The difference between a branch and a representative office: definition, concept, characteristics, features and working conditions

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Many people often confuse the concepts of “branch” and “representative office” and use them in a synonymous connotation, but there is still a difference between these terms, which will be discussed in this article. You have probably heard such concepts as "separate subdivision", "branch", "representative office" … What is the difference? This information can be useful for any person, because you never know what will happen to you tomorrow. So, what is the difference between a branch and a representative office?

Definition

A branch is a separate subdivision of a company or organization (that is, a legal entity), which is located in a different place than the legal entity itself, and at the same time performs all its functionsor a certain part of them.

Representation is the same separate, separate division of a company or organization, which is located elsewhere, but it is limited only by the functions of protecting the interests of a legal entity, representing its interests (concluding transactions on its behalf, performing other legal actions and etc.)

Legal Status

Both branches and representative offices have one thing in common - they are not assigned the status of a legal entity, but they have the full right to dispose of the property of the legal entity that created them and act in accordance with their assigned duties.

Individuals holding management positions in any separate divisions can only be appointed to a position by the appropriate body within the organization. They act on the basis of a power of attorney issued by a legal entity.

Lack of legal personality means the following for stand-alone enterprises:

• any transactions or agreements made on behalf of a branch or representative office are in fact concluded by the legal entity itself;
• the same legal entity is further responsible for all the circumstances that were caused by the activities of the branch or division;
• both branches and representative offices of a company cannot be plaintiffs or defendants in legal proceedings, since they do not have the right to independently, on their behalf, take part in suchprocesses.

Regulatory documents

We provide a list of documents that contain indications of the difference between a separate division and a branch and a representative office:

• Civil Code of the Russian Federation;
• Tax Code of the Russian Federation;
• documents of the Bank of Russia, which contain instructions on opening, maintaining and closing bank accounts;
• charter of the parent company and the division itself.

Branch functions

The difference between a branch and a representative office is that a branch has a much broader functionality, which may include both production operations and work with the economy, as well as the implementation of trade or other activities corresponding to the legal entity that owns the branch. Moreover, since the head of the branch has a power of attorney issued to him, the branch can enter into a dialogue with other legal entities, conduct any transactions that will benefit the company, appear in court, etc. The purpose of the branch is the same as that of parent organization - profit. The financial and material security of the branch depends first on the initial investments of the legal entity, and then on the income derived from the activities of the branch.

At the same time, it is important to take into account that the branch operates strictly within the framework of the working direction of its legal entity, it does not engage in amateur activities.

Specific branch functions:

1. Fulfillment of the entire volumefunctions of the parent company or a certain part of them.
2. Doing chores.
3. Having your own cash balance.
4. Cooperation with the bank to create a separate account.

Branch Goals

The specific goals of each branch are specified directly by its parent legal entity at the time of creation, so they may vary depending on the activities of the company and some other conditional variables. The overall main goal of any branch is to make a profit.

Representation functions

Representative offices do not have such functionality (and this is the main difference between a branch and a representative office), their entire task is to represent the interests of their parent organization, and the representative office is not prescribed to engage in production or commercial activities. It is provided by a legal entity and does not bring direct revenue, thus being a costly enterprise, although potentially the costs of representation in the future are covered by the results of its activities.

Specific Representation Functions:

1. Perform representative functions only.
2. No housekeeping.
3. Lack of own cash balance.
4. No need for a separate bank account.

Goals

Purposes of Representation:

1. Promotion on the market of the goods of the product,produced by the parent organization.
2. Increase brand awareness among competitors.
3. Resolving any issues with the parent company.
4. Attract new customers.
5. Drawing up and maintaining certain contracts with other businesses or persons.

Some nuances

How does a representative office or branch work? What is the difference? We have already answered these questions, but this topic does not end there. For example, it will certainly be useful and interesting for the reader to learn about some of the subtleties in matters of separate units.

Any separate division of any organization must comply with these points:

• the location of the separate division must be different from the location of the parent organization itself;
• any separate division must have at least one stationary workplace that will be able to function for more than one calendar month;
• it must also have at least one employee to carry out work duties at the official legal level;
• a branch, representative office or other separate enterprise is under the full control of the legal entity that opened it.

For the operation of both a branch and a representative office, as a rule, it is necessary to pass accreditation from the specialists corresponding to this task, and sometimes to obtain certain licenses (if the activities of a separate enterpriserequires them). There are almost no differences between a branch and a representative office in this matter.

The branch manager, as a rule, receives delegated opportunities to pay salaries to employees of his staff, as a result of which the branch must register at its location in these funds of the Russian Federation:

• pension fund;
• social security fund;
• territorial fund of obligatory medical insurance.

Representation does not require such legal procedures, but it does not bring profit as such. Carefully analyze your situation in order to conclude whether it is worth opening a separate enterprise, and if so, which one. Branch and representative office of a legal entity - the differences between these terms must be learned by every manager who considers the creation of such structural units.

Another important point is that in order for a separate enterprise to legally carry out its activities in accordance with the tasks of its parent organization, it must first go through the registration procedure and register with the relevant authorities for tax purposes, who monitor the implementation of this regulatory directive by the government. Very often situations arise when a legal entity has opened a separate enterprise, and in the end it does not work at all as the managers plannedthe parent organization, so that such subtleties must be studied and planned in advance.

Result

From all the information provided, we can conclude that the difference between a branch and a representative office lies primarily in the fact that these divisions, separate from the main legal entity, have completely different functions and scope of tasks. A branch is a structural unit of a more universal sense, while a representative office solves only an insignificant (if we put it in comparison) volume of tasks. What to open - a representative office or a branch? What is the difference, we looked at, we hope this will help you understand which type of separate enterprise is best for your organization.