As more Indian entrepreneurs expand globally, the United States remains a prime destination for incorporation, scaling, and funding. The Indian population is the second-largest group of immigrant entrepreneurs in the U.S. Several entrepreneurs are also keen on registering a company in the USA from India.
A recent study even found that 26% of U.S. tech startups founded by immigrants had Indian founders, and Indian Americans have founded or co-founded 72 of the 358 U.S. unicorns since 2018. It wouldn’t be wrong to say that the Indian diaspora is among the leading immigrant groups in U.S. business ownership.
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Despite the impressive stats, many Indian entrepreneurs make mistakes during the U.S. business setup process—leading to regulatory issues, tax inefficiencies, and operational delays. It is possible to undertake a company registration in the USA from India, but not without hurdles. Several of these issues/hurdles can be addressed by hiring a US Accounting Firm in India. Here’s Profitjets explaining the most common errors:
Common Mistakes Indians Make while Registering a Company in the USA from India (2025)
U.S. business law is radically different from India’s. Each state enforces its own set of rules regarding registration, tax, employment, and compliance. Which can be daunting. Several new founders do not seek experienced U.S. legal and tax counsel early, opting instead for generic online services or hearsay advice. This amplifies errors and compliance oversights, especially for nonresident founders unfamiliar with the American regulatory environment. Here’s a comprehensive list of the most common pitfalls Indian founders should watch for:
1. Choosing the Wrong Business Structure
Many Indians default to a C‑Corporation (due to VC preference) or LLC (due to simplicity), without evaluating long-term tax implications, ownership goals, or compliance complexity. This mismatch can lead to double taxation, reduced investor appeal, or legal exposure.
Consider consulting a cross-border tax/legal expert to decide between LLC, C‑Corp, and S‑Corp based on your startup’s scale, funding, and ownership plans.
2. Choosing the Wrong State for Incorporation
Delaware is the U.S. startup favorite, but it isn’t always optimal. Founders often overlook the importance of evaluating incorporation costs, tax rules, and compliance requirements in states such as Wyoming, Nevada, Florida, or their intended operating state.
If the business operates mainly in another state, this mistake can double annual fees, filing requirements, and compliance obligations. For example, incorporating in Delaware but operating in California could require dual registration, triggering extra fees and filings.
Selecting a state based on factors such as business operations, tax climate, ease of compliance, and investor preferences can help mitigate compliance risk.
3. Misunderstanding IRS requirements
An EIN is essential for tax filings, hiring employees, and opening a bank account. Some founders overlook this step or assume incorporation automatically includes EIN issuance. Delays in obtaining an EIN (especially without an SSN) can stall the business launch.
Applying for an EIN immediately after incorporation, through IRS Form SS-4 or with expert help, can help skip this error easily.
4. Using Informal or Non-Compliant Addresses
A U.S. mailing address is required for EIN, bank account, state registration, and legal correspondence. Some founders rely on friends’ addresses or virtual offices without ensuring they meet legal and IRS standards.
Failing to comply with the requirement for a registered agent in the state of incorporation can result in missing legal notices, non-compliance penalties, or even losing good standing. An address that does not meet legal and IRS standards could even result in the suspension of a business.
Use a registered agent service or reputable virtual business address provider that ensures mail handling, compliance, and real-time forwarding.
5. Not Prepared for U.S. Banking Requirements
Many founders rush into incorporation, expecting to open a business bank account remotely or quickly, but U.S. banks conduct strict KYC/AML checks. Lack of proper documentation, no U.S. physical presence, or unclear business purpose can cause rejection or months-long delays.
Stay prepared with incorporation documents, EIN, U.S. address, and owner IDs well in advance. Consider using fintechs like Mercury or Relay, or working with banks experienced in onboarding non-residents.
6. Assuming Incorporation is “Set and Forget”
Incorporation, although complex, is only the beginning. Failing to file annual reports, franchise tax returns, or IRS disclosures (like Form 5472 or BOI under the CTA) can lead to penalties, administrative dissolution, or IRS scrutiny. There are mandatory filings even when there’s no revenue.
This mistake can be mitigated by maintaining a compliance calendar for:
- State-specific Annual reports and mandatory Federal reports
- Check if franchise taxes are applicable
- IRS filings specific to foreign-owned entities, such as 5472
- Beneficial Ownership Information (BOI) filings (as per 2025 rules)
7. Underestimating Cultural & Documentation Differences
Many founders rely on informal agreements, WhatsApp discussions, or minimal contracts. In the U.S., proper documentation, like maintaining NDAs, MSAs, contracts, and policies, is essential for legality, fundraising, and reputation.
Using outdated templates or failing to comply with unique state-level documentation rules often causes delays or outright rejection of incorporation filings. Errors like missing information or incomplete forms are common.
Hiring an American attorney or advisor to draft/review contracts, employee agreements, NDAs, and equity paperwork eliminates the possibility of this mistake.
8. Lack of U.S. Finance/Tax Understanding
Managing U.S. finances without local guidance can lead to under-reported income, missed deadlines, incorrect expense classification, and failed audits. Many Indian founders are unaware of the significant differences between U.S. GAAP, payroll, and tax rules and Indian standards.
Incorrect or late federal and state tax classification can lead to costly IRS penalties and unwanted tax burdens, such as double taxation or the wrong default entity status.
Not complying with employment law, payroll requirements, or state business licenses can result in fines, lawsuits, or suspension.
Hiring a virtual CFO or U.S. accountant experienced in cross-border operations to handle bookkeeping, payroll, compliance, and strategy is one of the most essential hires for Indians looking to register a business in the U.S.
9. Failing to Address FEMA/ODI Compliance
Many Indian individuals directly own shares or receive payments from a U.S. entity without RBI/FEMA compliance. Failing to report U.S. investments correctly to Indian authorities can trigger legal problems, fines, or future restrictions on Indian outbound investments. This can even be treated as illegal overseas investment or “round-tripping” and attract penalties.
You can steer clear of this error by consulting an India-based FEMA expert to structure overseas ownership (through Indian LLP/Pvt Ltd, gift route, or LRS) and ensure proper ODI filings.
10. Overreliance on DIY Platforms
Many founders use DIY platforms to incorporate—without understanding tax rules, reporting obligations, or structure implications. These platforms don’t provide legal/tax advice, and errors may lead to retroactive tax bills or forced closures.
Use incorporation platforms with advisory support, or pair them with local accountants/lawyers to ensure a compliant foundation.
Conclusion
Indian-origin Americans are among the most dynamic and impactful immigrant entrepreneur communities in the United States, with tens of thousands of U.S. businesses under their ownership, extensive national job creation, and a broad presence in nearly every major economic sector. However, Indians registering or setting up a business in the US often make mistakes due to the vast differences in the regulatory environment between India & the US.
Hiring an efficient US accounting outsourcing companies in India could make a significant difference for Indian founders setting up a business in the U.S. A seasoned virtual CFO brings deep expertise in cross-border compliance, U.S. GAAP, federal and state tax regulations, and entity structuring, helping you navigate the complexities that often trip up first-time founders.
Frequently Asked Questions
1. Can I register a company in the USA from India?
Yes, Indian residents can register a company in the USA remotely. You do not need to be physically present in the U.S. to incorporate a business. However, you must comply with both U.S. regulations (like EIN, state filings) and Indian laws, such as FEMA and ODI rules, if you’re investing money from India.
2. Can I apply for a U.S. company from India without a U.S. address or SSN?
Yes, you can form a U.S. company (like an LLC or C-Corp) without a Social Security Number (SSN), but you will still need a valid U.S. business address and a registered agent for legal correspondence. Many virtual address and registered agent services are available to help with this process.
3. Can an Indian company open a U.S. bank account?
An Indian company can open a U.S. business bank account, but it typically requires:
– A U.S. entity (LLC or Corporation)
– A U.S. address
– An EIN (Employer Identification Number)
– KYC documents for directors/owners
– Some fintech platforms, such as Mercury or Relay, make this process easier for non-residents, but traditional banks may have stricter requirements.
4. How much does it cost to register a company in the U.S. from India?
The cost to register a U.S. company from India typically ranges between $300 $1,500, depending on the state of incorporation, type of entity (LLC or C-Corp), and additional services like a registered agent, EIN filing, or virtual office. DIY platforms are cheaper but may not include legal or tax compliance support.
5. What are the most common mistakes Indians make when a USA company registration is from India?
Some common mistakes include:
– Choosing the wrong state for incorporation
– Not obtaining an EIN or a U.S. address
– Overlooking U.S. annual compliance requirements
– Violating FEMA/ODI rules back in India
– Assuming U.S. bank account approval is instant
– Not hiring a Virtual CFO or compliance advisor
These errors can delay business operations or result in legal penalties.
6. Do I need to follow FEMA or ODI rules if I invest in a U.S. company from India?
Yes. If you’re a resident Indian investing in or owning shares in a U.S. entity, you must comply with India’s FEMA (Foreign Exchange Management Act) and ODI (Overseas Direct Investment) regulations. Failing to follow these rules could lead to penalties from Indian authorities—even if the U.S. company is fully compliant.
7. What is the best business structure for Indians setting up a company in the USA?
For most Indian entrepreneurs, a U.S. LLC or C-Corporation is suitable depending on their goals. An LLC offers flexibility and pass-through taxation, while a C-Corp is preferred if you plan to raise venture capital. Choosing the wrong structure can have long-term tax and compliance consequences, so it’s best to consult a U.S. tax advisor or Virtual CFO.
8. Do I need a virtual CFO to run my U.S. business from India?
While not mandatory, hiring a virtual CFO is highly recommended. A virtual CFO assists with financial planning, U.S. tax compliance, and cross-border structuring and helps avoid costly mistakes common among Indian founders unfamiliar with American regulations and accounting systems.
