Where Should I Incorporate My U.S. Subsidiary?(どこに米国子会社を設立すべきか?)



Hi.  This is John Sasaki again.

Here is another photo of my dog, Ichigo.  She is ready for the holidays!







Today I want to return to the theme of U.S. subsidiaries.  A few weeks ago, I posted an article about the differences between the incorporation process in the U.S. vs. Japan.

This time, let’s discuss where you should incorporate your U.S. subsidiary, assuming you already have a Japanese corporation.  You may recall that corporations are governed state-by-state in the U.S., so you need to choose the state where you will incorporate your U.S. subsidiary (which is the state where you file your articles of incorporation).  And then your U.S. subsidiary will be subject to the laws of that state.

So, how do you decide where to incorporate?


1. What is the selection criteria?

There are basically 2 main selection criteria: (1) the purpose of the subsidiary; and (2) the physical location of the subsidiary’s activities.

Regarding the purpose, there are two basic possible responses: (i) you want to operate the U.S. entity as a subsidiary; or (ii) you want to operate the U.S. entity as an independent entity, with the ultimate goal of an IPO.

Regarding the physical location, you have to ask yourself the following questions.  Where do you want your office to be located?  Where will you hire employees?  Where will your important customers be located?

If your objective is to operate your U.S. entity as a subsidiary to the Japanese parent corporation, then the physical location will most likely determine where you incorporate.  On the other hand, if you want to operate your U.S. entity as an independent entity, then you may wish to consider a state that might make it easier for your U.S. entity to complete an IPO.

So, let me go out on a limb and guess that most of you will choose to operate your U.S. entity as a subsidiary.  In that case, where will your business be located?  If you want to have your headquarters in Silicon Valley, for example, because that is where you can hire the best people and that is where your potential business partners are located, then you should probably incorporate your subsidiary in California.

2. So why are so many companies in Silicon Valley incorporated in Delaware?

If you are a Silicon Valley entrepreneur, your goal is not to operate as a U.S. subsidiary of a Japanese parent.  You want to incorporate an entity to raise financing from VCs for an ultimate IPO.  In that case, incorporating in Delaware might make sense.  Why?  Mainly because underwriters and lawyers like Delaware companies.  Why?  There are two main reasons.

(1) Delaware corporate law is well developed. This means that there are fewer legal uncertainties under Delaware law than in other states.  This tends to mean fewer disputes between management and the stockholders, which makes the underwriters and the lawyers happy, especially if the company is public and has a lot of stockholders.

(2) Generally speaking, Delaware provides for relatively strong management rights (as opposed to states that provide for strong stockholder rights). This is also important for public companies with a lot of stockholders.  If stockholder consent is required for numerous matters, or board decisions are constantly subject to challenge by the stockholders, the company would have a difficult time functioning as a public company.

So, many Silicon Valley start-up companies are incorporated in Delaware.

3. Why wouldn’t I choose Delaware for the same reasons?

If you incorporate your U.S. entity in Delaware, as mentioned above, you will be subject to Delaware corporate law.  But, then if you locate the headquarters of your U.S. entity in California, you will also be subject to California law.  And you will be liable to pay state taxes in both states.

If your goal is to raise financing from outside investors and to take the company public, it may be worth it to pay taxes in two states and be subject to the laws of two states.  But, if you don’t plan to raise outside financing or to take the company public, there’s no reason to pay taxes in two states or to subject your company to the laws of two states.

And, even if you change the purpose of the U.S. entity and decide to make it an independent entity in the future, you can convert your California corporation into a Delaware corporation before the IPO.  It’s not simple, but it can be done.  And it’s not so uncommon.  Some Silicon Valley companies have taken the same course of action.

4. What about Nevada?

Nevada and some other states have become popular because they do not impose a state tax.  But, if you incorporate your subsidiary in Nevada and then locate your headquarters in California, you will be subject to both Nevada and California laws.  And you will have to pay tax in California, even if you don’t have to pay tax in Nevada.

On the other hand, if your U.S. business will not require a physical presence in the U.S., then Nevada (or another state with no state taxes) may make sense.


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So, for most of you, incorporate your subsidiary in the state where you will physically locate your headquarters.

If you have any questions, please feel free to contact me at

Happy Holidays!
















1. 選択基準は何か?








あなたがシリコンバレーの起業家なら、日本の親会社の米国子会社として運営するのが目的ではないでしょう。VCからファイナンスを受けて、最終的にIPOを目指したいはずです。その場合、デラウェア州で設立するのが理にかなっています。なぜか? 証券会社や弁護士がデラウェア州の会社を好むことが主な理由です。どうして好まれるのか? 主に二つの理由からです。

(1) デラウェア州の会社法はよくできています。つまり他州よりもデラウェア州の法律は法的な不確定要素が少ないのです。これは、経営陣と株主の間での紛争が生じにくいことにもつながり、会社が公開していたり多数の株主がいたりする場合は特に、証券会社や弁護士には喜ばしいことです。

(2)  一般的に言って、デラウェア州は(強い株主側の権利を定める州とは反対に)比較的強い経営側の権利を定めています。この点も、多数の株主がいる公開会社には重要です。非常に多くの事項について株主の同意が必要だったり、取締役会の決定が常に株主からの異議にさらされたりするようでは、公開会社として機能することに支障を生じてしまいます。












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【参考和文作成:弁護士 林 賢治】


AZX Professionals Group
AZX Professionals Group
弁護士 パートナー
高橋 知洋
Takahashi, Tomohiro
AZX Professionals Group
弁護士 パートナー
雨宮 美季
Amemiya, Miki