Blog by Pasricha & Patel, LLC

A Quick Guide to Indian Ownership of Business Entities in the United States

Categories: Indian Startups , Startup Law , Startups

Expanding a startup business into the United States can be a lucrative prospect for Indian founders. Understanding the complex landscape of U.S. business entities and ownership regulations prior to taking the first steps of expansion is essential to ensure legal and regulatory compliance from the get-go. Below is a quick breakdown of the types of U.S. business entities that Indian nationals and Indian parent companies can and cannot own.

Indian Nationals Can Own:

  1. Limited Liability Company (LLC): An LLC is a business structure that combines the protective characteristics of a corporation while retaining some flexibility and benefits of a partnership or sole proprietorship. LLCs are popular for their relatively informal and flexible management structures, and pass-through taxation benefits. Indian nationals can either be members of, or wholly own, an LLC.
  2. C-Corporation: A C-Corporation is a type of corporate legal entity that provides liability protection for its shareholders, as well as the ability to raise capital through stock issuance. Indian nationals can own shares in a C-Corporation. Indian nationals can also serve on the board of directors of a C-Corporation.

Indian Parent Companies Can Own:

  1. Subsidiaries: A “subsidiary” is a company controlled by a parent company, usually when the parent company directly owns more than 50% of the subsidiary’s voting stock. Indian parent companies can establish and wholly own subsidiaries in the U.S., typically structured as LLCs or C-Corporations.
  2. Joint Ventures: A joint venture involves two or more businesses coming together to achieve a specific goal, sharing profits, losses, and control, usually by establishing an independent entity to be governed by a definitive joint venture agreement. Indian parent companies are free to enter into joint ventures with U.S. companies in the form of LLCs or C-Corporations.

Indian Nationals and Parent Companies Cannot Own:

  1. S-Corporations: S-Corporations are off-limits to Indian nationals and parent companies due to foreign ownership restrictions.
  2. Restricted Industries: Some industries in the U.S. have specific ownership restrictions for foreign entities. These restricted industries include, to varying extents, defense, telecommunications, maritime, aerospace, and real estate in certain states.

Special Note on H-1B Workers: This guide does not apply to Indian H-1B workers employed in the U.S. workforce. H-1B workers are subject to a separate set of rules and guidelines that govern their ability to engage in business activities. Generally, H-1B workers can only own equity in a business so long as they are not involved in its active management.