How to flip your HQ from India to USA for founders based in India

Relocating your company’s headquarters from India to the USA is a bold yet rewarding step. It opens doors to international markets, investor opportunities, and operational advantages. However, this shift involves intricate planning and precise execution. Here's a guide tailored for Indian founders exploring this transition.

1. Start with a Well-Laid Plan

Success lies in preparation. Before making any moves, ensure you’ve covered these essentials:

• Identify Challenges: Understand the intricacies of relocating your HQ, including compliance, timelines, and financial implications.
• Audit Your Cap Table: Take a closer look at your company’s ownership structure. Who are your investors and stakeholders? A cap table cleanup may be necessary to align interests.
• Value Your Business: Assess your Indian company’s worth, including intellectual property (IP) and other assets. A formal valuation report will be crucial during this process.
• Budget for Taxes: Taxes can significantly impact your finances. Plan for capital gains, income tax, and other levies arising from this transition.
• Know the Regulations: Indian laws, particularly under FEMA, will dictate how smoothly the process unfolds. Understand the permissions and paperwork required.

2. Choose the Right Structural Approach

When flipping your HQ, there’s no one-size-fits-all solution. You have three primary routes to consider:

a. Corporate Structure

This is a common approach involving separate LLPs (Limited Liability Partnerships) set up by each founder in India. These LLPs own shares in the US-based company, rather than the founders directly.

• Mirror Your Cap Table: Align your US ownership with your Indian cap table. This ensures stakeholders are accurately represented before you raise funds.
• Handle IP Transfers: Assign your IP rights to the US company, keeping in mind the tax implications of these transactions.

b. Parallel Structure

In this setup, the Indian and US entities remain independent, with no direct ownership link between them.

• Master Services Agreement (MSA): The Indian company functions as a vendor to the US entity. This ensures operational continuity while shifting control of IP and strategic assets to the US HQ.
• Transfer Pricing Compliance: Given the shared involvement of founders in both entities, Indian tax laws will require a markup on services offered.

c. Employer of Record (EOR) Structure

A modern and streamlined model, the EOR approach is gaining popularity for its simplicity.

• Direct Setup in the US: Founders incorporate the US HQ and assign IP rights.
• Leverage an EOR for India: Companies like Rapid offer solutions to manage the Indian workforce without the complexities of forming a local subsidiary. This eliminates issues like transfer pricing and corporate taxes.

3. Key Considerations

• Timing is Crucial: As your company grows, so does its valuation, which directly affects your tax liabilities. The earlier you flip, the more manageable the costs.
• Plan for Cash Flow Management: In certain structures, like parallel setups, surplus cash generated in India can only be used for capital expenditures. Strategize how to deploy this effectively.
• Work with Experts: From legal consultants to tax advisors, professional guidance is essential to navigate the regulatory and financial intricacies.

Why Flipping to the USA Makes Sense

For an in-depth discussion on each of these strategies and their benefits, watch our YouTube video, where we delve deeper into the process and share actionable insights.

This shift positions your company on a global stage, attracts international investors, and reduces operational roadblocks. With multiple structural options available, choose the one that aligns with your company’s stage, goals, and financial outlook.