. Moving to an SAS subsidiary clarified liability, VAT registration and the banking relationship, without making day-to-day management heavier.

1. Frame the French project: length of presence, clients, employees, forecast volume.
2. Assess the acceptable exposure of the parent LLC to commitments made in France.
3. Compare subsidiary and branch on liability, VAT and banking image.
4. Choose the form (SAS or SARL subsidiary, or branch) and set the capital if a subsidiary.
5. Complete the formalities on the single portal and obtain registration with the trade register.
6. Set up the accounting under the general accounting plan and the chart of accounts.
7. Register the structure for VAT and settle the need for a tax representative.
8. Configure the invoicing chain for the 2026 reform and anticipate the result going up.

• Acceptable exposure of the parent LLC to French debts settled.
• Length and intensity of the French presence estimated.
• VAT consequences and any need for a tax representative assessed.
• Forecast built on a 25% corporate tax rate as a precaution.
• Expected image with French banks and clients taken into account.
• Invoicing chain checked against the 2026 reform.
• Strategy for sending the result up to the LLC anticipated.

• The subsidiary is a French company with legal personality; the branch is an extension of the LLC, with no separate legal personality.
• Liability is in principle confined to the subsidiary, whereas a branch exposes the US parent.
• Both structures pay corporate tax in France on their French-source result; the standard rate is 25% and the reduced 15% rate is often out of reach when ownership runs through a legal person.
• The subsidiary registers for VAT on its own; the tax representative and the accounting boundary with the LLC are the sensitive points of the branch.
• Formalities go through the single business formalities portal, mandatory since 1 January 2023, the Infogreffe continuity procedure having ended on 31 December 2024.

To go further, you can read our analysis comparing subsidiary, branch or liaison office, our file on the LLC, C-corp or subsidiary trade-off, our company creation in Paris service and our page dedicated to company creation for US entrepreneurs.