This document discusses options for structuring business relationships between Indian and US entities. It outlines two scenarios: 1) an Indian entity functioning as the holding company with a US subsidiary, and 2) a US entity as the holding company with an Indian subsidiary. For both scenarios, it lists required compliances around areas like transfer pricing, taxes, intellectual property, and business registrations. It recommends limited liability companies (LLCs) or C/S corporations as preferred entity types in the US. C corporations provide liability protection for shareholders but result in double taxation of profits. Delaware is presented as the most popular state for incorporation due to its flexible corporate laws and lowest costs.

1. Indian entity
expanding
business in USA
India & US requirements
Handbook

2. Structuring of Business
Depending on case to case requirements, NovoJuris can structure/ re-structure of business
between India and US entity. The control structure will determine the Holding-Subsidiary
relationship between India and US entity.
Scenario 1: Control Structure in India: Indian entity can function as Holding Company
and US entity can function as wholly owned subsidiary company/ Joint Venture.
Compliances required: Transfer Pricing, Overseas Direct Investment Compliances, Tax
Structuring, Intellectual Property, Joint Venture Agreement, Secretarial Compliances,
Business Registrations in India and US, Accounting and Payroll Services in India and US.
Scenario 2: Control Structure in US: Indian entity can function as wholly-owned
subsidiary/Joint Venture and US entity as Holding Company.
Compliances required: Transfer Pricing, Foreign Direct Investment Compliances, RBI
Annual Filing, Tax Structuring, Intellectual Property, Joint Venture Agreement, External
Commercial Borrowings and Secretarial Compliances, Business Registrations in India and
US, Accounting and Payroll Services in India and US.

3. All the above structures are available, however, it is most preferred to go with LLC or C Corp or S Corp,
depending on the requirements of each case. However C Corp is the most preferred type of entity.
Sl.
No.
Type of Entity Features
1. Sole Proprietorship Easy to form and close
No state filing required
Provides no liability protection to owner
Extremely difficult to obtain outside funding
2. Partnership 2 or more individuals or entities can form partnership
All partners are jointly & severally liable for all partnership debts
Governed by Partnership Agreement
Getting capital can be difficult, as investors prefer legal structure
3. Limited Liability
Partnership
Hybrid model of partnerships and limited liability company(LLC)
Partners liable only the extent of capital invested
4. Limited Liabilty
Company(LLC)
Separate Legal entity
Owners of LLC are called members and not shareholders
Operating Agreement governs the functioning of LLC, which can be modified
as the business grows
Members (owners) are not personally responsible for business debts and
liabilities
LLCs are not taxed as a separate business entity. All profits and losses are
"passed through" the business to each member of the LLC. LLC members
report profits and losses on their personal federal tax returns.
5. C Corp Separate Legal entity
Limited liability protection to shareholders. More detailed in the next section
6. S Corp Separate Legal entity
Maximum 100 shareholders
Limited Liability protection to shareholders
Shareholders must be US citizens/residents
Can have only one class of stock
Directors, who are elected by shareholders, make major business decisions,
Directors appoint officers, who oversee day-to-day operations
Types of entity available in US

4. Features of C Corp
Separate Legal entity. Shareholders are not personally responsible for business debts and
liabilities.
Perpetual Succession
Owners of LLC are called shareholders.
No restrictions on number of members. Can have unlimited number of shareholders
Must hold annual meetings and record minutes. More paperwork than LLC.
Double Taxation. Profits of C Corp are taxed and along with that dividend is also taxed in the
hands of the shareholders.
Can have multiple types of class of stock.
More flexibility when starting a business if you plan to grow, expand the ownership or sell your
corporation
Taxed as a separate legal entity
A business tax return is required to be filed and taxes are paid on the corporation’s profits.
If the corporation distributes profits to the shareholders in the form of dividends, shareholders
pay income tax on those distributions (because dividend is considered as personal income in
the hands of shareholders). This creates a double taxation of corporate profits
Incorporation and Management
Articles of incorporation must be filed and necessary filing fees paid.
Regular state filings depends on state to state. Generally, annual report and/or franchise tax is
due every year.
Other Compliances include adopting and maintaining bylaws, holding and documenting initial
and annual meetings of directors and shareholders
Management is overseen by the Directors, who are elected by shareholders, make major
business decisions. Directors appoint officers, who oversee day-to-day operations.
C Corp

5. Which State to incorporate in?
Different state jurisdictions are available for incorporation in US.
Choosing state totally depends on the State where the business
will be set up and the place where the employees (if any) will be
based. If there is no such preference from your side, then we
would recommend Delaware to start business with.
Delaware is the most preferred state for incorporation.
Advantages are listed below
Advantages
 Delaware has the lowest cost of incorporation is US.
 Corporate law is one of the most flexible in the
country. Protects the entities/ shareholders more
effectively.
 Many angels, venture capitalists and private equity
investors favor startups in Delaware corporations.
We therefore help in structuring and restructuring your
business in US and India and also support all the concerned
compliances.
Delaware is
home to more
than 50 percent
of all U.S.
publicly-traded
companies and
60 percent of
Fortune 500
Companies