If you're based in India and planning to start a U.S.-based business, you’ve probably asked yourself: should I form an LLC or a C Corporation? It’s a key decision—and while both options are viable for non-U.S. residents, they come with important differences in structure, taxation, and how they’re viewed by investors and platforms.
What Are Your Options?
As a non-resident founder from India, you typically have three U.S. business structures to choose from:
- A single-member LLC (owned solely by you)
- A multi-member LLC (owned by you and one or more partners)
- A C Corporation (a separate legal entity with shareholders)
Each of these can be formed remotely, and if you’re still deciding on a formation service, platforms like Firstbase or Doola make the entire process simple and hands-off. They handle everything from filing documents to assigning a registered agent and helping you get your EIN.
Why Do People Choose an LLC or a C-Corp?
LLCs are the go-to choice for solo founders, consultants, freelancers, or anyone running a lean online business. They’re easy to manage and come with minimal paperwork.
If you’re running a design agency, software development business, SEO service, or selling digital products, an LLC gives you liability protection and simple tax reporting. Many founders who just want to get up and running quickly without raising outside money choose an LLC.
Single-member LLCs are especially common because you don’t have to coordinate with other partners or issue equity. Multi-member LLCs are used when you have co-founders but don’t need the complexity of a corporation.
C-Corps, on the other hand, are built for scale. If your business will raise funding from angel investors or venture capitalists, join an accelerator like Y Combinator, or issue stock options to early employees, then a Delaware C-Corp is the preferred structure.
SaaS founders, fintech startups, and any product-focused startup planning for rapid growth usually go with a C-Corp. They’re structured to accommodate equity investment and shareholder management, which is essential for many tech businesses.
One important note: if you’re not sure which to choose, many founders start with an LLC and later convert to a C-Corp if their business grows or funding becomes a goal. The switch is possible, so starting with an LLC isn’t a bad idea if you want to move quickly and keep things simple at first.
Tax Differences
No matter which structure you choose, forming a U.S. company means you will have two tax obligations each year—one at the state level, and one with the federal government. These filings are required annually, even if your company earns no revenue.
State Tax Obligations:
If you incorporate in Delaware:
- LLCs pay a flat $300 franchise tax due by June 1. There is no annual report.
- C-Corps file an annual report and pay a franchise tax starting at $225, based on either authorized shares or par value. This is due by March 1.
If you incorporate in Wyoming:
- Both LLCs and C-Corps file a simple annual report with the Secretary of State.
- You pay a license tax based on assets in Wyoming, with a minimum fee of $60. The filing is due in the anniversary month of formation.
Your registered agent can often remind you of these deadlines, but it’s your responsibility to file on time to keep your company in good standing.
Federal Tax Obligations:
If you form a single-member LLC, it is treated as a “disregarded entity” by the IRS. You are required to file:
- Form 5472: This reports ownership and any financial activity between you (the foreign owner) and the LLC, like transferring money or taking distributions.
- Pro forma Form 1120: A blank version of the corporate income tax form submitted alongside Form 5472.These are both due by April 15 and must be submitted each year, regardless of whether the business earned income.
If you form a multi-member LLC, it is treated as a partnership for tax purposes. You must file:
- Form 1065: This reports your partnership’s income and expenses.
- Schedule K-1s: Issued to each partner to show their share of the business's profits or losses.
- Form 1040-NR: Required if any non-U.S. partners need to report U.S. income.This return is also due by April 15, and penalties apply if it’s late or missing.
If you form a C Corporation, your company must file:
- Form 1120: The corporate income tax return. It reports income, deductions, and taxes owed. Even if the C-Corp didn’t generate any revenue, this form is still required. The federal corporate tax rate is 21% on U.S.-source income. This return is due by April 15 each year.
- Form 5472: If the C-Corp is foreign-owned (which it typically will be if you are based in India), and the owner holds 25% or more of the company, this form is also required. It discloses ownership details and any financial transactions between the foreign shareholder and the corporation.
These filings ensure transparency with the IRS and must be submitted even if there is no income. Penalties for missing them can be significant.
All of these are annual filings, so you're only required to submit them once per year.
Other Factors to Consider
- Funding: If you plan to raise venture capital, C-Corp is almost always the right choice.
- Profit distributions: LLCs allow profits to flow through directly to owners. C-Corps must pay corporate tax on profits, and dividends (if paid) may be taxed again at the shareholder level.
- Simplicity: LLCs are easier to maintain, with fewer formalities like shareholder meetings or board resolutions.
- Equity and Stock Options: Only C-Corps can issue stock and options, making them ideal for startups with employees or investors.
How Bookmate Can Help You Decide and File
Not sure which structure fits your goals? Bookmate can walk you through the pros and cons of each option in a free consultation. Once your company is formed, we can also help you file the necessary federal tax documents, so you stay compliant with the IRS.
Our process is 100% remote, paperless, and built for founders outside the U.S.:
- We start with a free Zoom call to understand your business and structure.
- We send a digital invoice and engagement letter—no printing or mailing required.
- You fill out a secure online form so we can gather your details.
- Our tax professionals prepare your IRS forms and review them with you.
- We handle the filing and help respond to any IRS follow-ups, if needed.
Let’s take the stress out of U.S. tax compliance. Book a free consultation to get started. Learn more at trybookmate.co
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Each tax situation is unique. Please consult Bookmate or a qualified advisor.
