The US LLC Boom: Inside The Industry Selling American Companies To Indian Entrepreneurs

There is a specific genre of content that has exploded across Indian social media over the past two years. The format varies-sometimes it’s a talking-head YouTube video, sometimes an Instagram carousel, occasionally a LinkedIn thread-but the message is almost always the same. Register a US LLC. Get an American bank account. Accept payments in dollars. The whole thing costs less than a round-trip flight to Goa.

The advice targets a specific demographic: Indian freelancers billing international clients, SaaS founders selling to Western markets, e-commerce operators running Shopify stores, and digital agency owners tired of losing several percentage points on every cross-border payment through Indian processors. The pitch resonates because the underlying problem is real. Indian businesses face genuine friction when trying to operate globally-restricted access to payment platforms, currency conversion losses, and the perception gap that comes with invoicing from a sole proprietorship registered in, say, Indore.

According to LLCBuddy, which tracks LLC formation requirements and costs across all 50 US states, filing fees range from roughly $40 in states like Kentucky to $500 in Massachusetts. The states most popular among non-US residents-Wyoming, Delaware, New Mexico-charge state fees of $100, $90–110, and about $50 respectively. Add a registered agent (mandatory, since you need a physical US address to receive legal documents), and total formation costs typically land between $200 and $500. That’s the easy part.

A Formation Industry Built on Information Gaps

What few of these formation guides mention is that an entire industry has grown up around selling US LLCs to non-Americans. It is not a small business. Dozens of companies now specifically target Indian, Pakistani, and Middle Eastern entrepreneurs with services that range from state registration to Employer Identification Number (EIN) procurement to opening US bank accounts remotely. Pricing for these bundled packages typically runs from $500 to $2,000.

The economics of this industry are worth understanding. State filing fees are fixed and public. A registered agent service costs $50–200 per year. EIN applications to the IRS are free. The margin on formation services, then, is largely built on convenience and information asymmetry-the gap between what the founder knows and what the service provider chooses to explain.

This is not to suggest that formation services are fraudulent or unnecessary. Many provide legitimate value, particularly for first-time founders who would otherwise struggle with unfamiliar US bureaucracy. The issue is narrower than that: the marketing sells formation as a complete solution, while the actual compliance obligations that follow are often left entirely unaddressed. Even Steve Goldstein, who runs LLC formation resource LLCBuddy, acknowledges the problem. "The industry has a completion bias," he says. "We're very good at getting people formed. We're not nearly as good at making sure they understand what happens in month thirteen." For someone sitting in Pune or Hyderabad, the difference between what was promised and what is required can be jarring-and expensive.

What the Pitch Gets Right

Before cataloguing the gaps, it is worth acknowledging what the pitch gets right, because the underlying logic is not flawed.

An Indian citizen can legally form and wholly own a US LLC without a visa, a Social Security Number, or a single trip to America. The LLC structure offers limited liability protection, separating personal assets from business debts. For single-member LLCs owned by non-US persons, the IRS treats the entity as a “foreign-owned disregarded entity,” which means the LLC itself typically does not owe US federal income tax on income not connected to a US trade or business. This is a meaningful advantage.

More practically, a US LLC can open US business bank accounts and access payment processors that may be difficult or impossible to use through an Indian entity. For a SaaS company selling subscriptions to American customers, or a design studio invoicing US clients, this removes a real operational bottleneck. The credibility benefit matters too. Rightly or wrongly, a Delaware-registered company looks different on an invoice than a sole proprietorship.

All of this is accurate. The problem starts when the conversation ends here.

The $25,000 Filing Nobody Mentions

Every single-member LLC owned by a non-US person must file IRS Form 5472, attached to a pro forma Form 1120, every year. This is not optional, and the penalties are not gentle.

The form requires disclosure of all “reportable transactions” between the LLC and its foreign owner. That language sounds narrow, but in practice it covers nearly everything: revenue deposited into the LLC’s bank account, capital contributed when the company was formed, personal expenses paid through the business, transfers between the founder’s personal and business accounts, even the value of services the founder provides to the LLC without formal compensation.

Per the IRS instructions for Form 5472 (revised December 2024), the penalty for failing to file-or for filing with substantially incomplete information-is $25,000 per form, per year. If the IRS issues a notice and the deficiency is not corrected within 90 days, additional penalties of $25,000 may apply for each subsequent 30-day period. There is no statutory cap.

The form cannot currently be filed electronically. It must be mailed or faxed to an IRS processing centre in Ogden, Utah. For someone in India who has never interacted with the US tax system, this can feel absurdly opaque. And the filing obligation exists even if the LLC earned zero revenue during the year. Merely forming the company and putting money into its bank account may be enough to trigger a reportable transaction.

A reasonable question: how many Indian-owned US LLCs are actually filing this form? No public data exists, but professionals who work with non-US LLC owners suggest the compliance rate is low. The penalty risk, while real, often feels theoretical-until it is not.

The Indian Obligations That Compound the Problem

Forming a foreign entity from India may trigger obligations under the Foreign Exchange Management Act (FEMA) and related RBI regulations. The Overseas Direct Investment (ODI) framework governs how Indian residents invest in or control foreign businesses. Whether a specific LLC structure requires ODI reporting, LRS (Liberalised Remittance Scheme) compliance, or other filings depends on the nature of the investment, the amounts involved, and the founder’s residency status. This is a question for qualified legal counsel, not a formation service provider’s FAQ page.

Then there is the tax dimension. India taxes its residents on worldwide income. An Indian resident who owns a US LLC that earns revenue-even if that revenue sits in an American bank account-is generally liable to report and pay Indian income tax on that income in the financial year it is earned. The India-US Double Taxation Avoidance Agreement (DTAA) may help prevent the same income from being taxed twice, but claiming DTAA benefits requires proper documentation, including a Tax Residency Certificate from Indian authorities.

The practical effect: an Indian founder with a US LLC is not choosing between the Indian tax system and the American one. They are operating within both systems simultaneously, each with its own reporting requirements, deadlines, and penalties for non-compliance. This is manageable with the right professional guidance. It is not manageable through a formation company’s automated onboarding flow.

One Regulatory Burden That Has Eased

Not all the news is about mounting obligations. Under the Corporate Transparency Act (CTA), the US Treasury’s Financial Crimes Enforcement Network (FinCEN) was set to require most LLCs to file Beneficial Ownership Information (BOI) reports-disclosing the identities of ultimate owners. For foreign-owned LLCs, this appeared to add yet another compliance layer.

However, in March 2025, FinCEN issued an interim final rule that narrowed the scope of BOI reporting to only those entities formed under foreign law and registered to do business in a US state. Domestic entities-meaning LLCs formed in a US state, which includes most LLCs set up by Indian entrepreneurs-are exempt from BOI reporting requirements under the current rule. This is a genuine simplification, though founders should monitor any further regulatory changes in this space.

What It Actually Costs to Run a US LLC from India

The honest annual cost of maintaining a compliant US LLC from India looks nothing like the formation fee. A rough breakdown, with the caveat that every situation differs: state annual report or franchise tax (typically $50–300), registered agent renewal ($50–200), Form 5472 preparation by a US-based CPA or tax professional ($500–1,500 or more depending on complexity), and Indian tax and compliance advisory for cross-border income ($500–2,000 or more annually, depending on the complexity of the structure and amounts involved).

That puts realistic annual compliance costs somewhere between $1,100 and $4,000-before the LLC has earned its first rupee. Goldstein pegs the break-even threshold at roughly $3,000 to $4,000 in monthly revenue - below that, he says, the compliance cost-to-revenue ratio starts working against the founder rather than for them. For a SaaS company doing $5,000–10,000 a month, these costs are easily absorbed. For a freelancer earning ₹5–10 lakh a year from occasional international projects, the compliance overhead may exceed any benefit the LLC provides.

This is not an argument against US LLCs. It is an argument against forming one without understanding the full cost structure. The calculation is straightforward; it just never appears in the marketing.

Regulatory Winds: The Income Tax Bill 2025

India’s proposed Income Tax Bill 2025, if enacted in its current form, could tighten residency determination rules. The bill retains the provision introduced in 2020 under which Indian citizens with Indian-source income exceeding ₹15 lakh who are not tax residents of any other country can be deemed Indian tax residents. For someone living in India and running a US LLC, this may not change much-they are already Indian residents. But for NRIs and frequent travellers who assumed they could structure around residency rules, the direction of travel in Indian tax policy is clearly toward broader taxation of offshore income. The specifics will depend on the final enacted version, but the trajectory is worth watching.

Who Should Actually Form a US LLC-and Who Probably Shouldn’t

There is a profile for whom a US LLC makes clear sense: a founder or business with meaningful US-facing revenue (think $3,000 a month or more), a genuine need for US payment infrastructure, and the budget and willingness to maintain compliance on both sides of the arrangement. A SaaS company, a productised agency, an e-commerce brand selling primarily to US consumers-these are reasonable use cases.

The profile for whom it often does not make sense is equally clear: a freelancer with irregular international income, someone forming an LLC primarily to “look more professional” without corresponding revenue, or anyone who plans to register the company and then figure out the compliance later. The LLC itself costs little. Running it properly does not.

Before forming a US LLC, an Indian resident might ask: Can I quantify the revenue I expect to process through this entity in the next 12 months? Do I have access to a US-based CPA who can handle Form 5472? Have I consulted an Indian CA or lawyer about FEMA implications and worldwide income reporting? Am I prepared for ongoing annual costs of $1,000–4,000 beyond the formation fee? If the answer to any of these is no, the formation can wait.

The Information Problem

The US LLC is a perfectly legitimate business structure. Tens of thousands of non-US residents use them productively every year. The problem is not the entity itself but the ecosystem that has grown up around selling it to people who may not need it-or who need it but are not told what comes after the registration confirmation email.

In a functioning market, the buyer knows what they are buying. In the LLC formation market targeting Indian entrepreneurs, the buyer frequently does not. Goldstein, who has processed thousands of formation inquiries through his platform, describes a consistent pattern: founders know the state fee, may know about the registered agent, rarely know about Form 5472, almost never know about FEMA, and virtually never have a plan for Indian tax compliance on their LLC's income.

That gap-between what is sold and what is required-is where the risk lives. Not in the LLC itself, but in the silence around everything that follows.

Disclaimer: This article is for informational purposes only and does not constitute legal, tax, or financial advice. US tax law, Indian tax law, FEMA regulations, and state-level LLC requirements are each subject to change. Readers should consult qualified professionals in both jurisdictions before making any business formation or tax planning decisions.

This information does not constitute legal, tax, or financial advice.

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