Get your business up and running in the US in a matter of days.
Whether you live in Mumbai or Bangalore, you can start a US LLC from anywhere in India.
As a non-resident, you don’t ever have to visit US to start a company there.
Surprisingly over the years, forming an LLC in the US has become an attractive option to many founders in India due to its tax benefits and currency conversion benefits.
In this guide, you will learn everything there is to know about starting and operating a US LLC.
Let us go through it step-by-step.
After deciding to go ahead with a Limited Liability Company, your first task is to choose a state to register the LLC.
You can technically choose ANY of the 50 states in the US.
But, should you? Nope.
You will want to spend some time thinking about it.
Here’s a good rule of thumb: If you have an office or full-time employees located in a particular state, form your LLC in that state.
But, most founders from India start a freelance business, creative agency, SaaS product or an e-commerce business. In these cases, you may not have a physical presence in the US. So, it is recommended that you form the LLC in Delaware or Wyoming.
Why these 2 states?
In short, these 2 states are very business friendly are widely popular among founders from India. Several startups from India are formed in these 2 states with StartGlobal. So, I know it’s a popular choice :)
Choosing a business name shouldn’t be hard. Let your creative juices flow.
However, the Secretary of State has some guidelines regarding the name:
After deciding the name, follow the steps below:
The name that you have chosen is considered ‘registered’ only after you have filed the LLC Articles of Organization.
Before you do that, you would need to hire a registered agent.
Secretary of State requires every LLC to have a registered agent located in the state of formation.
Who and what is a registered agent?
Registered agent is an individual or an authorized corporation that has a physical address in the state that accept official notices on behalf of your LLC.
Since you are a resident of India, US government needs a local representative to be physically present in the US. They are the ones who receive notices from the State, notices of lawsuits, legal summons, state franchise tax notices etc on your behalf.
If you have friends or family living in the state you chose, they can be your registered agent. But being a registered agent requires them to be available 5 days a week and their contact details will be made public.
Why trouble your loved ones, when you can pay for professional registered agent services?!
So, find a registered agent and keep their details handy because you will need it while filing articles of organization and applying for EIN.
When it comes to the daily operations of the LLC, you can decide to have a manager run the operations or the members themselves.
If you are forming a single-member LLC, you are most likely to be the one running the entire show.
In a multi-member LLC, you can also appoint one of the members as the manager.
But sometimes, when the business is too large and diverse, you need some external help for professional management.
This must not be a tough decision to make. Most business owners already know who should manage the LLC.
Whatever you decide, you will need to mention this in the LLC's Articles of Organization and in the operating agreement.
After you file the Articles of Organization and it is accepted by the Secretary of State, your LLC is officially formed.
Articles of Organization is like the business' birth certificate.
They contain basic details about the LLC, such as:
You can upload the articles to the websites of the Secretary of State in Delaware & Wyoming.
After you have filed the articles of organization, you'll get a stamped "filed" copy of the document along with the filing receipt in a couple of weeks.
After the LLC is approved, you can set the ground rules for an LLC in a document called as Operating agreement.
Even if you are a single founder, it is always recommended to create an operating agreement as it is often referenced by financial institutions and courts.
In most states, it is not mandatory to have an operating agreement. But it is always a good practice to maintain one.
Operating agreement for non-residents usually includes:
You may have to reach out to lawyers to prepare an operating agreement customized for your needs.
Next thing to do: request for an EIN, Employer Identification Number.
It's also known as Federal Tax Identification Number.
EIN is how the IRS identifies your business for tax purposes.
You need an EIN:
Here's how you can apply for an EIN.
There are 2 types of income taxes:
For non-residents living in India, there are no state income taxes in Delaware and Wyoming. That’s a relief.
Federal income taxes are levied based on multiple factors. It’s quite complicated. So, we have created a tax estimator that calculates an estimated tax that your business owes.
Incomes are of 2 types ECI (Effectively connected income) and FDAP(Fixed, Determinable, Annual and Periodic income). ECI generally refers to the income generated by a business, whereas FDAP usually refers to passive incomes like rents, dividends, interest, royalty etc.
When it comes to calculating federal income tax, IRS treats ECI and FDAP differently. ECI incomes are generally taxed at different tiers ranging from 10% to 37%. FDAP incomes are generally taxed at 30%.
However, tax rates vary based on the tax treaty between US and India.
According to the tax treaty, ECI incomes are exempt from US federal taxes. And FDAP incomes are taxed at 15% (Interest), 25% (Dividends) and 15% (Royalties).
You can pat yourself on the back and be confident that you have laid a solid foundation for your business.
Next thing to do is to open a bank account.
Having got EIN and LLC formation documents, you are in a comfortable position to apply for a business checking account.
Banking platforms like Mercury and RelayFi are excellent choices for startups to open an FDIC-insured business bank account.
Alternatively, you can also try Wise or Payoneer to open an online payment account.
These platforms almost always allow founders from India. So, that’s awesome.
One more nice addition is to get a US phone number that forwards calls to your local India number. That way, you can share a US phone number with your customers.
That’s pretty much all you have to do to form a full-fledged LLC from India. Good luck on your journey, it’s a wonderful road ahead.
If you find this entire process to be slightly complicated, StartGlobal offers a formation package specially designed for founders residing in India.
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