How to Form a Delaware Company from India: LLC or C-Corp

Founders in India setting up a US company face two decisions before any paperwork: which kind of entity, and how it relates to anything they already run at home.

Both are easier to get right at the start than to change later, and the side most often planned late is the Indian one. Holding shares abroad brings reporting obligations that attach to the founder personally rather than to the company.

This covers the two entity routes and who each suits, how a US parent differs from a US subsidiary, the exchange control position on the Indian side, and the transfer pricing exposure that arises as soon as the two entities deal with each other.

Two Paths: LLC or C-Corp?

Indian founders typically form a US entity for one of two reasons: to access US venture capital or to collect payments in USD from US customers. The right entity depends on which goal matters more.

Option A: Delaware C-Corporation for Indian Founders

Why VCs Require a Delaware C-Corp

US institutional investors (VCs, angels through platforms like AngelList) almost universally require:

• Delaware incorporation (Court of Chancery, established case law)
• C-corp structure (VCs cannot invest in pass-through entities due to UBTI issues)
• Preferred stock authorization (usually at least 10 million authorized shares initially)
• Standard investor rights: information rights, pro-rata, anti-dilution

Steps to Form a Delaware C-Corp from India

• Choose a unique company name and verify availability at corp.delaware.gov
• Appoint a Delaware registered agent ($50-$200/year)
• File Certificate of Incorporation: authorized shares (typically 10M common + space for preferred), par value ($0.0001 standard)
• Get EIN via Form SS-4 by fax (international founders without SSN), 4 business days
• Draft bylaws and board resolutions
• Issue founder shares, do this immediately at formation, not months later
• File 83(b) election within 30 days if shares are subject to vesting
• Open US bank account (Mercury is the standard for Indian founders)
• Set up US payment processing (Stripe US requires a US entity)

Founder Share Structure

Standard for early-stage Delaware C-corp:

• Authorize 10,000,000 shares of common stock, par value $0.0001
• Issue 8,000,000-9,000,000 to founders at par value ($100-$900 total, important to do at formation before the company has value)
• Reserve 1,000,000-2,000,000 as option pool for future employees
• Attach a 4-year vesting schedule with 1-year cliff to all founder shares

Option B: Delaware LLC for Indian Founders

When an LLC Makes More Sense

• You are bootstrapping and have no VC plans in the next 2-3 years
• You want simpler annual compliance (no corporate formalities, no board)
• You are earning US revenue and want to pass profits through to India
• You want to avoid Delaware franchise tax complexity of C-corps with large authorized share counts

Steps to Form a Delaware LLC from India

• File Certificate of Formation ($90), simpler than C-corp incorporation
• Appoint registered agent
• Draft Operating Agreement
• Get EIN via Form SS-4
• Open Mercury or Relay account
• File Form ODI in India before remitting capital (see FEMA section below)

Operating Structure: US Parent or US Subsidiary?

Structure 1: Indian Company as Subsidiary of US Parent (Flip)

'Flipping' means restructuring so the US C-corp becomes the parent of your Indian operations. This is the standard structure for Indian SaaS startups raising US VC.

• US Delaware C-corp owns 100% of Indian Private Limited Company
• Revenue is booked at the US parent, IP held at US parent
• Indian entity acts as a service/development center (charges intercompany service fees)
• Transfer pricing rules require arm's length pricing on intercompany transactions

Structure 2: Indian Parent with US Subsidiary

If you are not flipping, your Indian company is the parent and the US entity is a subsidiary:

• US LLC or C-corp is a wholly owned subsidiary of the Indian company
• Indian parent owns the IP and receives royalties from the US entity
• Better for companies focused on Indian market with US as secondary market
• Avoids the complexity and cost of flipping

FEMA Compliance for Indian Residents

Indian residents investing in or forming a US entity must comply with FEMA/RBI regulations:

• Liberalised Remittance Scheme (LRS): Individuals can remit up to $250,000 per financial year without RBI approval
• Capital invested in a US LLC or C-corp counts as an Overseas Direct Investment (ODI)
• File Form ODI Part I with your AD bank before the investment
• File Annual Performance Report (APR) each year the investment exists
• Income from the US entity is taxable in India as foreign income

Transfer Pricing: The Invisible Risk

If your US entity and Indian entity transact with each other (services, IP licensing, etc.), transfer pricing rules apply in both India and the US. Both tax authorities require arm's length pricing:

• India: Section 92 of the Income Tax Act. Form 3CEB filing required if international transactions exceed INR 1 crore.
• US: IRC Section 482 requires arm's length pricing on all intercompany transactions
• Document intercompany pricing before transactions, not after

Frequently Asked Questions

Written by

Anu Gupta, CA, EA, B.Tech

Anu works with US businesses on tax and entity questions at Profitjets, from choosing a structure to the filings that follow it. She writes about the decisions owners make once and then live with for years. Connect on LinkedIn