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Nikunj Verma asked a question

What are the pros and cons of incorporating your startup in the US?

Many people are now advising new startup founders to incorporate in the US. It's pretty affordable (Stripe Atlas does the entire setup at $500) and fast. 

 

Would love to know the experience of people who have done this. Are these pros and cons really true?

 

Pros:

  • Better chances of raising money from US investors
  • Acccess to more products that don't operate in India (such as Stripe)
  • More credibility (We're HQ'ed in US!)
  • Anything else?

Cons:

  • Higher cost of corporate and financial compliance
  • Legal costs and risk of getting sued easliy
  • Indian taxation and labor law compliance
  • Anything else?

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Jeanne-Elise M Heydecker American Expat in India for Past Ten Years

Incorporating in the US would protect the VCs, not you, as they would be able to sue you in the US. Your organization would have to follow American labor laws, legal compliance and the US GAAP (Generally Accepted Accounting Practices).

 

If you are sure that incorporating in the US is a good idea, it would probably be a good idea to incorporate in India for whatever needs you may have here. For example, with our firm, iPlace USA is an American company incorporated in Delaware (best state to incorporate in) and is primarily the sales engine for our Indian company, iPlace India, which focuses on delivery of services. Every thing else is done here and follows Indian labor laws, legal compliance and Indian GAAP, supported by the US company. NOTE: There are some intricacies to this relationship. The government of India sees the US firm as our customer and we can only earn money in the US at our Indian company. You should seek the advice of an experienced chartered accountant for more information on how to incorporate because the way it it set up has tremendous tax implications if done incorrectly.

 

Many American companies have a venture capital presence in India. Intel Capital, Google and many other companies and VCs have been evaluating the opportunities here in India and have made significant investments over the past ten years I've been here. 500 Startups is a good place to start. Pankaj Jain runs the program I think. Connect with him on Linkedin. He may be of some help. Good luck!

Nikunj Verma Building CutShort brick by brick
Thanks for weighing in! While it's true that VC funding is increasingly getting common in India, there seems to be a huge gap in the quality and quantity of early stage angels in India. For example, the whole AngelList syndicate thing doesn't work in India yet. And then there is a problem with exits (in form of M&As). Foreign companies find it complex to deal with Indian tax and labor laws. I believe FB faced a lot of problems with their only acquisition in India (Little Eye Labs). But yes, there are higher costs of compliance too. So there is a trade-off - however my current thinking is that it makes sense for startups to incorporate in the US once they achieve product market fit and have some sort of International audience.
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