Numerous Indian entrepreneurs aspire to start a business in the United States, recognizing the opportunities and potential for success it offers. Establishing a business in the U.S. from India involves submitting essential documents and following the prescribed procedures. Keep reading to know more!
Overview
The U.S. is a beacon of opportunities for individuals from various backgrounds, transcending nationality, color, or race. Achieving business success in the U.S. not only fulfills personal goals but also opens doors to global expansion. Notably, major companies like Facebook, Amazon, Apple, Netflix, and Google (FAANG) have chosen the U.S. as their base. Learn about how to start a business in US, documents and method to register.
For Indian entrepreneurs eyeing a spot among such esteemed companies, the pathway doesn’t necessarily involve an immediate relocation. Contrary to the common belief of obtaining a visa and physically relocating to the U.S., entrepreneurs can initiate and manage a U.S.-based business while remaining in India.
In the U.S., foreign companies can opt for incorporation as a C-Corporation or an LLC (Limited Liability Company), akin to India’s LLP (Limited Liability Partnership Registration). While the S-Corporation is another option, it is restricted to U.S. citizens as members. On the other hand, C-Corporation and LLC structures have no such limitations, allowing entrepreneurs from any nationality to become members.
Considerations for Commencing a Foreign Business in the U.S:
There are two major factors to consider when one contemplates starting a business in US while staying in India or any other country for that matter.
Type of Entity
Determining the type of business entity is a critical decision for an Indian business planning to set up operations in the U.S. The business owner needs to consider several factors to make an informed choice:
- Location of Major Operations:
– Decide whether the primary operations of the business will be in India or the U.S.
– Evaluate if the U.S. establishment is primarily for marketing and brand building, with official operations taking place in India.
– Explore whether the U.S. entity will act as a subsidiary to the Indian company, with all business operations conducted in the U.S.
- Ideal Business Types – LLC or C-Corporation:
– If the business aligns with the first two scenarios, choosing between an LLC (Limited Liability Company) or a C-Corporation is recommended.
– Both LLC and C-Corporation offer numerous benefits, providing the business with a legal structure that enhances reputation and professionalism.
– These business types also offer the advantage of restricted liability, protecting personal assets from business-related risks.
- Benefits of LLC and C-Corporation:
LLC (Limited Liability Company):
– Suitable for businesses with operations in both India and the U.S.
– Offers flexibility in management and tax benefits.
– Provides limited liability protection to members.
C-Corporation:
– Ideal for businesses with significant operations in the U.S.
– Attracts potential investors with the ability to issue multiple classes of stock.
– Provides a clear structure for growth and expansion.
Choosing a State in U.S
Selecting the right state in the U.S. is a crucial decision for an Indian business owner looking to establish a business. Considerations for choosing a state include:
- Pro-Business Environment:
– Evaluate states that are known to be “pro-business,” particularly those welcoming to foreign entrepreneurs.
– Some states have policies and regulations that are favourable to businesses, providing a conducive environment for growth.
- Banking Exposure and Transactions:
– Consider states where banking institutions have extensive exposure to foreign clients without local offices.
– A state with such exposure can facilitate smoother banking transactions for the business owner, even without a physical presence.
- International Certification Scheme:
– Explore states that offer an International Certification scheme, allowing businesses to operate in other states from their chosen base.
– This scheme provides flexibility for business operations and expansion beyond the selected state.
- Delaware and Nevada – Business-Friendly States:
– Delaware and Nevada are often considered among the most business-friendly states for foreign entrepreneurs.
– These states provide favourable conditions for establishing either a C-Corporation or an LLC.
- Establishing C-Corporation or LLC:
– Assess the specific needs and goals of the business to determine whether a C-Corporation or an LLC is more suitable.
– Delaware and Nevada offer the option to establish either entity type, providing flexibility based on the business’s structure and objectives.
- Advantages of Delaware and Nevada:
Delaware:
– Known for its well-established corporate laws and court system.
– Attracts a significant number of businesses, including Fortune 500 companies.
Nevada:
– Offers favourable tax conditions, including no corporate income tax or personal income tax.
– Provides strong asset protection laws for businesses.
- Consideration of Future Expansion:
– Think about the potential for future expansion and operations in other states.
– Choosing a state with flexibility for interstate operations ensures scalability for the business.
Comparison Between C Corporation and LLC
Both C-Corporation (C-Corp) and Limited Liability Company (LLC) are popular business structures offering limited liability to their members. The choice between them depends on various factors such as business type, market structure, scalability, turnover, and the need for a physical office in the United States.
LLC (Limited Liability Company):
– Ideal for High-Risk Businesses:
LLCs are suitable for high-risk businesses as members enjoy limited liability. Personal assets are protected, and members are not personally liable for the business’s debts.
– Simplicity in Tax Filing:
Filing taxes for an LLC is relatively simpler compared to other business structures. It provides a flexible tax structure, allowing members to choose between pass-through taxation or being taxed as a corporation.
– Required Documents for Incorporation:
- LLC Agreement: Outlines the operating rules and regulations.
- Certificate of Formation: Formal document filed with the state.
- Confidentiality Agreement: Specifies confidentiality terms among members.
C-Corporation:
– Suitable for Start-Up Companies:
C-Corporations are often chosen by start-up companies. They are advantageous for those planning to reinvest profits into the business.
– Double Taxation:
C-Corporations face double taxation as taxes are levied on corporate income and dividends paid to shareholders. Dividends are not deductible.
Required Documents for Incorporation: Start a Business in US
- LLC Agreement: Outlines the operating rules and regulations.
- Certificate of Formation: Formal document filed with the state.
- Confidentiality Agreement: Specifies confidentiality terms among members.
Considerations for Choosing Between LLC and C-Corporation:
- Liability Protection:
– Choose an LLC for personal asset protection against business debts.
- Tax Structure:
– Consider the tax implications and flexibility. LLCs offer pass-through taxation, while C-Corporations face double taxation.
- Business Risk and Nature:
– High-risk businesses may prefer the liability protection of an LLC. Start-ups reinvesting profits may find the C-Corporation structure beneficial.
- Simplicity in Operations:
– LLCs are known for their simplicity in terms of management and regulatory requirements.
- Scalability and Growth Plans:
– Assess future scalability and growth plans. C-Corporations may be more suitable for businesses with expansion goals.
- Physical Presence in the U.S.:
– Evaluate the need for a physical office in the United States. Both LLCs and C-Corporations offer flexibility in this regard.
Method to Register and Start a Business in US
The process of registering a company in the U.S. involves several steps, and it may vary slightly depending on the state and the type of business entity, whether it’s an LLC or a C-Corporation. Here is a general overview of the steps involved:
- Type of Visa:
Determine the type of visa required. While starting a business doesn’t necessarily require a visa, having one allows the business owner to visit the U.S. Options include B1-Visa for a 6-month stay or E2 visa for non-resident entrepreneurs, which can be renewed indefinitely.
- Registered Agent:
Appoint a registered agent in the state of incorporation. The registered agent serves as a liaison between the business owner and the government, accepting and forwarding official documents.
- Name of the Company:
Verify the uniqueness of the chosen company name to ensure it doesn’t infringe on existing company names or trademarks.
- Details of Directors and Members:
Provide details of the company’s directors and members, including names, addresses, and relevant KYC documentation such as passports, address proofs, and ID proofs.
- Federal Employee Identification Number (FEIN):
Obtain the company’s unique identification number, the Federal Employer Identification Number (FEIN), from the Internal Revenue Service (IRS). This number is essential for opening a bank account in the U.S.
- Certification by Apostille:
If the Indian government requires proof of the U.S. company, certify company documents with an ‘Apostille.’
- Opening of Bank Account:
Open a merchant account in the U.S. to facilitate payments. Some banks may require a physical address different from the registered agent’s address, while others may consider the registered agent’s address. Consider banks with branches in both India and the U.S.
- U.S. Phone Number, Address, Website:
Obtain a U.S. phone number and establish an online presence with a website. This provides the business with a means of contact for potential clients in the U.S.
The Way Forward
Establishing a business in the U.S. while being based in India or any foreign country can provide an international platform for the business, foster a cosmopolitan image and open doors to international opportunities. Moreover, presence in the U.S. market enhances the business’s reach and credibility, contributing to global growth.
Note: For precise and tailored guidance based on specific circumstances, it’s recommended to seek assistance from legal professionals or business consultants, such as those from Vakilsearch, who possess expertise in U.S. business registration and can provide accurate guidance throughout the process.
