Incorporation in USA

Every State in the USA is governed by its State Laws and the regulations vary from one State to another. Establishing a Company is US is preferred due to certain benefits such as, lower Corporate Income Tax and well-defined regulations that promote setting up a business.

Delaware and Nevada are the common destination points for setting up a business. Particularly, Delaware has no state sales tax. Further, the state’s franchise tax for small US businesses is very low. Further, non-residents are exempted from paying separate corporate income tax in Delaware

• Less tax than any other USA entity. Only Income tax is payable on annual net profits, regardless of whether dividends are declared.
• Does not have a personal holding company tax.
• Must file a legal annual return, but does not have to file financial statements.
• There are no independent statutory audit requirements.

1. Of all the USA States, Delaware is the more pro-business friendly state including
   1. State laws that favour employers more than employees and
   2. Case law that welcomes entrepreneurs and multi-national companies and
   3. General Corporation Law that favours directors over shareholders and
   4. Delaware case and State law if consistent, transparent and predictable.
2. Due to the above features, 60% of the Fortune 500 companies are incorporated in Delaware.
3. Business set up is fast and easy because
   1. Company registration without employees and office premises is common
   2. No income tax payable if all business is conducted outside the State
4. Delaware tax is lower than most other USA states because;
   1. Lower personal income tax rates, compared to other USA States.
   2. There is no sales tax in Delaware.
   3. Delaware does not impose state withholding taxes on dividends or interest or royalties paid to overseas shareholders.
   4. Delaware does not have tax imports or exports.
   5. No personal property or inventory taxes. Corporations can own their own office spaces without suffering property tax.
   6. There is no inheritance tax in Delaware, nor withholding taxes on dividends or interest or royalties paid to overseas shareholders, nor capital gains tax on transfer of stock/equity.
   7. Compared to other states, Delaware offers very low franchise taxes including a flat tax of US$ 100 for a C Corp and US$ 250 for an LLC.
   8. Property tax relief for new construction and improvements of existing property.
   9. The deferment of import taxes at the Port of Wilmington’s foreign trade zone.
   10. Public utility tax rebates of 50% on increased consumption for qualifying industries and reduced rate for manufacturers and agricultural processors.
5. Because the majority of global banks and financial services companies have a large presence in Delaware; it is easier to (i) secure debt and equity finance and (ii) conduct M&A activity.
6. There is no public register of shareholders and directors in Delaware and consequently one can enjoy the benefits of confidentiality.

The entry route available for an Indian national is through LLC (Limited Liability Corporation) or a C-Corp type of entity.

Limited Liability Corporation

• It has features of both a Corporation and a Partnership.
• Appropriate for small-scale businesses with limited shareholders.
• It provides the owners with limited liability protection in case of any lawsuit or bankruptcy.
• Need not conduct annual shareholder’s meeting.

C-Corporation

• This form is the ideal choice if one is seeking Venture Capital (VC) funding and Angel investors.
• Its highly regarded form by Bankers, Investors, Customers, Vendors and the Employees.
• Its separate legal entity and different from the members.