This article breaks down the insights revealed from the recent OpenCorporates webinar on US branch data, with OpenCorporates founder Chris Taggart, VP of Data Nick Wright, and data journalist Anna Muñoz Padrós.
From understanding business activity and corporate relationships, to tracking growth and identifying fraud, legal entity data can change how we approach business, risk, and decision-making. Keep reading to learn how.
The importance of legal entities
Chris Taggart started the discussion by saying, “Legal entity data is the most important dataset in the world.” This is because every part of business—contracts, liabilities, employment—involves legal entities. We often think of a company like Microsoft as a single entity, but it is actually made up of hundreds of different legal entities working together. For businesses, understanding which specific legal entity they are dealing with, its registration status, and its location is crucial for trust and compliance.
When signing contracts, businesses don’t deal with “Microsoft” but rather with a specific entity, like Microsoft Corporation or Microsoft UK Limited. Having accurate, up-to-date information about these entities, directly from registries, is vital for business integrity. Chris explained how this understanding led to the founding of OpenCorporates nearly 14 years ago, with the goal of making legal entity data accessible and trustworthy.
Legal entities can represent anything from a company producing goods and services to an entity holding intellectual property or assets. Some are used for money laundering or to hide assets from creditors, making it even more important for regulators, businesses, and banks to understand these structures. Without clear legal entity information, it’s like doing business with an avatar instead of a real person—you don’t know who you are really dealing with.
US branch data: What it tells us
Nick Wright shared insights on US branch data, focusing on “foreign LLCs” or branch extensions of parent companies that operate in states other than where they were originally incorporated. These branches are not independent companies but extensions of their parent company. Companies choose between operating as a subsidiary or a branch based on factors like state regulations, tax benefits, and business goals.
Nick highlighted some key reasons companies create branches:
- State data privacy and consumer protection laws: Laws like California’s Consumer Privacy Act require companies that collect significant data from residents to register as foreign LLCs in those states. Over recent years, more states have created their own privacy laws, making it complex for companies to operate in multiple places.
- Economic nexus laws: After the 2018 South Dakota v. Wayfair Supreme Court ruling, states can require companies to register as foreign LLCs if they surpass certain sales or transaction limits, even without a physical presence. This change has had a big impact on how companies approach state-level registration.
- Tax and compliance incentives: States like Delaware and Wyoming are popular for their favorable tax rules and simpler compliance processes. Delaware is known for its corporate law expertise, while Wyoming offers advantages like no personal income tax and a business-friendly environment.
Nick also discussed how the rise of digital currencies, payment processing services, and changes in state laws have pushed companies to create branches or incorporate in specific states. The COVID-19 pandemic also led to more remote work, prompting companies to register branches in new states where their employees had moved.
Case study: Stripe’s growth across the US
Anna presented a case study of Stripe’s expansion, showing how branch data can provide valuable insights. Stripe first incorporated in Delaware in 2010 and opened its first branch in California in 2012. Over time, it expanded across many states, often driven by changes in regulations or business needs.
In 2019, Stripe grew significantly, expanding from 15 to 38 branches across the US This happened around the same time as the Tax Cuts and Jobs Act in 2017, which reduced corporate tax rates from 35% to 21%. This likely encouraged Stripe to grow faster.
Anna also pointed out times when Stripe closed and reopened branches in certain states, such as Kansas and Montana. These changes could be due to administrative decisions, like rebranding or restructuring, or challenges with state regulations.
Understanding corporate growth and risk
Branch data also gives insights into company growth and risk management. Nick explained how branch registration is a good sign of a company’s growth, especially when expanding into new areas and staying compliant with regulations. It shows when companies are moving from planning to actively growing, which can be useful information for investors, competitors, and regulators.
Branch data can also help identify risks. For example, if a branch is active but its parent company is no longer in good standing, it can be a warning sign for fraud or other issues. Understanding the relationship between parent companies and their branches is key to assessing a company’s stability.
Nick also talked about how OpenCorporates collects branch data from primary sources like state Secretaries of State. The data is gathered through APIs, purchased files, or web scraping, and then standardized into a common format. By matching branch information with parent company details, OpenCorporates provides a complete view of corporate structures.
Using branch data to detect fraud
Anna explained how branch data can help detect fraud. She shared a historical money laundering case involving two entities, Benex International and BEECS International, which were used to illegally transfer funds from Russia to the US through complex company structures. OpenCorporates’ data revealed inconsistencies in the registrations of these entities, raising questions about their legitimacy.
In another example, a branch called Chip Monk Mining LLC was found to reference a parent company in Colorado that did not exist. This raised red flags and showed how discrepancies between branch and parent data could indicate potential fraud or errors. These examples highlight the importance of checking both branch and parent data to ensure compliance and reduce risks.
Geographic trends in branch data
Anna also discussed geographic trends in branch data, using examples from major tech companies like Google and Facebook. Both companies were initially incorporated in Delaware but later opened branches in multiple states, influenced by regulations that were favorable for data centers in states like Virginia and North Carolina.
Another interesting trend was that many large tech companies did not have branches in Alaska, even though Alaska offers favorable tax incentives. This raises questions about the strategic reasons behind choosing branch locations and how companies weigh regulatory benefits against other challenges.
Branch data as a sign of business activity
Chris and Nick emphasized that branch data is a record of business activity. Companies don’t create branches without reason—they create them to support operations, comply with regulations, or explore market opportunities. Branch registrations can signal a company’s intentions and strategies.
Chris explained that branches are sometimes used instead of subsidiaries. Subsidiaries are separate legal entities that can operate independently, while branches are directly linked to the parent company. This distinction affects everything from compliance to liability and taxes.
Branch data can also show changes in a company’s strategy. When a branch closes, it could mean the company is changing its market focus or responding to new regulations. On the other hand, an increase in branches may show market expansion or new opportunities.
The need for reliable legal entity data
Having reliable legal entity data—sourced directly from registries—is essential for understanding corporate structures, staying compliant, managing risks, and finding opportunities. Whether you’re a business, regulator, or bank, understanding the real entities behind the scenes is crucial.
Chris ended the webinar by highlighting the opportunity that legal entity data provides: “The complexity of legal entities is real, but it’s an opportunity to get to the bottom of the businesses you’re dealing with—or that your customers are dealing with.” Legal entity data isn’t just about compliance; it’s about seeing the truth behind every transaction and partnership.
Key takeaways
- Legal entities are the foundation of all business activities, and understanding them is crucial.
- Branch data provides unique insights into a company’s growth, compliance, and business activities.
- The decision to create a branch or subsidiary involves navigating state regulations, taxes, and strategy.
- Analyzing branch data can help detect fraud, manage risks, and understand competitors.
- Reliable legal entity data, sourced directly from registries, is critical for transparency, compliance, and strategic decisions.
Watch the full webinar
For more information
To learn more about how OpenCorporates’ data can help you understand corporate structures and manage risk, reach out for a demo or explore our services. If you’re interested in deeper analyses or specific use cases, stay tuned for upcoming articles and webinars about the power of legal entity data.
