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

Nowadays, numerous individuals express a strong interest in establishing a business in the United States, as it fosters greater trust among international customers and offers simplified payment facilitation. 

A common initial query for many is whether they can initiate their own company in the U.S. despite not being a resident.

The response is affirmative—indeed, non-residents can launch their own businesses in the U.S. This blog seeks to provide a comprehensive, step-by-step guide to assist you in the process of setting up your business in the United States.

How to register your business in the U.S.? If you're considering incorporating in the U.S., you have three options:

1. Do it Yourself: If you're confident in your understanding of the laws and willing to put in the extra effort, you can choose to incorporate your business independently. However, be cautious, as any mistakes in the filing process could lead to complications.

2. Hire an Expert: You can enlist the services of an expert who will guide you through the process and ensure your business is properly registered. They'll also provide legal advice tailored to your business needs.

3. Do it with Inkle:  We offer a very good pre-incorporation package for cross-border founders of U.S. Registered startups. Check it out here.

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What type of business entity should you choose?

The initial decision is determining the most suitable form for your business. Typically, foreigners opt for two main types of entities in the U.S.:

1. Delaware C-Corporation
2. Limited Liability Corporation (LLC)

Let's explore each of these options in more detail. 

Overview of a Delaware C-Corporation

• Structure: C-Corporation, also known as a closed corporation.
• Liability: Provides limited liability to its members.
• Stock Issuance: Capable of issuing stocks, offering high growth potential.
• Shareholder Limit: No restriction on the maximum number of shareholders.
• Compliance: Involves a more complex compliance process compared to an LLC.
• Tax Treatment: Does not have the flexibility to choose its tax treatment; taxed solely as a corporation.
• Double Taxation: Subject to double taxation, where the corporation is taxed first, followed by individual shareholder taxation on dividends.
• Venture Capital Preference: This is preferred by venture capitalists (VCs) due to the ability to issue preferred stock.
• Preferred Stock Benefits: Ensures a steady and higher income through dividends; preferred stock owners are prioritised in the event of dissolution.
• Shareholder Limitation: There is no maximum limit on the number of shareholders, allowing flexibility for future fundraising.
• Long-Term Vision: Ideal choice if long-term expansion and capital raising are part of the company's vision.

Overview of a Limited Liability Company (LLC)

• Flexibility: Considered the most flexible business structure.
• Benefits:
  - Provides tax advantages.
  - Offers limited liability, protecting personal assets.

• Tax Options: LLCs have the flexibility to choose between individual and corporate taxation.
• "Pass-Through" Entities: Often classified as "pass-through" entities for tax purposes.
• Avoiding Double Taxation: Opting for individual taxation helps avoid double taxation.
  - Income is taxed only at the individual member level, not at the company level.

• Liability: Members' liability is limited.
• Venture Capital Considerations:
  - Venture capitalists are generally hesitant to invest in LLCs.
  - Venture capitalists prefer C-Corporations, as they can issue preferred stock with steady income and ownership rights.

• Preferred Stock Issuance: Limited to C-Corporations, not available for LLCs.
• Fundraising Warning: If raising funds from venture capitalists is crucial, there are more favourable options than choosing an LLC.

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Where in the United States should you choose to register your business?

Once you've decided on the entity type, the next consideration is the State in the U.S. where you want to register your business. Each State has its own laws and regulations for business registration, providing flexibility in choosing your registration location. 

However, Delaware and Nevada are often considered the most foreign-friendly states. These states have relatively relaxed laws, making them particularly accommodating for non-residents looking to start a business in the U.S.

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How to Establish a C-Corporation in Delaware?

Step 1: Choose a Unique Name

Begin by selecting an exclusive name for your C-Corporation that is distinct from existing company names. Confirm name availability in the Secretary of State's database. Optionally, reserve the name for 120 days by paying a $75 fee.

Step 2: Appoint a Registered Agent

Mandatory for every filing, appoint a registered agent authorised to handle legal papers on your behalf. Registered agents typically charge a minimum annual fee. You can select from a list of registered agents or act as your own if physically present in Delaware.

Step 3: File the Certificate of Incorporation

The pivotal step involves filing the certificate of incorporation with the State. The incorporation form requires company name and address, purpose of formation, registered agent details, authorised capital, and promoter information. 

Note that the registered agent's address differs from the company address, necessitating a physical U.S. address.

Access the incorporation form here.

File the certificate with a $89 fee through mail or fax, as online filing is currently unavailable. Alternatively, your registered agent can assist with the filing.

Step 4: Ensure Tax and Regulatory Compliance

1. Obtain an EIN (Employer Identification Number): Obtain an EIN number for tax compliance, with no filing fees. Apply for an EIN here.

2. File Annual Reports:
   - File annual reports by March 1st of each year. Check out Inkle's pricing here.
   - Non-filing incurs a penalty.

Following these steps ensures the establishment of a C-Corporation in Delaware, allowing you to commence business as a U.S. corporation.

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How to Form an LLC in Delaware?

Step 1: Choose an LLC Name

Begin by selecting a unique name for your LLC. Check the availability of the chosen name in the Delaware Secretary of State's database. If the name is available, reserve it for a nominal fee of $75. Please check the name availability here and register it here.

Step 2: Appoint a Registered Agent

Once you've chosen a name, appoint a registered agent, an individual or entity authorised to collect legal papers on your behalf. The RA must have a physical address in Delaware, or you can act as your own if physically located there. 

Step 3: File a Certificate of Formation

After appointing a registered agent:

1. Complete the Certificate of Formation of Limited Liability form, which can be filed by mail or fax.
2. Provide details such as the LLCs' and registered agents' names and addresses.
3. Note that a physical U.S. address is not required; the address of the Delaware-based registered agent is sufficient.

The processing takes approximately 7-14 days.

Step 4: Draft an Operating Agreement

While not mandatory, it's advisable to create an operating agreement—a legal document defining co-owner relationships and the financial structure of the LLC. This agreement can help avoid conflicts by establishing rules that govern the LLC. Include critical points such as members' percentage interest, rights and responsibilities, voting powers, profit and loss allocation, and management structure.

Step 5: Address Tax and Regulatory Requirements

Upon obtaining the Certificate of Formation, adhere to tax laws by applying for:

1. EIN (Employee Identification Number): Required if the LLC has more than one member, even if no employees are present during incorporation. Some members may opt to tax the LLC as a sole proprietorship/individual if no employees are hired.
2. Business License: If your business requires special permits or licenses, obtain them to operate legally.
3. Annual Report: While not mandatory in Delaware, some states may require annual reports.

Step 6: Pay State Taxes

Delaware mandates an annual Alternative Entity Tax of $300, due on June 1 each year. You are required to pay this tax to the Delaware Division of Corporation Franchise Tax Section.

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How to Form an LLC in Nevada?

Step 1: Choose an LLC Name

Initiate the incorporation process by selecting a unique name for your LLC, ensuring it is not already in use. Verify name availability in the Nevada Secretary of State business name database. Once you find a distinct name, reserve it for 90 days by filing a Name Reservation request form. This can be done online on the Secretary of State's web-based business filing portal or by mail, with a filing fee of $25.

Step 2: Appoint a Registered Agent

After choosing an LLC name, appoint a Registered Agent, either an individual or a business entity physically located in Nevada. This agent will accept legal papers on behalf of your LLC. Select a registered agent from the list provided.

Step 3: File Articles of Organisation

File the Articles of Organisation Limited Liability Company with the Nevada Secretary of State. Include essential details such as the LLC's name, address, registered agent's name and address, the registered agent's signature, dissolution date (if any), and the name and address of each member. 

Note that the registered agent's address is distinct from the company's address, requiring a physical U.S. address. You can use a virtual office for this purpose. You can file the Articles of Organisation online/by mail, with a filing fee of $75.

Step 4: Draft an Operating Agreement

Although it is not mandatory to file with the State, it is advisable to create an operating agreement. Courts typically honour this document in case of disputes over the State's default rules. 

Include critical points such as members' percentage interests, rights and responsibilities, voting powers, profit and loss allocation, and management structure.

Step 5: Address Tax and Regulatory Requirements

After the LLC is established, comply with tax requirements by applying for:

1. EIN (Employee Identification Number): Necessary if the LLC has more than one member, even if no employees are present during incorporation. Some members may opt to tax the LLC as a sole proprietorship/individual if no employees are hired. No filing fee is required.
2. Business License: Obtain a state business license, mandatory for every business in Nevada. Renew this license annually, with a license and annual renewal fee of $200.
3. Department of Taxation: Register with The Nevada Department of Taxation (DOT) and The Nevada Employment Security Division if you have employees.

Step 6: File Annual Reports

Every Nevada LLC must file an annual report. The first report is due by the last day of the first month after filing the LLC's articles of organisation. 

Subsequent annual reports are due by the last day of the month after completing 12 months of LLC existence. For example, if your LLC was created in June, subsequent annual reports are due by the last day of June each year.

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How to Establish a C-Corporation in Nevada?

Step 1: Choose a Company Name

Select a distinctive name for your company that is not similar to existing company names. Verify name availability in the business name database and reserve it for 90 days for a $25 fee. You can file the reservation request here.

Note: Name reservation is optional; the name will automatically be reserved when incorporated.

Step 2: Appoint a Registered Agent

Mandatory for legal purposes, you are required to appoint an RA who can accept legal papers on your behalf. If physically located in Nevada, you can act as your own registered agent.

Step 3: File Articles of Incorporation

The key step involves filing the Articles of Incorporation with the Nevada Secretary of State. The required details in the form include the company name and address, signature of the registered agent, name & address of the registered agent, authorised capital, and names and addresses of promoters and directors. 

Note: The registered agent's address is distinct from the company's address, requiring a physical U.S. address. Virtual offices such as Opus Virtual Offices, Northwest, and DaVinci Virtual Offices can provide an address and a local U.S. phone number. Filing fees depend on the authorised capital and can be filed online or through your registered agent.

Step 4: File the List of Officers

Within one month of incorporation, file the first list of officers, including details of officers, directors, registered agent, and the state business license application. The form will be sent to your registered address after incorporation, with a filing fee of $125. 

Step 5: Address Tax and Regulatory Requirements

Comply with tax and regulatory requirements applicable to all companies:

1. EIN (Employer Identification Number): Mandatory for tax compliance; obtain an EIN number here with no filing fees.
2. Business License: Depending on your business type, obtain a business license if your company requires a permit or license.

Following these steps ensures the establishment of a C-Corporation in Nevada, allowing you to commence business as a U.S. corporation.

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Other Legal Compliance Requirements for C-Corps Applicable Across All States

Outlined below are essential regulatory obligations applicable to all C-corporations:

Maintenance of Corporate Records Book: Ensure the upkeep of a comprehensive corporate records book at your principal office, containing crucial documents such as:

• Minutes of directors' meetings
• Minutes of shareholders' meetings
• Stock certificates
• Additionally, include other pertinent documents related to your company.

Development of Corporate Bylaws: Draft internal corporate bylaws, serving as a document outlining your company's operational rules. While not mandatory for filing with the State, creating corporate bylaws is recommended as it:

• Establishes operational guidelines for your corporation
• Validates the legitimacy of your corporation in the eyes of external parties
• Confirms the legitimacy of your business, preventing misconceptions about its authenticity.

Appointment of Initial Directors: Promoters are required to appoint the initial directors responsible for managing the business. They will serve on the board until the first shareholders' meeting. Create an Incorporator's Statement specifying the names of the directors. Although not filed with the State, this statement should be retained at the principal office in the company's record book.

Conducting the First Board of Directors' Meeting: Following the incorporation of your company, conduct the inaugural Board of Directors' meeting. During this meeting, you can:

• Appoint corporate officers
• Adopt corporate bylaws
• Select a corporate bank
• Authorise the issuance of stock
• Adopt an official stock issuance form
• Set the corporation's fiscal year
• Adopt a company seal
• Address any other matters pertinent to your company.

Record the minutes of the meeting, ensuring they are documented and signed by all directors involved.

In the United States, there are two primary types of taxes:

1. Federal Tax
2. Franchise Tax

Federal Tax is the amount paid to the central government, calculated based on your annual income.

Franchise Tax varies across states and is contingent on your company's sales. Certain states, like Nevada, grant exemptions for in-state sales. Delaware, on the other hand, exempts services from franchise tax.

We trust that this information proves beneficial as you establish your business in the U.S. Please contact us if you require help in this endeavour, and we will offer personalised support.

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