Last reviewed October 7, 2026 · By the NYBACS advisory team
Short answer
Formation choices decide much of the L-1 evidence before a petition is drafted. The entity type, who owns it and in what proportions, where it is formed and registered, how it is capitalized and what records are kept determine whether a qualifying relationship can be proven and whether the US company looks like a real operating business. Some choices, such as running the US office as a branch, also affect later green card options.
Key takeaways
- A US corporation or LLC can petition for its own owner-employee; a sole proprietorship cannot.
- A registered US branch of a foreign company can support an L-1, but cannot file an EB-1C multinational manager green card petition because it is not a separate US legal entity.
- Ownership percentages set at formation must fit the parent-subsidiary or affiliate tests — mismatched founder holdings across the two companies can defeat an affiliate relationship.
- A company formed in Delaware but operating from an office in another state generally needs to register as a foreign entity, and set up payroll, in the state where it operates.
- A US corporation that is at least 25% foreign-owned, or a foreign-owned single-member LLC, has Form 5472 reporting, so the parent's capital and intercompany payments must be tracked from day one.
Choosing the vehicle: corporation, LLC or branch
| Vehicle | L-1 | EB-1C later | Points to weigh |
|---|---|---|---|
| C-Corp subsidiary | Works; can petition for owners and employees | Can petition | Clear share-based ownership evidence; files Form 1120, plus Form 5472 where 25%+ foreign-owned |
| LLC owned by the foreign parent | Works; an LLC is a distinct legal entity | Can petition | Tax classification matters: a single-member LLC owned by a foreign company is disregarded by default unless it elects corporate treatment |
| Branch (foreign company registered in a state) | Can qualify as the same organization | Cannot petition as a branch | Evidence includes Form 1120-F, payroll filings and a lease; the foreign company is directly exposed to US tax and liability |
| Sole proprietorship | Cannot petition for its own owner | Cannot self-petition | Not usually suitable for founder transfers |
For most non-US groups planning a founder or executive transfer, a US corporation or LLC subsidiary keeps the L-1 and EB-1C paths open. The tax classification decision should be made with a tax adviser, because it affects returns, withholding and the cost of moving profits back to the parent.
Designing ownership with the L-1 in mind
The cap table is immigration evidence. Two common designs:
- Parent-owned subsidiary. The foreign operating company holds the US shares. This is usually the cleanest to prove, and it stays stable if individual founders change their personal holdings.
- Founder-owned affiliate. The same person, or the same group in roughly the same proportions, owns both companies directly. This can work, but every future change in personal ownership — a co-founder exit, a gift of shares to family, an investor coming in at one level only — must be checked against the affiliate test.
Also consider control, not only percentages. Board composition, reserved matters and voting agreements in the bylaws or operating agreement should not hand control away from the parent. If US investors are expected, discuss with counsel before signing term sheets how much dilution the L-1 structure can absorb.
State of formation versus where the office is
Many founders form in Delaware for corporate-law reasons and then open an office in New York, New Jersey, Texas or California. The L-1 petition will rest on the premises and the operation in that working state, so:
- the company generally needs to register to do business (foreign qualification) where it has its office and staff;
- state payroll, unemployment insurance and withholding registrations follow the employees, not the formation state;
- the lease, payroll filings and state registrations should all show the same legal name and address used in the petition.
A Delaware entity with a New York lease but no New York registration is a small inconsistency that a careful file avoids.
Capitalization and intercompany money flows
How money moves at the start shapes both the ownership evidence and the tax filings:
- Subscription first, then wire. Board minutes approve the share issuance, the parent wires the subscription amount, and the US books record it as paid-in capital. USCIS may ask for proof the ownership interest was actually acquired.
- Separate capital from loans. If the parent also lends money, document it with a loan agreement and record interest terms; mixing loans and equity confuses both ownership and tax reporting.
- Plan who pays the transferee. The source of salary is generally not controlling for L-1, but US payroll, any home-country payroll and cost recharges between the companies must be set up deliberately.
- Intercompany agreements. Where the parent provides staff, software or services to the US entity, a written intercompany agreement and regular invoices support both transfer pricing and the petition's story of how the US office is supported.
These transactions are exactly what Form 5472 asks a foreign-owned US company to report, so clean records serve the tax filing and the immigration file at once.
Records to start keeping from formation
Set up, from the first week: a stock ledger or membership register; signed bylaws or operating agreement; organizational minutes appointing officers and authorizing the L-1 sponsorship; the IRS EIN notice; a US bank account in the company's name; a bookkeeping file with monthly reconciliations; and a folder of contracts, invoices and payroll filings. Each one later becomes evidence of ownership, control or doing business.
Common mistakes to avoid
- Running the US operation as a branch for simplicity, then discovering it cannot file the EB-1C petition the founder was counting on.
- Issuing US shares directly to founders in different percentages from their foreign holdings, breaking the affiliate test.
- Forming in Delaware and leasing in another state without registering there or setting up state payroll.
- Recording the parent's funding as a vague "transfer" instead of documented capital or a loan.
- Signing investor documents that give an outside investor control without checking the L-1 consequences.
- Forgetting Form 5472 reporting on the parent's capital contributions and intercompany charges.
NYBACS 360° support
How NYBACS helps
- Forms the US corporation or LLC with an ownership and governance structure discussed in advance with your immigration attorney and tax adviser.
- Handles foreign qualification, EIN, registered agent and state payroll registrations so legal name and address are consistent across filings.
- Documents and books the parent's capitalization, loans and intercompany charges, and prepares the related Form 5472 reporting.
- Maintains the stock ledger, minutes and resolutions that later serve as L-1 and EB-1C ownership evidence.
Frequently Asked Questions
Should the US company be formed before talking to an immigration attorney?
It is better to agree the structure with counsel first. Forming quickly is easy, but unwinding the wrong ownership, entity type or state set-up later costs time and creates a confusing record.
Is an LLC or a C-Corp better for an L-1?
Both can petition. The decision usually turns on tax treatment, investor expectations and how profits will move to the parent. From an L-1 evidence standpoint, what matters most is clear ownership, control and doing business.
Can we convert a branch into a subsidiary later?
Usually yes, but a reorganization may require an amended L-1 petition and changes tax filings. Counsel should review timing, especially if an EB-1C petition is planned.
Does the US company need its own bank account for the L-1?
There is no rule that names a bank account, but bank statements are among the most persuasive evidence of capitalization and doing business. A US account in the company's own name is strongly advisable.
