The Difference Between Branch, Subsidiary, and an Affiliate for L-1 Visa Purposes
Summary of the L1 Visa?
An L1-Visa (Intracompany Transferee) allows an employer to temporarily transfer a foreign employee who is classified as an executive, manager, or one who possesses special knowledge to the United States to continue employment with an organization. A manager or executive can then apply for and receive a Green Card after they have had their L1 for only one year; a much better system than the EB5 and a lot less risky and expensive.
A qualifying organization includes an office of the same employer, a parent, branch, affiliate, or subsidiary of the petitioning company. In other words, this looks at the relationship between the entity where the employee works and the entity they will transfer to.
A qualifying organization is just one of many rules that must be met to obtain an L1 visa. The information listed below explains the qualifying business entities in more detail and how they differ from one another.
There are only 3 types of companies that can make transfers: a branch, subsidiary, or affiliate. Here we will explain them.
A “parent” is any legal business entity that has subsidiaries. Think of this as a parent-child relationship where the parent company exercises control over another entity. For example, the Coca Cola Company is the parent to Dasani Bottled Waters. Coca Cola could transfer an employee (who qualifies) from the parent, Coca Cola, to its subsidiary, Dasani Bottled Waters, in the United States.
The same situation occurs when a larger company owns companies underneath it. They could all be owned by one person. For example, one person could own a company called Roberto Inc. and it could own 10 restaurants. Roberto Inc. would be the parent, and each restaurant is a subsidiary.
A “subsidiary” can be defined in several ways. It is a legal business entity that a parent owns, directly or even indirectly: (1) More than 50% of the entity and controls the entity; or (2) 50% of the entity and controls the entity; or (3) 50% of a joint venture and has control and veto power over the entity; or (4) less than 50% of the entity is sufficient, if in fact the parent can show control of the entity.
Veto power, or what is called negative control, is a situation whereby one company owns another one but even though it runs smoothly with its own group, if the owner with veto power or negative control makes a vote against something major, nothing happens. It is very similar to the power a wife has over a husband. He may want a new car every year, but she has veto power.
Let’s use Sofia and Lorenzo as an example. Sofia and Lorenzo are married, in love, and have two children together. Lorenzo wants to buy a Fiat and the children couldn’t be more thrilled so they give him the go ahead vote to make the purchase. Unfortunately for Lorenzo, Sofia voted no on the Fiat. Sofia has negative control or veto power, and what she says, goes!
The term affiliate is the latest of terms to be injected into the L1 mold. It has been used because there are many situations wherein someone owns several companies that are completely unrelated. Many entrepreneurs invest in companies that are completely unrelated to keep them from being bored. However, as long as they own 51% of a company, they own the majority and as a result, even if they entered into a joint venture where another company or person owns 49%, they can still transfer people over. In fact, we see this happen most of the time with the president or CEO of the company. He or she will transfer their own position over from one company in another country to the one in the United States.
For immigration purposes, an “affiliate” includes: (1) one of two subsidiaries that are both owned and controlled by the same parent or individual; or (2) one of two legal business entities that are owned and controlled by the same group of individuals where each own and control nearly the same percentage of each entity.
Additionally, subsidiaries are affiliates of each other. Going back to the Coca Cola and Dasani example, Coca Cola is also a parent company of Bacardi Mixed Drinks. Here, Dasani and Bacardi are affiliates because they are both owned and controlled by the Coca Cola Company.
A “branch” is where an organization operates identically, just in different locations. For example, a bank could have several branches all over the world. They are all operated in the same manner with the same rules and guidelines.
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This information is based on the U.S. Department of State Foreign Affairs Manual Volume 9 Visas. 9 FAM 41.54.