India has 15 million freelancers, an $825 billion export economy, and some of the world's most ambitious tech founders. Yet thousands of them are registering their companies 8,000 miles away - and the reason has less to do with tax strategy than with a payment system that still doesn't work.
Imagine spending three months landing a US software client, negotiating a $4,000 contract, doing the work - and then watching $320 vanish in payment processing fees before the money even clears your Indian bank account. That is the arithmetic that has sent thousands of Indian founders on what has become a familiar detour: not to a new city, but to a new country's corporate registry.
Wyoming. Delaware. New Mexico. These are not places that feature in India's startup folklore. But they have quietly become the preferred domicile for a growing segment of India's digital economy - freelancers, SaaS founders, agency owners, and solo consultants who have discovered that operating a US business entity is, for all practical purposes, the most reliable way to get paid by international clients without losing a significant share of every invoice to fees, friction, and foreign exchange markups.
According to formation data tracked by LLCBuddy, a platform that monitors LLC requirements, filing fees, and compliance obligations across all 50 US states, the three states overwhelmingly favoured by non-US residents forming LLCs are Wyoming (approximately $100 in state fees), Delaware (approximately $90–110), and New Mexico (approximately $50) - one of the very few states that imposes no annual report requirement on LLCs at all. Steve Goldstein, who founded LLCBuddy and has spent over a decade studying how LLC formation patterns shift across jurisdictions, has observed a marked rise in international formations driven specifically by Indian founders seeking US payment infrastructure access. The formation numbers, he has noted, tell a story not about tax optimisation - the most common assumption - but about payment system access and client credibility.
The Plumbing Problem
To understand why a Bengaluru-based developer would pay $500 to incorporate in a state she has never visited, you need to understand what happens when she tries to get paid from a US client using India's domestic infrastructure.
Stripe - the payment processor that has become synonymous with modern internet commerce - has operated on an invite-only basis for new Indian users since May 2024, following regulatory complications around its Payment Aggregator licence application with the RBI. For the hundreds of thousands of Indian founders who built their business models around Stripe's global payment infrastructure, this is not a minor inconvenience. It is a structural blockage at the point where money enters their business.
PayPal, the other globally recognised option, works in India - but at a cost that significantly changes the economics of small-to-medium international invoices. The total effective cost of receiving a payment through PayPal India, once transaction fees (4.4 per cent) and currency conversion markup (3–4 per cent above mid-market rates) are combined, typically runs to 7–8 per cent of the invoice value. On a $5,000 invoice, that is $350–400 in fees. On a $10,000 invoice, the leakage exceeds $700. For a freelancer operating on tight margins, that is not a rounding error.
The deeper problem is documentation. Indian exporters and service providers are required under FEMA regulations to hold a Foreign Inward Remittance Advice for every international receipt - a compliance document that several payment platforms either do not issue automatically or issue only after delays and manual requests. The administrative overhead of receiving an international payment correctly, with the right purpose codes, FIRA documentation, and GST treatment, is substantial enough that many founders have concluded it is easier to move the billing entity offshore than to navigate it annually.
Thousands of Indian founders have concluded it is easier to move the billing entity offshore than to navigate the payment paperwork annually.
What a US Entity Actually Solves
A US LLC solves the payment infrastructure problem with real effectiveness - though not as instantly as the YouTube tutorials suggest. Non-US residents must apply for an Employer Identification Number by mail or fax to the IRS, a process that typically takes two to three months. Only once the EIN arrives can a US bank account be opened. Fintech platforms like Relay and Airwallex currently offer the most accessible path for non-resident founders; Mercury, long the default choice for international founders, has tightened its requirements significantly since 2024 and now denies or restricts a larger share of non-resident applications. Once an account is established, the founder can connect to Stripe directly - Stripe's terms of service permit US-formed entities regardless of the owner's nationality. Payments arrive in US dollars at standard domestic processing rates, and the FIRA documentation burden that dogs India-based accounts disappears entirely.
For founders selling to enterprise clients - companies with procurement processes, vendor registration requirements, and finance teams that prefer wire transfers to overseas bank accounts - the credibility dimension is equally significant. A US LLC with a US bank account and a US business address is, for most practical purposes, indistinguishable from a US-based vendor. For founders whose clients are US companies, this matters.
Goldstein's research at LLCBuddy offers a useful corrective to the formation-cost framing that dominates most of the content targeting Indian founders. The state fee - $50, $100, $110 - is the number that gets quoted in YouTube thumbnails. The actual annual cost of maintaining a US LLC in good standing, he has noted, is a different figure: registered agent fees ($50–200 per year), state annual report filings (where required), IRS Form 5472 preparation for any reportable transactions with the foreign owner (typically $300–500 with a US CPA), and basic accounting. His estimate of the realistic annual maintenance cost - $1,000 to $3,000 depending on state and transaction volume - reframes the decision considerably. A founder billing $50,000 a year in international services might save $3,000–4,000 in PayPal fees alone. A founder billing $5,000 a year may find the economics do not work.
The Compliance Layer Nobody Mentions
The formation-to-banking pipeline that US LLC advocates describe is genuinely functional. What is less often mentioned is what comes with it.
Every foreign-owned single-member LLC is required to file IRS Form 5472 annually - a report of all transactions between the LLC and its foreign owner. The penalty for failing to file is $25,000 per form, and it cannot be submitted electronically; it goes by post or fax to an IRS processing centre in Utah. The form is not complicated in itself, but it is unfamiliar enough that founders who skip it on the assumption that their company made too little money to matter have received penalty notices that dwarfed their entire year's income.
On the Indian side, the formation of a US LLC by an Indian resident constitutes an Overseas Direct Investment under the Foreign Exchange Management (Overseas Investment) Rules, 2022. The RBI expects to know about it - through a Unique Identification Number, an ODI filing within 30 days, and Annual Performance Reports thereafter. A significant number of founders who formed their LLC in the past three years have never filed any of this, either because they did not know the requirement existed or because the content they used to research the decision covered only the American side of the equation.
A Mirror Held Up to Indian Infrastructure
There is a more interesting question behind the registration trend, and it is one that Indian policymakers are beginning to grapple with: why does the world's most ambitious digital economy still send its founders offshore to collect basic payments?
The answer is not simple. India's UPI infrastructure is exceptional for domestic transactions - fast, cheap, nearly universal. The cross-border equivalent does not exist. SWIFT transfers remain slow and expensive. The regulatory framework around payment aggregators is tightening, which is partly why Stripe's general availability has stalled. The documentation requirements attached to foreign inward remittances are comprehensive enough to deter casual compliance.
There are signs this is changing. Xflow, a cross-border payments startup backed by Stripe and PayPal Ventures, processed close to $1 billion in annualised payment volume in 2025 - roughly ten times its 2024 figure - serving Indian SaaS firms, freelancers, and exporters who want to receive international payments without forming offshore entities. Several other platforms are building similar infrastructure, and the RBI has been granting Payment Aggregator–Cross Border licences to new entrants. The infrastructure gap that drove the LLC trend is being attacked from the India side.
Goldstein has observed that the Indian founder cohort driving US formations is not monolithic. Some are making a well-considered structural decision about where they want their business to be domiciled long-term. Many more are solving a payment problem - and would happily solve it in India if the tools existed. The LLC trend, in his assessment, is less a vote against Indian incorporation than a vote against Indian payment friction. When the friction goes down, the calculus changes.
The Decision in Practice
For founders considering the move, the honest version of the decision looks like this: a US LLC genuinely solves the Stripe access problem, reduces PayPal dependency, and simplifies enterprise client onboarding. For founders billing more than $40,000–50,000 a year in international services, the fee savings alone likely justify the formation and maintenance costs.
What it does not do is simplify the regulatory picture. It adds a layer of US compliance (Form 5472, registered agent, state annual reports) and a layer of Indian compliance (FEMA ODI framework, RBI reporting) on top of the founder's existing Indian tax obligations. Income earned through the US LLC is still taxable in India for an Indian resident - the entity is transparent for Indian tax purposes. The founders who navigate this well have a CA on the Indian side and a CPA on the US side and have budgeted for both.
The founders who don't are the ones who formed the LLC for $100, opened a Mercury account for free, collected payments for two years, and are now dealing with an IRS penalty notice in one hand and a CA's questions about offshore assets in the other. The $50 decision, as Goldstein's data makes clear, has a year-two price that the YouTube tutorials never get to.
This article is for informational purposes only and does not constitute legal, tax, or financial advice. Tax rules, RBI regulations, and IRS requirements are subject to change. Consult qualified professionals before making any cross-border business or formation decisions.