US LLC from India: RBI, TCS and taxes, step by step

0:00The SMS: ₹1 lakh TCS, explained

That second number is money Aarav didn't plan for. It isn't a fine. It counts as tax he's already paid, and he'll get credit for it. But for most of a year, it's cash he can't use, and nobody told him it was coming. Three weeks earlier, he didn't know any of this. By the end of this video, you will, along with every other thing that happens when you own a US company from India. Most of it happens on the Indian side.

We're BaseAcross. We set up US companies for founders outside America, so we read these rules for a living.

0:42Do you need a US company?

It usually starts like this. A client in America who'd rather pay a US vendor. Or Stripe. Or an investor who wants shares in a Delaware company. Before Aarav opens a single tab, it's worth asking whether he needs a US company at all. If all you do is invoice foreign clients, Indian businesses already do that, and get paid in foreign currency through Indian banks. A US company adds paperwork in two countries every year.

It needs a reason. Aarav has one. His client wants a US vendor, and he wants to take card payments in dollars. So which kind of company? For an owner-run business selling to US customers, a Wyoming LLC is the usual answer. If you're raising from US investors, they'll expect a Delaware C-Corp, because they want shares. And the S-corporation you'll read about doesn't apply. People who aren't US residents can't own one.

If you already run an Indian private limited company and want to put it under a US parent, stop and talk to Indian counsel first. That's called a flip, and India's rules limit how many layers of companies that kind of structure can have.

1:57The RBI route: your bank, the form, the UIN

This is the part most guides skip. When someone living in India owns a company abroad, India treats it as overseas investment, and there's a set route for it. You don't apply to the RBI yourself. You pick one bank to handle this company, and everything goes through that bank. Before anything moves, you give that bank a form about the company. The bank gets the company an identification number from the RBI.

Only after that can money go out. The rules for individuals are narrower than for companies. It has to be a real operating business, and not one in financial services. If you're building anything close to fintech, that's the first question for your CA. It's a reasonable guess. And it's wrong. We read the regulation itself, not a blog about it, and one phrase settles it. Whichever comes first.

Sending money, or owning the shares. Owning the shares counts. A company that funds itself avoids sending money, and the tax on it. It doesn't avoid the bank. That form was renamed in 2022. The internet hasn't heard.

3:20Forming the company and the EIN

From here, two clocks are running, and they don't run at the same speed. The American clock is quick. Aarav picks a name. Every US company needs a registered agent in its state, an address that accepts legal papers for it. It isn't your business address. Then the state approves the filing, and the company exists. Next comes the operating agreement, the LLC's rulebook. Before he signs, Aarav checks every name and spelling against his passport and the form he gave his bank.

One extra letter here slows down everything after it. Then the company needs a US tax number, the EIN. Aarav has no social security number, which is normal. Without one, the application goes on a paper form to the IRS rather than through the online tool. And no, his PAN doesn't go on it. Now both clocks slow down. The American side waits on the IRS. The Indian side waits on the bank.

Neither one runs on your schedule, and anyone who promises a date is guessing.

4:29Funding it: the LRS limit and TCS

Once the UIN arrives, Aarav can fund the company. The money goes out under India's scheme for individuals sending money abroad. There's a yearly ceiling on what you can send under it, every transfer needs your PAN, and the year runs April to March. Past a certain amount in a year, the bank also collects tax at source, called TCS, on the part above it. This is where we came in. It comes back as a credit against his income tax.

But if you're funding a company from India, check the current threshold with your bank first, and count everything else you've sent abroad under the scheme that year, like money to family. It all adds up together. One more thing to get right: within a few months of investing, Aarav gives the bank proof that he owns his share of the company. Documents like his operating agreement can show that.

His bank says what it accepts.

5:30A US bank and Stripe

Now the company needs somewhere to keep money, and a way to take payments. US banks that work with founders abroad decide country by country, and case by case. They'll ask what the company does, whether it has or plans business in America, and for a real business address. Your address in India can often be that. A registered agent's mailbox usually can't. For card payments, a US company with an EIN and a US bank account can apply for a US Stripe account.

Stripe reviews it like any other American business, and it can say no. If an application stalls, look at the names first. The same name and address, and the same description of the business, everywhere, every time.

6:20What it really costs

Let's talk money, all of it, including the parts most price tags leave out. On the American side, there's the formation itself, the state's filing fee, and a yearly charge from the state to keep the company going. The formation is the part a service like ours does. Then there's everything outside any formation bill. Your CA. The yearly report to the RBI, and you'll see in a minute why that needs an audit.

Someone to prepare the US tax return. And bank charges on your transfers. We don't put our prices in videos, because prices change and this video won't. Today's full bill, with what's included and what isn't, is on the page linked below.

7:06What you file every year

A year in, the company has been quiet. A few invoices, one client. And both countries still want to hear from Aarav. In America, a one-owner LLC with a foreign owner usually files an information return with the IRS when money moves between the company and its owner. That can apply even in a year with no sales. The penalty for skipping it is large enough to wipe out a small company's first year.

The state wants its yearly report too. In India, two things. The first is a yearly performance report on the company, filed through your bank. Here's what nearly every guide leaves out. If you control the company, and a solo founder does, that report is based on audited accounts, certified by a CA. It's a cost every year, so budget for it. The second is your own income tax return.

As a resident, you list the company and its accounts in the foreign-assets schedule, every year, by calendar year, even when it earned nothing. It's one of the most expensive lines to forget. And if the company ever pays Aarav a share of its profit, that money has to come home within a set time. If he sells or closes it, the bank needs to know within a set time too. Late RBI filings can usually still be made with a fee, which is the most comforting sentence in this whole video.

8:34Is your US company taxed in India?

India taxes its residents on their income from anywhere. Keeping the money in an American account doesn't change that. But there's a bigger question, and it's about the company itself. India can treat a foreign company as Indian-resident if it's effectively managed from India, meaning that's where the important decisions are really made. Look at Aarav's desk. Every decision gets made right here.

We can't tell you how that comes out for you. It depends on facts only your CA can weigh. But it's a question to ask in the first month, not after the company starts doing well. Ask, too, how India treats the company's profit: as it's earned, or only when it's paid to you. Some better news to end on. India and the US have a tax treaty, which can lower US tax withheld on things like royalties paid to you, if you claim it on the right form.

And pay for work you do in India generally isn't US-source income in the first place. A one-owner LLC with no office or staff in America often owes no US income tax on it. It still files. And where the US does tax the same income, you can claim credit for it in your Indian return.

9:49Questions for your CA

If you take one thing from this video, take these to your CA before you order anything. Does my company meet the RBI's conditions, and which bank should handle it? How will India tax the profit, and when? Could the company count as managed from India? And who prepares and audits the yearly report? So that's Aarav's year. India first. Then the company, then the tax number, then the bank, then one calendar for two countries.

The full guide is linked below, with every source we used, and it's kept up to date. The list for your CA is there too, as a file you can send. And if you're forming from somewhere else, tell us where. That's the next one we'll make.