A US Limited Liability Company (LLC) is the most popular business structure for Indian entrepreneurs looking to establish a US presence — whether to sell on Amazon US, serve American clients, or raise capital from US investors. The process can be completed entirely online from India. However, understanding the tax and compliance implications is essential before you form.
Delaware vs Wyoming: Which State to Choose?
| Factor | Delaware | Wyoming |
|---|---|---|
| Annual fee | $300 (franchise tax) | $62 minimum |
| Privacy | Moderate | High (no public member list) |
| VC / investor preference | Very high (most VCs prefer Delaware C-Corp) | Lower |
| Best for | Startups raising funding, larger companies | Small businesses, consultants, privacy-focused |
| Court system | Renowned Court of Chancery | Standard |
For most Indian freelancers, consultants, and small e-commerce businesses, Wyoming LLC is the practical choice due to low cost and privacy. For startups seeking US VC funding, Delaware C-Corp is the preferred structure.
The Formation Process
- Choose state and entity type (LLC or C-Corp).
- Appoint a Registered Agent in the state — mandatory legal requirement. Annual cost: $50–$200.
- File Articles of Organization (LLC) or Articles of Incorporation (C-Corp) with the Secretary of State. Filing fees: $90–$500 depending on state.
- Obtain EIN (Employer Identification Number) from the IRS — required for banking, tax filings, and contracts. Non-US residents apply via Form SS-4 (international fax or mail).
- Prepare Operating Agreement (LLC) or Bylaws + Shareholder Agreement (C-Corp).
- Open a US business bank account — Mercury, Relay, or Brex are popular options for non-US resident owners.
US Tax Obligations for Indian Owners
- Single-member LLC (non-US resident): Treated as a disregarded entity — generally no US federal income tax if there is no US-source income (Effectively Connected Income / ECI). However, Form 5472 and Form 1120 pro-forma must be filed annually.
- Multi-member LLC: Treated as a partnership — files Form 1065. Non-US resident members report their share of US-source income on Form 1040-NR.
- C-Corp: Subject to 21% US federal corporate tax on profits. Dividends to non-resident shareholders subject to 30% withholding tax (reduced under DTAA).
- State income tax: Varies by state. Wyoming has no state income tax — an advantage for Wyoming LLCs.
Indian Tax Implications
- Indian residents (ordinarily resident) are taxed on global income in India — including income from a US LLC or C-Corp.
- Profits repatriated from the US LLC to India are subject to Indian income tax if you are a resident.
- The India–USA Double Tax Avoidance Agreement (DTAA) provides relief — taxes paid in the US can be claimed as a foreign tax credit in India.
- FEMA compliance required for investment in foreign entities — LRS remittance or automatic route as applicable.