Thank you Aditya from Kaapi for sharing his story in this blog post! Kaapi provides remote managers with tools like standup meetings, employee surveys and more.
Are you an entrepreneur that wants to start a global business? You should spend some time exploring options to register your business in a foreign country! The world is flat now, and your ambitions should be global from day 1. Choosing the right option to launch your global business can provide many advantages like -
As an Indian citizen building a global software business, I chose to register my new startup in Delaware. I am excited with the opportunities this gives me, but the process of making this decision was a tough one. Here are some of the important questions I had to navigate.Â
While registering in Delaware is a very popular option, the two other popular options that I have seen are -
I am not sure of all the details here so you should consult an expert before going forward!
Note - There are of course more options like Panama, Ireland etc that can potentially give you huge tax savings. But I would not recommend that you opt for these tax saving havens for your small startup. These come in to play when you are making much more in revenue so my advice is: keep it simple.
Doola has already written a great article on this here. The tl;dr is that LLCs are less hassle to maintain, and C-corps are better if you might fundraise from investors one day.Â
This is often the most difficult answer to get! If you live the majority of your time in India, and run a business in the USA, where will you pay taxes?
At a high level: “taxes are paid where income is made.” If you have effectively collected income in the USA (read: a physical presence there) your USA company has to pay taxes. However, if you do not have a physical presence in the US, you might only have an informational filing requirement in the US. That being said, your home country can also come knocking for their tax dollars claiming that you own a Controlled Foreign Corporation. This is called Place Of Effective Management (PoEM); and the Indian government especially has some tricky laws around this.
In no way does this mean that registering outside the country is a bad option because of this! You simply have to take care of a few things to follow all the rules. Please find a good CA to do this, especially if you are planning to scale up your business fast! And in the US you can chat with a professional CPA as well if you have any questions.Â
Most experts recommend one of the two possible ways to do this -
While this is great for funded startups; solo creators should keep things simple! Do not have two entities, and manage all your operations from your US registered company.
If you do decide to register a C-corp, these are the important dates you should keep in mind:
In the early days you could do the bookkeeping (fancy word for keeping track of every penny you spend, and every dollar you earn) yourself, and the tax filings too! But as the business grows you would need to hire a professional CPA / tax service for it. Use tools like Freshbooks or Xero to manage your books!
In case you are physically operating in other states (ie warehouses, employees, etc), you might have to pay taxes there too. But I doubt if this would be applicable for an internet entrepreneur.
Note - As soon as you register a company, put important tax deadlines in your calendar. I have already made the mistake of forgetting to file the Delaware Franchise Tax, and had to pay a penalty fee of $100.
Hope these tips were useful!
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