How to incorporate your business from India: A step-by-step guide
Embarking on the journey to incorporate your business in the United States is a pivotal step towards accessing the thriving business landscape of the nation. This process, while significant, doesn’t have to be overwhelming.
In this guide, we'll walk you through each essential step, providing you with the knowledge and tools needed to embark on this exciting venture. So, let's dive in and pave the way for your business to thrive in the dynamic US market.
Click here to start the US incorporation process today.
Why incorporate in the US?
Incorporation is not just a formality — it serves the pivotal role of providing legitimate access to the rich business ecosystem of the United States.
Incorporating your business in the US gives you more credibility. If you incorporate as a C-corp, you'll also have the ability to issue shares. This is important because it allows you to raise funds from American venture capital firms, angel investors, and startup syndicates.
Moreover, incorporation also sets the foundation for potential tax benefits associated with doing business in the US. The US government offers various incentives aimed at fostering business growth. These incentives can lower your overall tax liability, thereby increasing your bottom line.
Step 1: Choose the right entity type
Choosing the perfect entity type for your business incorporation in the US isn't just important — it's vital! Exploring your options and gaining insights into what each offers isn't merely groundwork; it's the first step towards steering your business to its envisioned future.
C corporation
C corporations (C-corps) are the most popular choice among Indian companies, especially when planning to raise funds from US investors. Note that most venture capital firms and startup syndicates are looking for C-corps. Key features include:
Taxes: Profits are taxed on the corporate level, and shareholders are taxed again on their personal income when they receive dividends. However, C-corps don't have to start paying corporate taxes until they begin to turn a profit.
Limited liability: Shareholders have protection from personal liability for business debts or legal actions against the corporation.
High flexibility in ownership structure: No restrictions on the number of shareholders — they can be foreign individuals or even other business entities. Shares can also be traded easily.
Limited Liability Company (LLC)
LLCs are beneficial for smaller businesses or those seeking a simpler ownership structure. Some of the key features of an LLC include:
Pass-through taxation: Profits are not taxed at the entity level. Instead, they pass through to the owners, who report their share of the income on individual tax returns, avoiding double taxation.
Limited liability: Similar to C-corp owners, LLC members enjoy protection from personal liability for business debts or legal actions.
Flexible management structure: Unlike a C-corp, an LLC has a less rigid management structure, requiring fewer formalities and paperwork.
Not sure which business structure to choose? Check out our LLC vs. C-corp quiz!
Step 2: Select a state
At Firstbase, we generally recommend incorporating in Delaware, especially if you plan to create a C-corp.
Delaware offers a business-friendly legal system, well-established corporate laws, and the nation's leading investment ecosystem. Wyoming is a good option for LLCs due to its strong privacy protections.
While there are good reasons to consider incorporating in other states, we'll focus on incorporating in Delaware for the remainder of the article.
Step 3: File for incorporation
Filing for incorporation may seem daunting, but it doesn't have to be. With Firstbase, you can complete your application in as little as ten minutes.
Here are the steps required to file for incorporation in Delaware:
- Determine the name of your corporation and make sure it complies with Delaware's naming requirements.
- Prepare and file the Certificate of Incorporation with the Delaware Secretary of State. This document includes important details about your corporation, such as its name, purpose, and stock information.
- Pay the filing fee.
- Appoint an in-state registered agent who can receive legal documents and important notices on behalf of your corporation.
Step 4: Get a registered agent
A registered agent is your business's designated point of contact with US federal and state governments and is responsible for receiving all legal and official correspondence. You usually can't serve as your registered agent due to residency requirements, so focusing your search on trustworthy, professional services is key. Look for agents with a strong track record, excellent customer support, and a clear pricing structure.
Step 5: Obtain an Employer Identification Number (EIN)
To open a US bank account and ensure your business is set up for tax purposes, you'll need an EIN from the Internal Revenue Service (IRS).
Getting an EIN for your Indian company in Delaware is fairly simple:
Check if you're eligible: Check and see if you're eligible to apply for an EIN online. It's also necessary for the person applying to have a valid number for tax purposes. This could be your own Social Security number, an EIN that you used for another business, or an Individual Taxpayer Identification Number.
Apply online: If you're eligible, you can visit the IRS website and fill out the form for an EIN application. Once you fill out everything correctly and send your application, your EIN will be given to you on the spot.
Provide responsible party details: When filling out the EIN application, you have to include a Social Security number or EIN for the person accountable for the company, often called the "responsible party." A registered agent and the responsible party are not the same entities.
According to the IRS, the "responsible party" has control or rights to an entity's funds or assets. Essentially, they manage the entity, influencing its functioning and fund allocation.
Applicants may call the IRS at +1 (267) 941-1099, which is not a toll-free number but is a business line. This line is operational from 6:00 a.m. to 11:00 p.m. EST, Monday through Friday.
Step 6: Open a US bank account
Once you have your EIN, it's time to open a US bank account. Having a US bank account makes it easier to manage your finances by simplifying international transactions, reducing currency conversion fees, and streamlining your cash flow as an international business.
Be sure to select a bank that meets the needs of international businesses. You want to look for a bank that makes dealing with multiple currencies and international transactions easy.
Step 7: Maintain good standing
In Delaware, businesses are required to file annual reports by March 1st each year to stay in good standing. Firstbase provides built-in tools to help you stay compliant with filing requirements, ensuring your business remains in good standing.
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How to shift your company's registration from India to the US
So, your business is registered in India, and you're thinking about moving it to the US? Enter the "Delaware flip."
This works best when your company is in its early stages with few shareholders and no outside capital.
Here's the run-down on a Delaware flip:
- Set up a Delaware C corporation: First off, you've got to start a Delaware C corporation. This process will involve appointing directors and officers and handing out shares. And don't worry; Firstbase streamlines the process of registering a Delaware corporation from India.
- Get help from Indian lawyers and accountants: To smooth out your company's transition, you'll need to recruit some experts — that's lawyers and accountants. Also, take care of any outstanding debts or equity warrants.
- Exchange equity: The shareholders in your Indian corporation must agree to swap their equity for shares in your new Delaware corporation.
- Turn your Indian equity into a subsidiary: After all this, your Indian equity becomes a fully-owned subsidiary of your new Delaware C corporation.
US tax and visa considerations for Indian business owners
Don't worry; registering your business in the US won't affect your personal tax situation. Your corporation — the separate legal entity — will pay taxes in the US while you still pay personal taxes in India.
You don't need a visa to register your company in the US. However, if you're planning to shift your life to the US to operate your business, you'll need one. A range of work visas are available for Indian citizens, like E-1, E-2, EB-5, L-1, and O-1 visas. You can look at our comprehensive guide to US immigration visas for more info.
Recruiting in India with your Delaware corporation
Just because you've set up a US company from India doesn't mean your hiring is confined to Americans — you can recruit local talent. But, it does require a bit more legwork.
Take a look at these two options:
- Start an Indian business and make it a subsidiary of your Delaware C corporation. This route is simpler and cheaper, particularly if you plan to concentrate your hiring efforts in India.
- Work with an employer of record (EOR) agency to sidestep the need to create a local business in India and hire workers directly. Firstbase can help you find the right partner.
Starting a business in the United States from India can be tricky. Firstbase makes the process way easier by guiding you every step of the way.
Our tools can get all the startup details sorted for you, like paperwork, getting an EIN, and opening a US bank account. We also help you with US taxes, good banking habits, and more.
With Firstbase, starting a business in the US from India is easy. Focus on growing your business while we handle incorporation.