Can a U.S. subsidiary later become the parent through a Delaware flip?

Yes, but it is a separate restructuring. The shareholders of the Korean company exchange their shares for shares of a U.S. parent, and the Korean tax consequences depend on valuation at that time. If a flip is likely within a year or two, tell your counsel when setting up the subsidiary.

How long does it take a Korean startup to set up a U.S. subsidiary?

The Delaware filing takes days. End to end, including the EIN for a non-resident responsible party, the bank account, and Korean overseas direct investment reporting, usually four to eight weeks.

How much does it cost to set up a U.S. subsidiary?

Government and third-party costs include the Delaware filing fee, the registered agent's annual fee, and annual franchise tax. BNL Law handles U.S. subsidiary formation for a flat legal fee of $1,500.

U.S. Subsidiary for Korean Startups: Setup Guide 2026

Legal Guide · Formation & Management · For Korean and other international founders

You have a working company in Korea, U.S. customers are starting to ask for a U.S. contracting entity, and someone told you to “just open a U.S. subsidiary.” This guide walks through exactly what that means, when a subsidiary is the right structure (and when it is not), the steps on both the U.S. and Korean side, and what it costs.

TL;DR: A U.S. subsidiary is a U.S. company (usually a Delaware C-Corp) owned by your Korean company. It is the right structure when you want to sell, hire, or operate in the U.S. while keeping your Korean company on top. If your goal is to raise from U.S. venture investors, you will usually need a Delaware flip instead. Incorporation itself takes days; the EIN, bank account, and Korean overseas-investment reporting are what take weeks. BNL sets up U.S. subsidiaries for a flat fee of $1,500.

What is a U.S. subsidiary, exactly?

A U.S. subsidiary is a separate legal entity formed under the law of a U.S. state and owned — wholly or in majority — by your existing Korean company (the “parent”). The parent holds the shares; the subsidiary signs U.S. contracts, hires U.S. employees, opens U.S. bank accounts, and files U.S. tax returns in its own name.

Because it is a separate entity, the subsidiary’s liabilities generally stay with the subsidiary, and your Korean company’s ownership structure, investors, and IP stay exactly where they are. That is the key difference from a flip, where the ownership is inverted and a U.S. company becomes the parent.

Subsidiary vs. Delaware flip vs. branch: which one do you need?

This is the decision most Korean founders get wrong, usually because they answer it before asking who will fund the company next.

Structure	Who is on top	Best for	Watch out for
U.S. subsidiary	Korean company	Selling, hiring, and operating in the U.S.; keeping Korean investors and grants intact	U.S. VCs generally will not invest into a subsidiary of a foreign parent
Delaware flip	New U.S. company	Raising from U.S. venture investors; U.S.-centric growth	Home-country tax on the share exchange; heavier restructuring
Branch / registration only	Korean company itself	Very light presence with no separate entity	No liability shield; the Korean company is directly exposed to U.S. tax and lawsuits

Rule of thumb: if the next 18 months are about U.S. revenue and a U.S. team, a subsidiary is usually enough. If the next 18 months are about a U.S. seed or Series A, start planning a flip — and read What Is a “Delaware Flip”? first. Some companies do both in sequence: subsidiary now, flip later, once the U.S. business proves itself.

Step 1 — Choose the entity type: C-Corp or LLC?

For a subsidiary of a Korean corporation, a C-Corporation is the default choice. It is taxed as its own entity, which keeps U.S. tax filings at the subsidiary level and away from the Korean parent, and it is the structure U.S. customers, landlords, and future investors expect to see.

An LLC is popular with U.S. founders because of pass-through taxation, but for a foreign parent that same pass-through can pull the Korean company directly into U.S. tax filing obligations. Unless your tax advisors have a specific reason to prefer an LLC, most Korean parents end up with a C-Corp.

Step 2 — Choose the state: Delaware, then qualify where you operate

Delaware remains the standard state of incorporation because of its predictable corporate law and court system. But incorporating in Delaware does not mean you can ignore the state where your people actually work. If your U.S. team sits in California, the Delaware subsidiary also registers in California as a “foreign corporation” (foreign qualification) and pays California taxes and fees.

If the subsidiary will only ever operate in one state and never raise outside capital, incorporating directly in that state can be simpler. This is a judgment call worth ten minutes with counsel before you file anything.

Step 3 — Incorporate: the U.S.-side checklist

Name check and registered agent. Confirm the name is available and appoint a registered agent with a physical address in the state of incorporation.
Certificate of incorporation. File with the Delaware Division of Corporations. Authorized shares are typically set at a round number with a low par value; the Korean parent is issued all (or the agreed majority of) the shares.
Organizational documents. Bylaws, the incorporator’s action appointing the board, and board consents electing officers, approving the share issuance to the parent, and authorizing a bank account. Directors and officers can be Korean residents; there is no U.S. residency requirement for a Delaware corporation.
Share issuance and ledger. Issue the shares to the parent and record them in the stock ledger. Keep this clean — it is the first thing a buyer, investor, or auditor asks for later.
EIN (Employer Identification Number). Apply to the IRS on Form SS-4. A subsidiary whose responsible party has no U.S. Social Security Number cannot use the online application and applies by fax or mail, which can take several weeks — start early.
Foreign qualification. Register in the state(s) where you have employees or an office.
Bank account. Most U.S. banks and fintech platforms will open an account for a foreign-owned subsidiary once the EIN and formation documents are in hand; requirements for an in-person visit or a U.S.-resident signer vary by bank.

Step 4 — The Korean side: overseas direct investment reporting

This is the step Korean founders most often skip, and it matters. When a Korean company acquires shares in a foreign company — including a newly formed U.S. subsidiary — it is generally treated as an overseas direct investment (해외직접투자) under Korea’s Foreign Exchange Transactions Act. The Korean parent files an overseas direct investment report with its designated foreign exchange bank before remitting the capital, and files follow-up reports afterward (for example, evidence of the investment and periodic business reports, depending on the amount invested).

Filing is not difficult, but the sequence is: report first, remit second. Sending the capital contribution before the report is filed is the classic mistake, and it creates a foreign exchange compliance problem that surfaces later in due diligence. Coordinate this with your Korean accountant and the bank while the U.S. formation is in progress.

Step 5 — Set up the relationship between parent and subsidiary

A subsidiary is only useful if the paperwork between the two companies reflects how they actually work together. At a minimum:

Intercompany services or distribution agreement — who sells what to whom, at what price, and who owns the customer contract.
IP license — if the Korean parent owns the product IP, the subsidiary needs a license to use it in the U.S. (or the parties decide to move certain IP).
Transfer pricing — payments between the two companies must be at arm’s length. U.S. and Korean tax authorities both look at this.
Employment and contractor documents — U.S. hires sign U.S. offer letters and invention assignment agreements with the subsidiary, not the Korean parent.

Step 6 — Ongoing compliance you should calendar now

Delaware annual report and franchise tax — due each year; the minimum is modest for a small subsidiary, but the calculation method matters if you authorized many shares.
Federal corporate income tax return (Form 1120) — and, because the subsidiary is 25%-or-more foreign-owned, the related-party information return (Form 5472) reporting transactions with the Korean parent. Penalties for missing Form 5472 are steep.
State filings — income or franchise tax and annual statements in each state where you are qualified.
Payroll, sales tax, and privacy — triggered as soon as you hire, sell taxable goods or services, or collect personal data from U.S. users.
Korean follow-up reporting — the post-investment reports to your foreign exchange bank described above.

How long does it take, and what does it cost?

Timeline. The Delaware filing itself can be completed in a matter of days. The realistic end-to-end timeline — formation, EIN for a non-resident responsible party, bank account, and Korean overseas investment reporting — is usually four to eight weeks, driven mostly by the EIN and the bank.

Cost. Government and third-party costs include the Delaware filing fee, the registered agent’s annual fee, and the annual franchise tax. Legal fees vary widely; BNL handles U.S. subsidiary formation for a flat fee of $1,500, with add-ons such as ESOP documents if the subsidiary will grant equity to U.S. hires. Korean-side reporting is typically handled with your Korean accountant.

Common mistakes Korean startups make with a U.S. subsidiary

Forming a subsidiary when a flip was needed. Then discovering, at term sheet stage, that the U.S. investor will not invest into it — and unwinding.
Wiring capital before the Korean overseas investment report. Report first, remit second.
Letting the parent sign U.S. customer contracts. If the subsidiary exists, use it — otherwise you lose the liability shield you formed it for.
Ignoring Form 5472. A foreign-owned U.S. corporation that skips this filing faces significant penalties even if it owes no tax.
Using Korean-law templates for U.S. hires. U.S. employment and IP assignment documents should be on U.S. forms from day one.

Frequently asked questions

Can a Korean company own 100% of a U.S. corporation?

Yes. There is no general restriction on foreign ownership of a Delaware corporation, and a Korean company can be the sole shareholder. Certain regulated industries and transactions may involve additional U.S. review (for example, CFIUS for sensitive sectors), which is the exception rather than the rule for a typical software or consumer startup.

Do I need a U.S. address or a U.S.-resident director?

Delaware requires a registered agent with a Delaware address, which a service provider supplies. Directors and officers do not need to be U.S. residents. Some banks, however, prefer a U.S.-resident signer, so plan the bank account around who will be available.

Can the subsidiary later become the parent (a flip)?

Yes, but it is a separate restructuring, not a switch. The shareholders of the Korean company exchange their shares for shares of a U.S. parent, and the tax consequences in Korea depend on valuation at that time. If a flip is likely within a year or two, tell your counsel now — it changes how the subsidiary should be set up.

Does the subsidiary need its own privacy policy and terms of service?

If the subsidiary is the entity contracting with U.S. customers or collecting data from U.S. users, yes — its customer-facing documents should be in its name and drafted for U.S. law (including state privacy statutes such as the CCPA). BNL’s B2B package covers Terms of Service, Privacy Policy, MSA, and DPA as a bundle.

Set up your U.S. subsidiary with a dual-licensed attorney

BNL Law is led by an attorney licensed in both California and Korea, which means the U.S. formation and the Korean foreign-exchange reporting are planned together rather than in two disconnected conversations. U.S. subsidiary formation is a flat $1,500. Schedule a consultation or message us on WhatsApp to get started.

— David Kun Chang, Attorney (California, Korea), BNL Law · official@bnl.legal

This article is general information, not legal or tax advice, and does not create an attorney–client relationship. Requirements change and depend on your facts — please consult a professional about your specific situation. Attorney Advertising.

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How to Set Up a U.S. Subsidiary for a Korean Startup (2026 Guide)