Choosing between a US LLC and a C-Corp for Indian founders

The choice is rarely about the US alone

Founders resident in India usually pick a US entity on the advice of whoever formed it, and only later discover what it did to their Indian return. The right comparison runs both sides at once.

What an LLC does

A single-member or multi-member LLC is a pass-through for US purposes. Profits are taxed to the members, and a non-resident member files Form 1040-NR with a Schedule K-1 from Form 1065. Withholding under section 1446 applies to effectively connected income allocated to a foreign partner.

For an Indian resident, India taxes worldwide income. The credit position for tax paid in the US depends on whether India treats the LLC as fiscally transparent, which is not automatic.

What a C-Corp does

A C-Corp is a separate taxpayer. It files Form 1120 and pays federal tax at 21 per cent, plus state tax. Distributions are dividends, generally subject to withholding at 25 per cent under domestic law and often reduced under the India–US treaty.

The advantage is predictability: the founder has no personal US filing obligation simply by owning shares, and the corporate return does not push through to a personal 1040-NR.

The questions that actually decide it

• Will you raise institutional capital in the US? Investors expect a Delaware C-Corp.
• Will profits be distributed or retained? Retention favours the C-Corp.
• Do you want to avoid a personal US filing obligation? That favours the C-Corp.
• Is the business a services business billing US customers with no US presence? Then permanent establishment analysis matters more than entity choice.

What to do next

Model both structures over three years, including the Indian tax on the same profits and the credit available. The entity that looks cheaper in year one often is not the one that is cheaper once distributions begin.