Know Why USA Company Registration Is Beneficial For Indian Businesses, Benefits And Process Explained
It has become very common for Indian startups to go for a USA Company Registration and get themselves incorporated in the USA. The numbers have been growing rapidly year on year, but this brings us to the first question – Why?
Why Is USA Company Registration Beneficial For Indian Businesses?
The answer to this question lies in the current business environment in India. Starting a business in India remains a herculean task and requires a lot of official work.
For Instance: Entrepreneurs wanting to start a business in major cities like Delhi or Bengaluru needs several documents, licences, and approvals.
Contrary to this, in the USA, business laws and regulations are well-formed, as well as the corporate income tax rates are less, which is extremely favourable for the foreign business to dive in.
Note: Every US state is governed by its state and laws and regulations. These rules differ from each other vastly. Keeping in mind most complimenting business and taxation laws, states like Delaware, Wyoming, Nevada facilitate a better business environment for companies to incorporate.
Indian startups seem to prefer Delaware for their business. Not only does registering your Delaware corporation from India gives access to venture capital firms and startup investors, but you will also get tax benefits. Delaware has no state sales tax, and the state’s franchise tax or small US businesses is also less. Additionally, the state also allows non-residents to pay no separate corporate income tax.
Besides this, here are the other advantages of having USA Company Registration
- The laws and regulations are business-friendly.
- Because of the limited liability, personal assets such as houses and savings are safe from liabilities.
- The corporate income tax rates are low.
- As per the laws, company shareholders and directors do not require to disclose their names.
Over the past three years, the USA has averaged $130 billion in venture capital invested in startups annually. That includes funds from traditional VC firms, angel investors, and startup syndicates (i.e. crowdfunding).
In contrast, the growth of the Indian capital market is exciting, and India is on track to see a $30 billion per year capital market by 2025.
This is certainly worth celebrating, but the bottom line, registering a USA business from India gives you access to more funds right away.
How To Incorporate A USA Company As A Founder In India
One has to follow six steps in order to have a USA Company Registration from India:
- Choose the right entity type for your business. As Investors highly prefer C corporations, most Indian companies choose this type.
- Decide the state in which you want to register your company. Delaware is the most prefered state and is the home to the majority of US tech companies. 70% of Fortune 1000 companies are registered in Delaware.
- File to incorporate.
- The next step is to get an employer identification number (EIN) from the Internal Revenue Service (IRS). Registering with the Internal Revenue Service also sets your company to pay taxes. Also, you need an EIN to open a US bank account.
- Once you have an EIN, open a US bank account, which is essential for doing business in the US.
- In the state of Delaware, you are required to file annual reports every year. So, keep your company in a sound situation by filing reports.
Choosing The Right Business Entity In USA
Business in the USA can be set up in sole proprietorship, general partnership, LLC or a Corporation. However, in the case of Indian companies, the entries are limited to an LLC or a C corporation in the USA.
In the USA, the laws and the regulations relevant to the incorporation and management of LLCs or corporations differ from one state to another.
LLC (Limited Liability Company)
LLC is a type of entity having features of both corporation and a partnership. It provides the owners limited liability protection in case of a lawsuit and even bankruptcy.
Providing flexibility, the compliance requirements for LLC are simple. In the case of a corporation, resolutions and shareholders’ meetings, recording and filing of forms showing meetings that were held and votes are required. Contrary to this, LLCs do not require annual shareholders’ meetings.
A C-corporation in the USA is favourable if your goal is to seek funding from the VCs and angel investors. Also, bankers, investors, customers, suppliers, and employees consider C-corporations ideal for most businesses.
C-Corporations are independent legal entities, separate from the people who own, control, and manage. Due to this, this entity is viewed as a regular person in tax laws and can thus be engaged in business. Also, contracts can initiate lawsuits and be sued.
How To Get A US Registered Agent
You don’t need to live inside the US to start a company there. But for the registration process, you do need a registered agent. Having a physical address in the state where you register your business, your registered agent receives official mails on your behalf.
- Compliance notices about reporting or other requirements
- Any tax document from the state’s revenue or tax department
- Services of the process (notices of lawsuits against your company)
The legal address must be your own address in India. One cannot use a registered agent’s address as the company’s legal address.
How To Tranfer Your Company’s Registration To The US If It’s Already Registered In India
In the case of a business already registered in India, you can effectively move it to the USA by doing a “Delaware flip.“
This option is the easiest to do when your company is in its nascent stage, having a few shareholders and no outside investors.
To do a Delaware flip:
- Register a Delaware C corporation stating the name of directors and officers and allocate shares.
- Hire lawyers and accountants in India in case you require necessary regulatory approvals for converting your company. Pay off any outstanding debt or warrants for equity.
- The approval of your shareholders in your Indian corporation, consenting to give up their equity in exchange for equity in your new Delaware corporation.
- After these steps, you make your Indian equity a fully owned subsidiary of your new Delaware C corp.
US Taxes And Visas For Indian Business Owners
Registering your business in the USA does not change your personal tax residency. Your corporation, as a separate legal entity, will pay its taxes in the USA.
Being an Indian citizen, you will continue paying personal taxes in India. Additionally, to register your company in the USA, you aren’t required to get a visa. But, if you decide to move to the USA to run your business, you will need one. There are a number of work visas for Indian citizens, including E-1, E-2, EB-5, L-1, and O-1 visas.
If you need legal assistance for your startup, contact us.