Every few months I speak with an Indian founder who has incorporated in Delaware, opened a Stripe account, and is now confused about why their CA back home has no idea what to do with their US company’s income.
This is extremely common. And almost entirely predictable.
The Delaware C-Corp is not a magic box
Indian founders incorporate in the US — usually Delaware — because investors expect it, because Stripe and Brex work better there, and because it signals seriousness to US customers. All valid reasons.
But the Delaware entity doesn’t exist in isolation. The moment an Indian resident is a director, signatory, or beneficial owner of a US company, a set of Indian compliance obligations activates that most founders don’t know about.
FEMA reporting is required when you hold equity in a foreign entity. The Overseas Direct Investment (ODI) framework governs how money moves from India to the US company and back. If the Indian entity and the US entity transact — services, IP licensing, recharges — transfer pricing documentation is mandatory.
None of this is optional. And none of it is handled automatically by forming the Delaware entity.
The bank account problem
Getting a US bank account as a non-resident Indian director is harder than founders expect. Mercury and Relay have helped here, but there’s still KYC scrutiny. More importantly, once you have that account, every transaction is potentially taxable in both jurisdictions, and the treatment depends on whether the US entity is considered a pass-through or a corporation for Indian tax purposes.
A Delaware C-Corp is a corporation for US tax purposes — it files its own return and pays its own US taxes. But India doesn’t automatically respect that boundary. The Indian founder’s ownership and control can, in some interpretations, create a taxable presence for the Indian tax authority.
Salary vs. dividends vs. consulting fees
How you extract money from the US entity matters significantly. Salary from the US company to an Indian resident is taxable in India as foreign income. Dividends from a foreign company are taxable in India. Consulting fees paid by the US entity to an Indian firm triggers transfer pricing analysis if the parties are related.
The DTAA between India and the USA provides relief in many scenarios — but only if structured correctly and claimed properly. Most founders simply don’t claim it, leaving meaningful money on the table every year.
What to set up before, not after
Before incorporating in the US, get clarity on: how money will flow between the two entities, who will file what in which country, whether any IP should sit in one entity or the other, and what the exit plan looks like from a tax perspective.
The cost of good advice before incorporation is a fraction of the cost of restructuring two years in. I’ve seen founders spend more unwinding a mess than they spent building the original product.
Expanding to the US is absolutely the right move for many Indian companies. Just go in with your eyes open on the compliance architecture. The opportunity is real — the tax complexity is equally real.