How to start a company in the U.S. from India? (Step-by-step guide)

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Nowadays, many people are keen to set up a business in the United States. It builds more trust in international customers. Also, the facilitation of payments is much more easier.

But the first question that arises in the mind of people is can they start their own company in the U.S. being a non-resident?

Well, the answer is Yes. Even if you are a non-resident you can start your own company in the U.S.

This article will give you a step-by-step guide to help set-up your own business in the U.S.

Article Overview

  1. How to get your business registered?
  2. Which form of entity should you make?
  3. In which state in the US should you register?
    1. How to incorporate in Delaware
    2. How to incorporate in Nevada
  4. Other Legal Compliances
  5. Tax Compliances

How to get your business registered in the US?

If you intent to incorporate in the US, you can get it done through the following 3 ways:-

  1. Hire an Expert: You can hire the services of an expert who will handhold you at every step and get your business registered. He will also give you expert legal advice based on the needs of your business.
  2. Do it yourself: If you think you know all the laws and are willing to take that extra effort – you can go ahead and incorporate it yourself. However, be extremely careful while setting up as any wrong filing may land you in trouble.
  3. Incorporation through Stripe Atlas: A new and upcoming option is incorporating your business through Stripe Atlas. Stripe is a payment gateway which helps you receive international payments and Stripe Atlas is one of their service through which they get your business incorporated. Although their charges for business incorporation maybe lesser than that of an expert, the only drawback here is that Stripe does not incorporate all forms of entities and only incorporates a C-Corp and that only in one state i.e. Delaware.

Which form of entity should you make?

The first thing to decide is which kind of entity are you going to form for your business. You need to choose which kind of entity is the most suitable for you.

Popularly there are two kinds of entities that foreigners prefer to form in U.S.namely,

  • Limited Liability Corporation- LLC
  • C-Corporation

Let us have a look at the two in detail.

Limited Liability Corporation (LLC)

A LLC is the most flexible business structure. It gives you tax benefits, limited liability and legal protection for your personal assets.

A LLC has the option to choose whether to be taxed as an individual or a corporation. Usually named as “Pass-through” entities.

Here, if you choose to be taxed as an individual, you can avoid double taxation. That means the income of the company is taxed as the income of the members only and the company does not pay any tax on it as a separate entity.

Whereas in corporation income is taxed twice. First, in the hands of the company and then in the hands of the individual.

The liability of the members here is limited. But it is also one of the major reasons why venture capitalists do not prefer to invest in a LLC. Moreover venture capitalists prefer to take preferred stock (just like preference shares) which ensures steady income and ownership rights as well, which can be issued by a C-corporation only.

Therefore, if you plan to raise funds for your business from the venture capitalists then it may not be a very good idea.

C-Corporation

A C-Corporation or the closed corporation is the common business structure in U.S. where the liability of the members is limited. It can issue stocks and thus has very high potential for growth. Additionally there is no restriction on the maximum number of shareholders.

The compliance procedure of a C-Corporation is more extensive as compared to LLC. You will have to maintain books of accounts and comply with other rules and regulations.

C-Corporation does not have the choice as to how it wants to get taxed. It will be taxed as a corporation only.

Thus, it is subject to double taxation wherein the Corporation is first taxed as a separate entity and then the dividend is taxed in the hands of individual as well.

However, if you want to raise funding in the future you might want to opt for C-corporation as VCs prefer C-corp.

Only C-corporation can issue preferred stock which is the most sought after investment for VCs. It ensures steady and higher income through dividends.

Also, in case of dissolution preferred stock owners are paid before common stock owners which is an added advantage.

Moreover C-corporation does not have a limit on the maximum shareholders. Thus, in case there is need for fund, more shareholders can be added.

Therefore, the choice of entity to form depends entirely on the long term vision of your company. If you want to expand in the future and intend to raise capital in the long run then you should opt for C-Corporation.

In which state in US should you register?

Once you know which entity to form the next thing you need to decide is the place where you want to set it up.

In U.S. every state has its own laws and regulations for registration of a business. You can register anywhere.

However, the state of Delaware and Nevada are considered to be the most foreign friendly. The laws are pretty relaxing for non-residents who want to start their business in U.S.

How to incorporate in Delaware?

The procedure to incorporate the 2 most popular forms of entities in Delaware i.e. LLC & C-Corporation is explained below:

How to incorporate a LLC in Delaware?

Step 1: Select a name for your LLC

The first step towards registration of your business is selecting a name for your company.

You need to find a suitable name for your company and then check whether it is already taken or still available. If it is already taken then you need to find another name that is distinct and suitable for your company.

But if you get lucky such that the name you chose is not yet taken, then you should immediately reserve the name for a nominal fee of $75. You can check the availability of the name here. And register your company name here.

Step 2: Appoint a registered agent

After you have selected a name for your LLC, the next step is to appoint a registered agent. A registered agent can be an individual or a business entity who is authorized to collect legal papers on your behalf.

The registered agent should have a physical address in Delaware. Even you can be your own registered agent if you are physically located in Delaware. You can choose from the list of registered agents here.

Step 3: File a certificate of formation

Now that you have appointed a registered agent, the next thing to do is to fill the form for Certificate of Formation of Limited Liability. The form can be filed by mail or fax.

In the form you need to fill the following details,

  • LLC’s name.
  • Name and address of the registered agent that you have appointed.

What you need to note here is that you do not need a physical address in U.S. to register in Delaware. The address of your registered agent based in Delaware is enough.

The filing fee is $90. The process of application takes approximately 7-14 days.

Step 4: Prepare an operating agreement

An operating agreement is a legal document that defines the relationship with your co-owners and establish the financial structure of your company.

Although it is not mandatory to make an operating agreement but it is advised to make one.

In the absence of an operating agreement, the state’s default operating rules shall apply. Therefore, it is advised to make an operating agreement so that if ever there is a dispute the courts will honour your agreement over the default state rules.

In the operating agreement, some key points that should be included are,

  • The members’ percentage interest in LLC
  • The rights and responsibilities of members
  • The voting powers of members
  • Basis of allocation of profits and losses of LLC
  • Management of LLC
  • What happens when a member wants to sell his/her interest
  • What happens in case of death or disability of a member

These are just some of the clauses that must be considered while making the operating agreement. Besides this you can also incorporate other clauses depending upon your business requirement.

Step 5: Fulfill Tax and Regulatory requirements

Once you have obtained the Certificate of Incorporation you need to comply with the tax laws. To comply with the tax laws you need to apply for the following:

1. EIN- Employee Identification Number

If you have more than one member in the LLC then you need to apply for EIN, even if there are no employees while incorporation.

If you are a sole member then you can opt to tax your LLC as a sole proprietorship/individual. But this is applicable only if you won’t be employing any employees.

2. Business License

If your business requires you to obtain any special permit or license to operate then you need to obtain that license to carry on your business.

3. Annual report

In Delaware it is not compulsory to file annual returns.

Step 6: Pay mandatory State Tax

The state of Delaware requires you to pay an annual tax of $300 as Alternative Entity Tax. It is due on June 1 of every year and is paid to the Delaware Division of Corporation Franchise Tax section.

How to incorporate a C-Corporation in Delaware?

Step 1: Select a name for your C-Corporation

The first thing to do is to find a unique name for your company. It should not be similar to other existing company names. You can check the availability of the name in the database of Secretary of State.

Once you have found a name for your company you can reserve the name for 120 days by paying a $75 fee.

You can also skip reservation of name, as when you register your company it will be automatically registered while incorporation.

Step 2: Appoint a registered agent

For every  filing it is mandatory to appoint a registered agent who is authorized the legal papers on your behalf. They usually charge a minimum annual fee for the same.

You can find a list of registered agents here. You can also act as your own registered agent if you are physically present in Delaware.

company in delaware-new

Step 3: File the certificate of Incorporation

This is the main step where you have to file the certificate of incorporation with the State.

Here you have to file the incorporation form wherein you have to fill the following details:

  • Company name and address
  • Purpose of formation of company
  • Name and address of registered agent
  • Mention authorized capital
  • Name and address of the promoters

You can find the incorporation form here- https://corp.delaware.gov/corpformscorp09.shtml

What you need to note here is that the address of registered agent is different from your company address. Therefore you need a physical address in U.S. to register as your address.

There is a concept of virtual offices in U.S. who provide you with an address where you can receive all your mails and they also provide you with a local U.S. phone number.

Some of the virtual offices are:

The filing fee is $89 and it can be filed by mail or fax only. Currently, the option to file it online is not available.

Hence, you can also ask your registered agent to file it for you.

Step 4: Comply with Tax and Other Regulatory Requirement

There are some additional requirements that need to be met for compliance purposes.

1. EIN: Employer Identification number

It is mandatory to get an EIN number for tax compliance purpose. There is no filing fees for the same. You can file here to get your EIN number.

Once you are done with all the regulatory compliances you will have an established corporation in Delaware and can start your business as a U.S. corporation.

2. File annual reports

You have to file the annual reports of the company every year by 1st March. The fee for filing of returns is $50.

You can file the returns here. The penalty for non-filing of returns is $100.

How to incorporate in Nevada?

The procedure to incorporate the 2 most popular forms of entities in Nevada i.e. LLC & C-Corporation is explained below:

How to incorporate a LLC in Nevada?

Follow the step-by-step guide given below to form a LLC in Nevada.

Step 1: Select a name for your LLC

The first step to incorporation is to choose a name for your LLC. It should be a distinct name which is not already taken up by any other business.

Once you have selected a name, check it for availability on the Nevada Secretary of State business name database. When you have found a distinct name, you can reserve it for 90 days by filing a Name Reservation request Form.

Application can be filed online on the Secretary of State’s web based business filing portal or by mail. The fee for filing is $25.

Step 2: Appoint a registered agent

After you have chosen a name for your LLC, the next thing to do is to appoint a Registered Agent. A registered agent may be an individual or a business entity who is physically located in Nevada.

The agent acts as your representative who is authorized to accept the legal papers of your LLC on your behalf. You can choose from the list of registered agents.

Step 3: File Articles of Organization

The next thing to do is to file the Articles of Organization Limited Liability Company with the Nevada Secretary of State. It must have the following details:

  • The LLC’s name
  • The LLC’s address
  • The name of the registered agent
  • The address of the registered agent
  • The signature of the registered agent
  • The LLC’s dissolution date (if any)
  • The name and address of each member

What you need to note here is that the address of registered agent is different from your company address.

Therefore you need a physical address in U.S. to register as your address.

There is a concept of virtual offices in U.S. who provide you with an address where you can receive all your mails and they also provide you with a local U.S. phone number.

Some of the virtual offices are:

You can file the Article of Organization by using the Secretary of State’s business filing portal or by mail.

The fees for filing is $75.

Step 4: Prepare an Operating Agreement

It is not mandatory to file an operating agreement with the State. Although it is advised that you should make one as in times of dispute the courts will honour your operating agreement over the State’s default rules.

The State’s rules are applicable in case of absence of LLC’s own operating agreement.

In the operating agreement, some key points that should be included are,

  • The members’ percentage interest in LLC
  • The rights and responsibilities of members
  • The voting powers of members
  • Basis of allocation of profits and losses of LLC
  • Management of LLC
  • What happens when a member wants to sell his/her interest
  • What happens in case of death or disability of a member

These are some of the points that should be included but apart from this you can also include other clauses according to your business.

Step 5: Comply with Tax and Regulatory Requirement

Once the business is set you need to comply with the tax requirements of the State, for which you need to apply for the following:

1. EIN- Employee Identification Number

If you have more than one member in the LLC then you need to apply for EIN, even if there are no employees while incorporation.

If you are a sole member then you can opt to tax your LLC as a sole proprietorship/individual. But this is applicable only if you won’t be employing any employees.

There is no filing fee for applying.

2. Business License

You need to get a business license for operation as in Nevada every business must compulsorily get a state business license.

This license needs to renewed annually. The license and annual renewal fee is $200.

3. Department of Taxation

If you have employees then you need to register with The Nevada Department of Taxation (DOT) and The Nevada Employment Security Division.

Step 6: File Annual Reports

Every LLC in Nevada has to file an annual report. So the next step is to check if your business is due to file annual reports.

The first annual report is due by the last day of the first month after you have filed LLC’s articles of organization.

Subsequent annual lists will be due by the last day of the month after the completion of 12 months of your LLC. For example, if you created your LLC in June, each subsequent annual list is due by the last day of June.

How to incorporate a C-corporation in Nevada?

Step 1: Select a name for your company

You need to select a unique name for your company. The name should not be similar to any existing company’s name.

You can search for the availability of your company’s name in the business name database.

Once you have found a name for the company you can reserve the name for 90 days for a fee of $25. You file the reservation request here.

You can also skip to reserve the name since when you incorporate the name it will be automatically be reserved.

Step 2: Appoint a registered agent

The next thing to do is to appoint a registered agent who can accept legal papers on your behalf.

It is mandatory to appoint a registered agent. You can choose from a list of registered agents here.

If you are physically located in Nevada you can be your own registered agent.

Nevada- (C-Corporation)

Step 3: File Articles of Incorporation

This is the main step of incorporation. Here you have to file the articles of incorporation with Nevada Secretary of State. The details that need to be filled in the form are as follows:

  • Company name and address
  • Signature of the registered agent
  • Name and address of registered agent
  • Mention authorized capital
  • Name and address of the promoters
  • Name and address of the directors

You can find the incorporation form here.

What you need to note here is that the address of registered agent is different from your company address. Therefore you need a physical address in U.S. to register as your address.

There is a concept of virtual offices in U.S. who provide you with an address where you can receive all your mails and they also provide you with a local U.S. phone number.

Some of the virtual offices are:

The filing fee depends upon the authorized capital of the company and it can be filed by online here. You can also ask your registered agent to file it for you.

Step 4: File the List of Officers in your company

Within one month of incorporation you need to file the first list of officers wherein you have to mention,

  • List of officers in your company
  • List of directors
  • Registered agent
  • State business license application

This form will be sent to you on your registered address after your incorporation.

The filing fees in $125

You have to file the List of officers every year. The form of List of officers can be found here.

Step 5: Other Tax and regulatory requirements

You need to comply with other tax and regulatory compliances applicable to all companies.

1. EIN: Employer Identification number

It is mandatory to get an EIN number for tax compliance purpose. There is no filing fees for the same.

You can file here to get your EIN number.

Once you are done with all the regulatory compliances you will have an established corporation in Delaware and can start your business as a U.S. corporation.

2. Business License

Depending upon the type of business you may have to obtain a business license if your company is doing a business that needs permit/license.

Other Legal Compliances for C-Corp applicable for all states

Listed below are some general regulatory compliances that all C-corporations need to take care of.

1. Maintainance of Corporate Records Book

Keep a record book of your company at your principal office.

It should have all the important papers related to your company, such as:

  • Minutes of directors’ meeting
  • Minutes of shareholders’ meeting
  • Stock certificates

Along with these you can keep all the other important papers related to your company.

2. Prepare Corporate Bylaws

Corporate Bylaws is the internal document of your company that states the rules of operation of your company.

It is not to be filed with the state but is advised to make one as it,

  • Establishes your corporation’s operation rules
  • Establishes legitimacy of your corporation in the eyes of third parties.

It ensures that yours is a running business and not a fake one.

3. Appoint the first directors of the company

The promoters need to appoint the first directors of the company who will be responsible for managing the business.

They will serve on board until the first shareholders meeting.

You need to make an Incorporator’s Statement, in which you will mention the names of the directors. It need not be filed with the State but should be kept at the principal office in the company’s record book.

4. Hold your first Board of Directors’ meeting

After the incorporation of your company you need to hold the first Board of Directors’ meeting.

Here you can appoint

  • Corporate officers
  • Adopt Bylaws
  • Select a Corporate Bank
  • Authorize issuance of stock
  • Adopt an official stock issuance form
  • Set the corporation’s fiscal year
  • Adopt a company seal

And any other matter that may be relevant for your company.

The minutes of the meeting should be recorded and signed by all the directors.

Tax Compliances

There are two types of taxes in U.S.

  • Federal Tax
  • Franchise Tax

Federal Tax is the tax you pay to the central government which is calculated on your income at the end of year.

Franchise Tax varies from state to state and depends upon the sale of your company. In some states such as Nevada it is exempt if you are selling within the state. In Delaware services are exempt from franchise tax.

We hope this article helps you in setting up your business in U.S. However, if you need assistance in the same, kindly write to us through the following form and we’ll assist you personally.

Karan is CA by Qualification with the rare distinction of being awarded All India Rank 22. He is also the founder of this website and is an expert in helping people save Taxes legally. He can be reached by booking an appointment for Tax Advisory Service.