Flipping HQ from India to USA using an EoR structure

When expanding your company's operations internationally, especially from India to the United States, there are various strategic routes to consider. One option that has gained significant attention is flipping your HQ from India to the USA using an Employer of Record (EoR) structure. This approach allows companies to streamline the process of hiring employees, handling compliance, and managing operations across borders without the need for a complex legal framework or entity setup in the foreign country.

In this blog, we will dive into how this structure works and why it can be an attractive option for companies looking to expand into the US while maintaining operations in India.

1. Understanding the EoR Structure

Simplifying International Expansion

An Employer of Record (EoR) structure is designed to simplify the process of hiring employees and expanding operations into new markets. With this structure, founders can incorporate a US-based company and set it up as the direct shareholder of the operations. This means that the Indian entity remains a part of the overall corporate structure but functions under a different framework, where the EoR partner takes on the responsibility for all legal employment, compliance, and payroll functions for the Indian team.

The key advantage of using an EoR structure is that you do not need to create a separate legal entity in the US or deal with the complexities of setting up a foreign subsidiary. Instead, your EoR partner acts as the official employer for the Indian workforce while you maintain full control over the operations and decision-making processes.

2. Mirroring the Cap Table

Aligning Ownership Across Borders

One of the first steps in the EoR structure is to mirror the cap table from India to the US. This ensures that ownership stakes, equity compensation, and other important financial elements are aligned across the two countries.

By maintaining consistency in the cap table, you ensure that your investors and stakeholders see the same equity structure regardless of which country the company is operating in. This approach minimizes confusion and streamlines the fundraising process, especially when it comes to raising capital in the US.

3. Assigning IP Rights and Assets

Transferring Key Assets to the US Entity

Once the US entity is set up and the cap table is mirrored, the next step involves the transfer of intellectual property (IP) rights and any other relevant assets from the Indian entity to the US company. This is a critical step, as it not only aligns the business structure but also has significant tax implications.

Since the US entity becomes the legal owner of the IP, the value of the IP will determine the amount of taxes to be paid during the transfer. Therefore, it’s important to work with tax experts who understand the complexities of cross-border IP transactions to minimize tax liabilities.

4. Leveraging the EoR for Compliance and Cost Efficiency

Lowering Operational Costs and Reducing Risk

One of the major advantages of using an EoR structure is the ability to lower operational costs. Since the EoR partner handles compliance, payroll, taxes, and other administrative tasks, you don’t have to set up an in-house HR department or deal with the intricacies of international labor laws. Instead, you can focus on scaling your business in the US while your EoR partner manages the compliance first approach in India.

Additionally, because the EoR typically charges a flat fee rather than dealing with transfer pricing or corporate taxes, the financial structure becomes more predictable and less risky. This makes the EoR model an excellent choice for startups or businesses looking to expand without the overhead of managing multiple complex legal and tax structures.

5. Setting Up Teams in India

Remote, Hybrid, or In-Person Teams

An EoR structure also gives you the flexibility to hire remote, hybrid, or in-person teams in India, while the US-based HQ manages the overall strategy and growth. Whether you're looking to establish a development center, customer support team, or sales force in India, the EoR provider ensures that all employees are legally compliant and properly onboarded according to local labor laws.

This flexibility allows businesses to leverage the Indian talent pool efficiently while maintaining full control over their operations in the US. The ability to scale rapidly with a compliant and cost-effective team in India gives US companies a significant competitive edge.

6. Offering Stock Options

Attracting Top Talent with Equity Compensation

Another benefit of using the EoR structure is the ability to offer stock options to employees in India. This is particularly attractive for startups looking to attract top talent without the need for immediate cash compensation.

Stock options, through ESOPs or other equity-based incentive plans, can be a powerful tool to align employees’ interests with the long-term growth of the company. By using an EoR model, companies can offer stock options while ensuring that the legal and compliance aspects are handled correctly, making it a seamless experience for both the employer and the employee.

7. Key Advantages of the EoR Structure

Why Choose the EoR Model?

• Cost Efficiency: The EoR structure reduces the need for complex entity setup and lowers operational costs by eliminating the need for a dedicated HR department and administrative burden.
• Compliance First: By partnering with an EoR provider like Rapid, companies can be assured of compliance with local labor laws, taxes, and regulations, minimizing legal risks.
• Flexibility in Team Setup: Whether you are hiring remote, hybrid, or in-person teams, the EoR model provides the flexibility to scale your workforce in India without compromising on legal compliance.
• Stock Options: The EoR structure enables the offering of stock options, which can be an attractive incentive for employees, especially in competitive job markets.
• Simplified Taxation: The flat-fee structure of the EoR removes the need for complex transfer pricing or corporate tax planning, making it easier to manage your international tax liabilities.

Conclusion

Flipping your HQ from India to the USA using an EoR structure offers a streamlined, efficient way to expand your business internationally. By working with an EoR partner, you can focus on scaling operations in the US while ensuring compliance and managing a cost-effective workforce in India. This model not only simplifies the process but also offers key advantages such as flexibility in team management, the ability to offer stock options, and tax efficiency.

As with any international expansion strategy, it’s essential to carefully consider the operational, financial, and legal implications of the EoR structure. Partnering with an experienced EoR provider can help you navigate these complexities and ensure a smooth transition as you expand your presence into the US market.