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How Can You Form A Company In USA From India?
Company

How Can You Form A Company In USA From India?

Globalization, The New World Order

Globalization has become the new universal order. Businesspersons who wish to attain grand success have to employ strategies that promote their global growth as well. The new world order -- with more porous borders and lesser international restrictions and more positive policies that encourage business in different countries – has expanded the potential scope of the market for numerous businesspersons across the globe.  

Also, read The Unique Identity Of A Company Director As Per The Company Law

Business Expansion Into Foreign Countries

Thus, there are many Indian businesspersons who want to set up a company in foreign countries. And the most preferred country where many of them wish to expand is the United States. Well, if you are one of them and you wish to set up a company in the US or someone close to you wishes to do the same, we here present you the legal provisions that you can use towards that goal

We are here to tell you about the various steps and protocols. These will help you set up companies in the USA from India.

USA As The Market For Business Expansion

Well, the USA market is arguably the most developed market in the global expanse. If an Indian businessperson accesses and tries to explore the American market, he/she is likely to find a plethora of opportunities for expansion and growth. Well, if someone from India wishes to set up a company in the USA, he/she will need to follow the following protocols:

The Methods In Which An Indian Company Can Set Up Its Business In The USA:

  • This company can do all its operations from India, but it would set up in America.
  • All the functions and activities by this company will be done in India, except the brand building and marketing work, which would by done in the USA, by this company set up in the US.
  • This company in the USA will be a subsidiary of its Indian parent company. But it will do all its activities and various works in the USA.

You may also read What are the legal compliances required for a Start-up?

The Two Ways In Which You Can Enter The US Market

If you want to do business in India, you can do it in the following two ways:

Corporation

Suppose you want to set up a company by procuring funding from venture capitalists, angel investors and so on, then you can go for C-corporation. Investors, bankers, supplies consider them more professional

LLC

It is a combination of partnership firms and corporation. Well, you are protected against a lawsuit by limited liability provision. The process here is quite similar to the process that takes place in the formation of LLP.

Herein, its compulsory to provide information about the agents of state formation. It is also required to give the various details of the companies and individuals who are working with the business. Deciding the name of the company is also mandatory.

Formation Of The Company

After carrying out the process, you will be ready to establish your business. You may have to choose your geopolity. There are various states in the US. There are states where the laws are more business-friendly and taxation is also low, like Delaware, Nevada, Wyoming, and so on. Sometime after you set up your business in one of these states, you can also expand to other regions of the USA>

Steps Involved In The USA Company Formation

You should first decide what type of company you wish to form. In the USA, this is all the more important. Then you can undertake the following steps towards the formation of the company in the USA:

Decide the company’s name

The name should be unique. Besides, that name should be available in the state where you are going to set up your company.

You will need to give a registered agent. That registered agent should have a physical address in the state where you are setting up the company. The agent should be there to sign the legal documents in the business hours and in the time required.

Federal Employer Identification Number –

This step is not compulsory. But it will be easier for you if you go for this step as well. You will need to apply for a Federal Employer Identification Number and Certificate of Authentication. Suppose you want to open an account in any bank of USA, then you should have these things, only then your account can be opened.

The Certificate of Authentication – This too is optional. Suppose you wish to open a bank account in India or say produce proof that you have a company in the USA (either a US corporation or LLC), then you will need to present a certificate of authentication or Apostille.

All of these are some simple steps, which will facilitate you form a company in the USA. You need to ensure that you follow them well. Also, you can also seek help from a professional firm that can help you set up a company in the USA.

Also, read Know All About The Service Agreement.

LLP Registration Procedure in India
Company

LLP Registration Procedure in India

A Limited Liability Partnership (LLP) is a type of business structure that is different from the traditional corporation. As a result, it not only offers the benefits of limited liability, but it also gives its members the freedom to organise their internal activities in the manner of a partnership based on an agreement reached by consensus.

You may also read How to Convert Partnership Firm to LLP ? Process and Benefits

The Limited Liability Partnership Act, 2008 governs the formation and operation of LLPs in India. In order to form an LLP, a minimum of two partners must be present. An LLP, on the other hand, has no upper restriction on the number of partners that can be formed.

There should be a minimum of two designated partners among the partners, both of whom should be people, with at least one of them being a resident of India. The LLP agreement governs the rights and responsibilities of designated partners and their designated partners. They are directly responsible for ensuring that the provisions of the Limited Liability Partnership Act, 2008, as well as any provisions stipulated in the LLP agreement, are adhered to.

Who are Designated Partners?

Every limited liability partnership (LLP) must have at least two designated partners. At least one of the designated partners needs to be a  resident of India (resident of India is a person who stays in India for a minimum of 182 days in an year). A body corporate may nominate an individual to act as a designated partner on behalf of the body corporate. In some cases, the incorporation deed may indicate which individuals will serve as designated partners. In line with the LLP Agreement, any partner may be designated as a partner or may be designated as a partner who is no longer designated. Every designated partner is required to have a DPIN. Limited Liability Partnership Rules, 2009 were changed by the Ministry of Commerce and Industry (MCA) on July 5, 2011 (with effect from July 9, 2011). Instead of applying for a Designated Partner Identification Number (DPIN), each partner who will be nominated as a Designated Partner will now need to apply for a DIN rather than a DPIN. In the case of individuals who hold both a DPIN and a DIN, their DPIN will be cancelled. In order to receive a DPIN, an individual must submit an application in Form DIN-1 in accordance with the Companies (Director Identification Number) Rules, 2006. LLP Forms 7 and 10 are no longer valid as a result of this decision. An individual must offer prior consent before becoming a designated partner, and the LLP must file consent in Form 4 with the Registrar before becoming a designated partner. If there is a change in the information included in the formerly used Form 7 or DIN-1 for the purpose of allocating a DPIN, the modifications must be reported in Form DIN-4 within 30 days of the change. A limited liability partnership (LLP) may select a designated partner within 30 days of a vacancy occurring for any cause. If there is no designated partner, or if there is only one designated partner at any point in time, each partner is deemed to be a designated partner under the circumstances. Designated partners are responsible for performing all acts, matters, and things that are needed to be fulfilled in order to comply with the conditions of the Limited Liability Partnership Act (LLP Act). They are accountable for any and all penalties levied against the LLP.

Also read Advantages of LLP Registration

An LLP can have as many partners as it wants. A body corporate can contain an Indian company, a company formed outside of India, an LLP registered in India, and an LLP incorporated outside of India. A body corporate, on the other hand, cannot be a designated partner. Every limited liability partnership (LLP) must have at least two authorised partners, with at least one of them being a resident of India. As long as all of the partners in an LLP are body corporates, at least two individual nominees of those body corporates should serve as designated partners.

Registration of LLP:

Step 1: Obtain a Certificate of Digital Signature Authority (DSC)

One must first get the digital signatures of the selected members of the prospective limited liability partnership (LLP) before proceeding with the registration system.

Costs associated with earning a DSC vary from one certifying agency to another. One should receive DSC in the Class 3 category.

Step 2: DIN Application 

Next, one must apply for a Director Identification Number (DIN) (DIN)

One must apply for the DINs of all of the designated partners, or those who want to become designated partners, of the proposed limited liability partnership. Form DIR-3 must be used to submit an application for the assignment of a DIN number.

One must include a softcopy of your identification documents (often one’s Aadhaar and PAN) to the application form.

Step 3: Obtaining Approval for the Name

In order to reserve the name of the proposed LLP, a form LLP-RUN (Limited Liability Partnership-Reserve Unique Name) must be filed with the Central Registration Centre, which will be handled by the Central Registration Centre under the Non-STP procedure. However, it is recommended that you use the free name search facility available on the MCA portal before entering the name in the form.

The form RUN-LLP must be accompanied by the fees listed in Annexure 'A, which may be allowed or denied by the registrar depending on the circumstances. A re-submission of the form will be permitted within 15 days of the initial submission in order to correct any errors. There is a provision in the agreement that allows for the provision of two recommended names for the LLP.

Step 4: Establishing a Limited Liability Partnership (LLP).

The FiLLiP (Form for Incorporation of Limited Liability Partnership) is the form that must be completed and filed with the Registrar of the state in where the LLP's registered office is located in order for the partnership to be formed. The form will be a single piece of software.

Fees in accordance with Annexure 'A' must be paid. If the individual who is to be nominated as a designated partner does not already have a DPIN or DIN, this form allows them to apply for one through the Department of Homeland Security.

One or two individuals will be permitted to submit an application for an allocation of land at any given time.A reservation request can also be submitted using FiLLiP, if that is preferred. As soon as the approved and reserved name of the LLP is established, this approved and reserved name will be used as the proposed name of the limited liability partnership. Formalize the Limited Liability Partnership (LLP) agreement in Step 5.

The LLP agreement controls the reciprocal rights and responsibilities of the partners, as well as the relationship between the LLP and its partners. The LLP Agreement must be printed on Stamp Paper in order to be valid. The stamp duty varies from state to state.

Also read Limited Liability Partnership (LLP). 

Which Is Better For A Small Sized Company: LLP Or Partnership?
Company

Which Is Better For A Small Sized Company: LLP Or Partnership?

Both Limited Liability Partnerships and Partnerships are two of the various ways of incorporating a business provided under the Indian Law. LLPs are governed under the Limited Liability Partnership Act, 2008 and Partnerships are governed under the Indian Partnership Act, 1932. Although new in introduction, LLPs have made their mark and have successfully replaced the prominence of partnerships to an extent. To conclude which of the two is better for a small-sized company, first of all, it is required to have a comparison between the two.

You may also like to read MSME Registration in India

About the entities

Partnerships- Partnerships are registered under the Indian Partnership Act, 1932. The main aspect of a partnership is the unlimited personal liability of the partners for the partnership liabilities. This essentially means that Partnerships and partners don’t have independent legal presence. Partnerships are not perpetual in existence.

LLPs are registered and governed under the Limited Liability Partnership Act, 2008. The most important facet of LLPs is that Partners of an LLP are not personally liable for LLP liabilities, the liability of the partner is according to his capital contribution in it. Meaning whereby that LLPs and its partners are separate legal entities. LLPs are perpetual in existence unless dissolved by the promoters.Partner Requirement

Partnership- An Indian Citizen residing in India can be a partner of a Partnership(including minors).The minimum partner threshold is 2 and maximum is 20. The management of the partnership is defined in the partnership deed where one or more partners can be designated as managers.

LLP- An Indian Citizen residing in India can be a partner of a LLP(excluding minors). Foreign Direct Investment with prior RBI approval is allowed. The minimum threshold of partners is 2 and maximum threshold is unlimited. The managerial aspects of a LLP are governed by an LLP agreement and designated partner/s for the management.

Transferability and Convertibility

Partnership- To transfer the share a partner has to obtain the consent of all the partners.  Also, to convert a partnership into a Pvt. Ltd. Company or LLP is a lengthy and cumbersome process.

LLP- The share in an LLP can be transferred easily, but it is not necessary that the transferee automatically attains a partner's status. The conversion process of LLP into a Pvt. Ltd. company is very easy.

Also, read Limited Liability Partnership v. Private Limited Company

Taxation

Partnership- The tax slab on profits of a Partnership is 30% + educational cess but there is no annual return filing requirement for a partnership firm.

LLP- The tax slab on profits of an LLP is 30% + educational cess. An LLP has to file annual return with the ministry of corporate affairs.

Registration procedure

Partnerships

Most important in the registration of partnerships is that registration is not compulsory but voluntary as under the Partnership Act, 1932. So, it can be registered at the time of its incorporation or a later stage. But it is highly recommended that the partners get the firm registered. The procedure is as follows-

  1. Partnerships are registered with the registrar of firms
  2. Submission of application to the registrar of firms
  3. Name Selection
  4. Drafting of Partnership Deed
  5. Obtaining the certificate of Registration

Processing Time- 10 days (Approx.)

LLP

The process of registration of LLPs is very similar to that of a Pvt. Ltd. Company and is given in the steps below-

1. Obtaining Digital Signature Certificate for the Proposed Partners

2. Obtaining Director Identification Number for the proposed Partners

3. Name Approval from Ministry of Corporate Affairs(MCA)

4. Filing Incorporation

5. Filing Limited Liability Partnership Agreement (within 30 days from the date of

incorporation of the LLP)

Processing Time- 20 days (Approx.)

Which is better for a small sized business?

The talk about something being ‘better’ totally depends on personal requirements of business owners. For example, there are far less compliances in partnerships as compared to the LLP, there is no requirement of filing annual returns in partnerships.

If minors are also involved in the activity, certainly partnership will be better. In traditional partnerships, minors can also be made the partners, which is not the case in LLPs.

On the other hand, LLP is a mix of a partnership and company, it saves partners form unlimited liability as it has its legal presence which makes it easy for the partners as they can hold property and take loans and enter into contracts for the business in the name of the business only, LLP certainly has less legal compliances but higher penalties in case they are missed.

If seen generally, the concept of LLPs has rapidly gained traction and more and more people are incorporating their businesses as LLPs. It is cheap and easy in its formation and management due to which it has been the popular choice of the small business owners. In Traditional partnerships, a Partnership agreement is not required and partners can work on consensus which can lead to disputes proving it to be a big detriment to the business owners. So, an LLP is good for a small business because it provides limited liability like a private company and flexibility like a partnership that gives synergized output to the business.

Also read Limited Liability Partnership (LLP). 

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