The Corporation.
Historically, most non-U.S. companies set up Delaware corporations as their subsidiaries. There is a trend to forming limited liability companies as U.S. subsidiaries. The reason for this is that a corporation has a number of formalities to maintain in order for the corporate form to be respected; namely, regular board meetings that are documented with board minutes, an annual shareholders meeting (even though the subsidiary will have just one shareholder), a board of directors that approves extraordinary transactions, maintenance of a minute book, a set of bylaws governing the internal operation of the corporation, etc. A limited liability company does not have these requirements. Thus, a LLC has the benefit of what is referred to as "relaxed corporate formalities" yet still provides the same level of limited liability protection as a corporation.
However, the corporation is a very regular, usual entity, and many customers particularly internationally, are used to dealing with U.S. corporations, and so many subsidiaries of foreign companies still use the corporate form. The corporate form has a board of directors and a president, secretary, and treasurer (or some use a Chief Financial Officer), and this management structure is very regular, and thus many feel comfortable operating a corporation.
Forming a corporation in Delaware, adopting bylaws, appointing a board of directors and officers, and issuing stock to the parent corporation so that the subsidiary is owned by the parent corporation involves legal fees of approximately $2,000-$2,500, plus there are about $500 of costs for an incorporation fee to the state of Delaware and paying the first year fees of an agent in Delaware to be the agent for receiving legal notices (called the "agent for service of process"). These costs are slightly higher than the LLC formation costs in Delaware, but not significantly so. If a corporate structure is desired for an LLC so that the LLC has a board of directors, officers, regular meetings, etc., then the cost of the LLC will be higher because the corporate elements have to be drafted into to an LLC operating agreement (the governing document for an LLC).
However, the corporation is a very regular, usual entity, and many customers particularly internationally, are used to dealing with U.S. corporations, and so many subsidiaries of foreign companies still use the corporate form. The corporate form has a board of directors and a president, secretary, and treasurer (or some use a Chief Financial Officer), and this management structure is very regular, and thus many feel comfortable operating a corporation.
Forming a corporation in Delaware, adopting bylaws, appointing a board of directors and officers, and issuing stock to the parent corporation so that the subsidiary is owned by the parent corporation involves legal fees of approximately $2,000-$2,500, plus there are about $500 of costs for an incorporation fee to the state of Delaware and paying the first year fees of an agent in Delaware to be the agent for receiving legal notices (called the "agent for service of process"). These costs are slightly higher than the LLC formation costs in Delaware, but not significantly so. If a corporate structure is desired for an LLC so that the LLC has a board of directors, officers, regular meetings, etc., then the cost of the LLC will be higher because the corporate elements have to be drafted into to an LLC operating agreement (the governing document for an LLC).
