How to Incorporate in the USA: US Inc. as a Subsidiary

Image credit: Lilly Bzh

Setting up your headquarters in the US and a subsidiary in India is a tested model. Here’s a blog post by Girish Mathrubootham, founder of Freshdesk, who articulates the process very clearly.

Our choice, however, is to follow the model in reverse.

I couldn’t find much information on this model, and thought this might be something worth considering as an option for lots of startups that operate from India.

This is not a post on the pros and cons of setting up your headquarters in the USA. That is a complex question and calls for another blog by itself.

This model gives you the option to retain the intellectual property (IP) outside of USA and still take advantage of the flexibility that comes with having a US Delaware C-Corp entity. You will also be paying income taxes in line with income in both the countries.

In the other model where the headquarters (HQ) is in the US and the subsidiary in India, you may set up the subsidiary as a service company with a transfer pricing model that requires you to have a profit margin of 12% to 15% in line with the services industry. And you will be paying 30% taxes, in the case of India, on that “perceived profit”.

So, here is an alternate model for your consideration that is compliant with the laws of the land in both the countries of operation. The basics of setting up a company in the US remain the same.

Setting up a company in the US

1. Incorporating in USA as a Delaware, C-Corp

You don’t have to be present in the USA for the incorporation. Instead, you can use one of the many service providers.

Here are a few recommended ones:

• LegalZoom (We used this one)
• Ryan Roberts – startuplawyer.com
• Harvard LLC

The cost for this would be approximately $1000, but you can pick and choose packages depending on the services you would require. I would highly recommend that you complete the entire documentation at a stretch including the formation documents, share allocation, etc.

Leaving out some of these may seem cheaper initially but might hurt you in the long run. So complete the entire procedure as part of the incorporation package to get the basic setup done right. You know what they say about being penny wise and …

Connecting US subsidiary and Indian HQ