Many people often confuse the concepts of “branch” and “representation” 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 a "separate division", "branch", "representation" ... 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 (i.e. a legal entity), which is located in a different place than the legal entity itself, and at the same time carries out all its functions or a certain part of them.
A representative office is the same separate, separate division of a company or organization that is located in another place, but it is limited only by functions to protect the interests of a legal entity, representing its interests (concluding transactions on its behalf, performing other legal actions, etc.)
Legal status
Both branches and representative offices are united by one thing - they are not assigned the status of a legal entity, but they have every right to dispose of the property of the legal entity that created them and act in accordance with the duties assigned to them.
Individuals holding managerial posts in any separate subdivisions may be appointed to the position only by the relevant body within the organization. They act on the basis of a power of attorney issued by a legal entity.
The absence of the status of a legal entity means for separate enterprises the following:
- any transactions or arrangements made on behalf of a branch or representative office are, in fact, concluded by the legal entity itself;
- the same legal entity is subsequently responsible for all circumstances that were caused by the activities of the branch or unit;
- both branches and representative offices of a company cannot be plaintiffs or defendants in legal proceedings, since they do not have the right to take part in such processes on their own behalf.
Regulatory documents
We provide a list of documents that contain indications of the difference between a separate division from a branch and a representative office:
- Civil Code of the Russian Federation;
- Tax Code of the Russian Federation;
- Bank of Russia documents containing instructions on opening, maintaining and closing bank accounts;
- Charter of the parent company and the division itself.
Branch Functions
The difference between the branch and the representative office is that the branch has much wider functionality, which may include production operations, work with the farm, as well as the implementation of a trade or other relevant legal entity to which the branch belongs. Moreover, since the head of the branch has a power of attorney drawn up for him, the branch can engage in dialogue with other legal entities, conduct any transactions that will benefit the company, act in court, etc. The purpose of the branch is the same as that of parent organization - making a 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 by the activities of the branch.
It is important to take into account that the branch acts strictly within the framework of the work focus of its legal entity, it does not engage in amateur activities.
Specific Branch Functions:
- Performing the entire scope of the functions of the parent company or a certain part thereof.
- Doing chores.
- Having your own cash balance.
- Cooperation with the bank on the creation of a separate account.
Branch Objectives
The specific goals of each branch are prescribed directly by its parent legal entity upon creation, so they can 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 whole task is to represent the interests of their parent organization, and the representative office is not required to engage in production activities or business in the field of commerce. It is provided by a legal entity and does not bring direct revenue, being the same costly enterprise, although potentially the costs of the representative office are subsequently covered by the results of its activities.
Specific Representation Functions:
- Performing only representative functions.
- Lack of housekeeping.
- Lack of own cash balance.
- Lack of need in a separate bank account.
Goals
Representation objectives:
- Market promotion of products produced by the parent organization.
- Increasing brand awareness among competitors.
- The solution to any problem situations associated with the parent company.
- Attraction of new clients.
- Drafting and maintaining certain contracts with other enterprises or persons.
Some nuances
How does a representative office or branch work? What is the difference? We have already answered these questions, but the topic does not end there. For example, the reader will probably find it useful and interesting to learn about some of the intricacies in questions of separate units.
Any separate unit of any organization must comply with these points:
- the location of a separate unit must be different from the location of the parent organization itself;
- any separate unit 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 undergo accreditation by specialists who are relevant to this task, and sometimes to obtain certain licenses (if the activities of a separate company require them). There are almost no differences between the branch and the representative office in this matter.
The branch manager, as a rule, receives delegated opportunities to pay employees of his state wages, as a result of which the branch is required to register at its location in these funds of the Russian Federation:
- pension fund;
- social insurance fund;
- territorial fund of compulsory medical insurance.
Representation does not require such legal procedures, but it does not bring profit as such. Carefully analyze your situation to conclude whether to open a separate enterprise, and if so, which one. Branch and representative office of a legal entity - differences between these terms must be learned by each manager who is considering the creation of such structural units.
Another important point is that in order for a detached enterprise to legally be able to 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 that control the implementation of this normative instructions from the government. Very often situations arise when a legal entity has opened a separate enterprise, and as a result it does not work at all as planned by the leaders of the parent organization, as a result of which such subtleties must be studied and planned in advance.
Total
From all the information presented, it can be concluded that the difference between a branch and a representative office lies primarily in the fact that these divisions that are 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 a small (if put in comparison) scope of tasks. What to open - a representative office or a branch? What is the difference, we have examined, we hope this will help you understand which type of stand-alone enterprise is best suited for your organization.