US Company Formation for NRIs (2026): Why ODI and LRS Do Not Apply Abroad, NRE vs NRO Funding, the ₹15 Lakh Deemed-Residency Trap for Gulf NRIs, H-1B Holders, and Keeping Your US Company When You Return to India

Most of what Indians read about forming a US company is written for people living in India: the overseas direct investment (ODI) rules, the Liberalised Remittance Scheme (LRS), TCS on remittances, Schedule FA. Much of that does not apply to a Non-Resident Indian. An engineer in Dubai, a consultant in London or a doctor in Toronto is a person resident outside India under FEMA, and can usually form and fund a US company from foreign earnings without any Indian approval at all.

But NRIs have their own traps, and they are different ones. The Indian tax definition of residence is not the same as FEMA's. Gulf NRIs with Indian income can be deemed resident in India. NRIs living in the USA are US taxpayers whose LLC is taxed in a completely different way. And the moment an NRI returns to India, the US company comes back into the Indian system, with rules for what you can keep and how it is taxed.

This guide is for Indian citizens (and OCI holders) living outside India. If you live in India, read how to register a company in the USA from India and the ODI and FEMA guide instead.

In short: An NRI can own 100% of a US LLC or C-Corporation, formed remotely, with a foreign address and an Indian passport. If you are a person resident outside India under FEMA and fund the company from foreign income or an NRE account, the ODI rules and the LRS do not apply. Funding from an NRO account is possible within the USD 1 million a year repatriation limit, with Form 15CA/15CB. Your Indian tax status depends on days in India and, for citizens with more than ₹15 lakh of Indian income who pay no tax abroad (typical in the Gulf), the deemed-resident rule. NRIs living in the USA are US tax residents: their LLC is taxed as their own business, not as a foreign-owned LLC. On return to India, FEMA Section 6(4) lets you keep a company acquired while abroad, and RNOR status can protect foreign income for a few years, but not income from a business controlled from India. With UCB, a Wyoming LLC with EIN is $249 and a Delaware corporation with EIN is $358, all-in.

First, which "non-resident" are you?

Two Indian laws decide how a US company affects you, and they define residence differently.

From the tax year starting 1 April 2026, the Income-tax Act 2025 replaces the 1961 Act. The residence tests are carried over largely unchanged, though the section numbers are different, so older articles citing "Section 6(1A)" still describe the same rules.

The two can disagree. A software engineer who moves to Dubai for a job on 1 October is a person resident outside India under FEMA from the day they leave. But they have already spent 183 days of that tax year (April to September) in India, so for that year they are an Indian tax resident. A person who left India for good can still be deemed resident for tax without spending a single day there. Work out both before you decide how to fund and run the company.

The FEMA side: why ODI usually does not apply

India's Overseas Investment Rules and Regulations of 2022 and the LRS apply to persons resident in India. If you are a person resident outside India:

• Forming and funding a US company from your salary or savings abroad needs no ODI filing, no Form ODI-Part I, no Annual Performance Report and no authorised dealer bank involvement in India.
• No TCS applies, because no money leaves India.
• Your Indian passport is enough as identity; the company can use your foreign address.

Funding from Indian accounts

If you want to use money held in India:

• NRE account: balances are freely repatriable. You can transfer them to your foreign account, or directly abroad, and use them for the US company.
• NRO account: balances come from Indian income (rent, pension, dividends, sale of property). They can be sent abroad up to USD 1 million per financial year, after tax, normally with Form 15CA and a chartered accountant's Form 15CB. Banks differ on the paperwork for small amounts, so ask yours.
• FCNR deposits: foreign currency deposits, freely repatriable.

Moving NRO money is not an investment approval issue for an NRI; it is a repatriation issue. Keep the bank's remittance records, because a later tax officer may ask where the capital came from.

Where an Indian business is involved

If your Indian company or LLP will own the US company, that Indian entity is a person resident in India, and the ODI rules apply to it in full, whatever your own status. See US subsidiary for a foreign company and the ODI guide.

The tax side: the residence tests that matter

The day counts

For an Indian citizen, in broad terms:

• 182 days or more in India in the tax year makes you resident.
• An Indian citizen or person of Indian origin visiting India is resident only at 182 days, unless Indian income exceeds ₹15 lakh, in which case 120 days in the year plus 365 days in the previous four years is enough. Someone caught by this 120-day rule is RNOR, not fully resident.
• An Indian citizen who leaves India for employment abroad uses the 182-day test for the year of departure.

The ₹15 lakh deemed-resident rule

An Indian citizen with Indian income above ₹15 lakh who is not liable to tax in any other country is deemed resident in India, regardless of days spent there. Deemed residents are treated as RNOR.

This rule was written with the Gulf in mind. An NRI in the UAE, Qatar, Saudi Arabia, Kuwait, Oman or Bahrain pays no personal income tax there, so someone with large Indian income (rent from several flats, interest, capital gains, a share of an Indian business), can become an Indian tax resident without visiting.

For a US company, the consequence is limited but real. An RNOR is taxed in India on Indian income and on foreign income derived from a business controlled in India or a profession set up in India. A Dubai NRI who runs their US LLC from Dubai is generally fine. A Dubai NRI whose US LLC is really managed by a brother in Pune is not.

NR, RNOR, ROR: what India taxes

Most NRIs abroad are NR. As an NR, income from a US company that you run from abroad is not taxed in India, even if you later bring it into an NRE account. The income is taxed, if at all, in your country of residence and the USA.

Where you live decides everything else

Once India drops out, the country you live in decides how your US company is taxed. That is why the right structure for an NRI in Dubai is different from the right one for an NRI in London.

NRIs in the Gulf

The UAE, Saudi Arabia, Qatar, Kuwait, Oman and Bahrain do not tax individuals on income. A single-member US LLC owned by a Gulf resident, with no US office, staff or dependent agents, pays no US income tax and no tax in the Gulf on the owner's share. It is often the simplest structure in the world for an NRI selling services or digital products to US customers.

The points to watch:

• the ₹15 lakh deemed-resident rule above, if you have significant Indian income;
• local licensing: the UAE expects business activity carried on in the UAE to be licensed there, and some free zones and employers restrict outside business; check your employment contract;
• banking: US banks generally accept Gulf-resident Indians, but use a UAE or Saudi address you can prove.

See the UAE, Saudi Arabia, Qatar, Kuwait, Oman and Bahrain guides.

NRIs in the UK, Europe, Canada, Australia and Singapore

These countries tax residents on worldwide income, and several do not accept the US view that a single-member LLC is "disregarded":

• UK: HMRC generally treats a US LLC as a company, which can create double taxation on distributions. See the UK guide.
• Canada: an LLC is a foreign corporation for Canadian purposes, with foreign affiliate and FAPI rules. See the Canada guide.
• Australia: see the Australia guide for the foreign hybrid and CFC rules.
• Germany: see the Germany guide.
• Singapore: see the Singapore guide.

For an NRI in these countries, the Indian rules are rarely the problem. The local tax treatment is, so read your country's guide before choosing between an LLC and a corporation.

NRIs living in the USA

An Indian citizen on an H-1B, L-1 or green card who meets the US substantial presence test is a US tax resident. For a US company, that changes the picture completely:

• A single-member LLC is taxed as your own business on Schedule C of Form 1040, with US income tax and self-employment tax. It is not a foreign-owned LLC, and Form 5472 does not apply.
• A C-Corporation is an ordinary US corporation, and you are a US shareholder.
• You get an EIN using your SSN, and you can form in your home state; the remote formation set-up that suits NRIs abroad does not give you any advantage.
• Visa status matters. An H-1B holder may generally own a US company as a passive investor, but working for it without separate work authorisation can breach the visa. Take immigration advice before doing any work for your own company. Green card holders have no such restriction.
• Your Indian accounts and investments have their own US reporting (FBAR and Form 8938), which is outside the scope of this guide.

The rest of this guide is about NRIs living outside the USA.

US LLC formation for NRIs

How the US taxes it

A single-member LLC owned by a non-resident alien is a disregarded entity. If the NRI does the work from outside the USA and the LLC has no US office, employees or dependent agents, its income is generally not effectively connected with a US business, and no US income tax is due (see effectively connected income explained). The LLC still files Form 5472 with a pro forma Form 1120 every year, and the penalty for missing it is $25,000 (see Form 5472 explained).

A multi-member LLC, for example with a spouse or a co-founder, is a partnership. It files Form 1065, and US withholding may apply to its partners' shares of any US business income. See single-member vs multi-member LLC.

Who it suits

• Gulf-resident freelancers, consultants and agencies with US clients.
• NRIs selling on Amazon US, Shopify or app stores who need a US entity, a US bank account and Stripe (see Stripe for non-residents).
• NRIs whose country of residence treats the LLC as transparent, or who have checked that it does not create a mismatch.

Example: a Dubai-based UX consultant

These are illustrative figures, not a client case.

Ananya is an Indian citizen who has lived in Dubai for six years. She works as a freelance UX consultant for US start-ups and earns about US$120,000 a year. Her only Indian income is rent of about ₹4 lakh from a flat in Kochi, credited to her NRO account.

• FEMA: she is a person resident outside India. She forms a Wyoming LLC and funds it with US$2,000 from her Emirates NBD account. No ODI filing is needed.
• Indian tax: she spends about 40 days a year in India and her Indian income is below ₹15 lakh, so she is non-resident. India taxes only the Kochi rent.
• UAE: no personal income tax. She holds a UAE freelance permit for her consulting work.
• USA: she works from Dubai and has no US presence, so the LLC pays no US income tax. It files Form 5472 and a pro forma 1120 every April.
• Money flow: US clients pay the LLC's US account by ACH. She transfers profits to Dubai, and sends some to her NRE account to pay her parents' expenses.

If her Indian rent rose above ₹15 lakh, for example after buying more flats, the deemed-resident rule could make her RNOR. Because the LLC is controlled from Dubai, its income would still generally be outside Indian tax, but she would need to file Indian returns more carefully.

US C-Corp formation for NRIs

How the US taxes it

A US corporation pays 21% federal tax on its profits, plus state tax where it has a presence, and files Form 1120 and Form 5472 every year. Dividends to a foreign shareholder are subject to 30% US withholding, reduced by a treaty with your country of residence, not India's, unless you are an Indian tax resident (see the 21% corporate tax explained and the C-Corp guide for non-residents). The Gulf countries have no income tax treaty with the USA, so a Gulf NRI receives dividends at 30%.

Who it suits

• NRIs building a start-up that will raise money from US investors, use stock options or have co-founders in several countries (see raising US investment as a foreign founder).
• NRIs who will hire in the USA or have a US office.
• NRIs in countries such as the UK or Canada where a corporation fits the local tax treatment better than an LLC.

Example: a London-based NRI founder with a team in Bengaluru

These are illustrative figures, not a client case.

Rohit is an Indian citizen working in London. He and a friend in Bengaluru are building a B2B SaaS product and plan to raise a pre-seed round from a US accelerator.

• They form a Delaware C-Corporation. Rohit holds 55% and the Bengaluru co-founder 45%.
• Rohit is a person resident outside India, so Rohit's shares need no ODI. The Bengaluru co-founder is a person resident in India, so that co-founder's subscription to Delaware shares must go through the ODI rules and an authorised dealer bank, with TCS on the LRS remittance.
• The Bengaluru team will be employed by an Indian private limited subsidiary, which bills the Delaware company for development services at cost plus a margin. Indian transfer pricing rules apply to those invoices.
• Rohit is UK-resident, so the Delaware company's dividends, if any, would carry the US–UK treaty rate, and the UK guide's rules apply to Rohit.

Mixed NRI and resident-Indian founding teams are common, and the resident founder's compliance is usually the slowest part. Start it first. For the reverse case, an Indian company that later moves its top company to Delaware, see the Delaware flip guide.

Returning to India with a US company

Many NRIs form a US company while abroad and later move home. Plan for it, because three things change.

FEMA: Section 6(4)

Section 6(4) of FEMA allows a person resident in India to hold, own and transfer foreign securities and property acquired while resident outside India, and to keep the income from them. So you can generally keep your US company after you return, without retrospective ODI approval. But:

• new money you put into the company after becoming a resident is a fresh overseas investment under the ODI rules and the LRS;
• keep proof of when and how you acquired the shares or membership interest, and from which foreign funds.

Tax: the RNOR years

A returning NRI is usually RNOR for the first two or three tax years, depending on the earlier years' status (non-resident in 9 of the 10 previous years, or 729 days or less in India in the previous 7 years). During RNOR, foreign income is not taxed in India unless it comes from a business controlled in India or a profession set up in India.

That exception is the one that catches returning NRIs. If you move to Hyderabad and keep running your US LLC from your laptop there, the business is controlled in India, and its income is taxable in India from the year you start doing so, RNOR or not.

Once you are ROR, India taxes your worldwide income and you must report the US company in Schedule FA. How Indian practice treats LLC profits, as your business income or as a foreign company, is explained in how a US LLC is taxed when the owner lives in India.

The company's own residence

A foreign company can become Indian tax resident if its place of effective management is in India. The POEM guidelines generally do not apply to companies with turnover of ₹50 crore or less in the year, so a small US corporation run by a returning founder is usually not affected. A larger one can be, and would then be taxed in India on its worldwide profits.

A checklist before you move

1. Decide what the US company will do once you live in India: continue, wind down, or become a subsidiary of an Indian company.
2. Keep records of the funds you used to form and capitalise it while you were abroad.
3. Model the tax for the RNOR and ROR years with an Indian chartered accountant.
4. Update the company's bank KYC and the IRS with your new address.
5. If you will put more money in from India, set up the ODI route with your bank before the first transfer.

Which state

• Wyoming or New Mexico for a small LLC owned by an NRI abroad: low yearly cost and simple filings.
• Delaware for a corporation that will raise investment.
• Your own state if you live in the USA.
• Texas, Florida or New York if you will have a warehouse, office or staff there.

See best state for non-residents and the state selector.

What it costs

UCB's prices include state fees and the first year of registered agent service:

• Wyoming LLC with EIN: $249, or $348 with a US bank account application.
• Delaware corporation with EIN: $358.

A Wyoming LLC costs $121 a year to keep active, or $421 with the annual federal return. A Delaware corporation costs $578 a year. A US business address with your own suite number is $60 a year. See what a US LLC costs every year.

Documents and banking

• Identity: your Indian passport. Use the name exactly as it appears in your passport, including the spelling of your surname, on every form.
• Address: proof of your address in your country of residence, such as a utility bill, tenancy contract or bank statement. A UAE Emirates ID or a UK, Canadian or Singapore residence document helps banks.
• Company owner: if an Indian or foreign company will own the US company, its registration documents and a board resolution.

You do not need a US visa, an SSN or an ITIN to form the company or get its EIN. US fintech banks generally accept Indian passport holders resident in the Gulf, Europe, Canada and Asia. See US business bank accounts for non-residents and why banks reject non-resident applications.

Mistakes NRIs make

• Following resident-Indian advice and paying for ODI filings that do not apply to you, or, the other way round, ignoring them when an Indian company or resident co-founder invests.
• Assuming "NRI" for FEMA means non-resident for tax in the year you leave or return.
• Forgetting the ₹15 lakh rule when you live in the Gulf and have large Indian income.
• Running the US company from India during RNOR years and assuming its income is exempt.
• Working for your own LLC on an H-1B without authorisation.
• Putting more money in after returning without using the ODI route.
• Missing Form 5472 in a year when no US tax was due.

Frequently asked questions

Can an NRI open a company in the USA? Yes. NRIs can own 100% of a US LLC or corporation and form it remotely with an Indian passport and a foreign address.

Do NRIs need ODI approval for a US company? Not if you are a person resident outside India under FEMA and the money comes from abroad, an NRE account or permitted NRO repatriation. ODI applies to persons resident in India, including an Indian company or a resident co-founder.

Can I fund a US company from my NRE or NRO account? NRE balances are freely repatriable. NRO balances can be sent abroad up to USD 1 million per financial year, after tax, normally with Forms 15CA and 15CB.

Is my US LLC's income taxed in India? Not if you are a non-resident for Indian tax and run the business from abroad. It can be taxed if you are RNOR and the business is controlled from India, or if you are fully resident.

I live in Dubai. Does my US LLC pay tax anywhere? Usually not, if it has no US presence: the UAE has no personal income tax and the US taxes only US business income. It still files Form 5472 every year.

Can I keep my US company when I return to India? Generally yes, under FEMA Section 6(4), for what you acquired while abroad. New investment after your return falls under the ODI rules, and the income comes into Indian tax as your status changes.

I am on an H-1B. Can I own an LLC? You can generally own one, but working for it without authorisation can breach your visa, and as a US tax resident your LLC is taxed on your own return. Take immigration and tax advice first.

How UCB can help

We form US LLCs and corporations for NRIs in the Gulf, Europe, the Americas and Asia remotely: the state filing, EIN, registered agent, US business address and bank application. Each year we file the US returns, including Form 5472, through our US tax filing service. If you are planning a return to India, we can coordinate with your Indian chartered accountant on the company's US side. See our formation, EIN and bank account package.

An NRI setting up a US company? WhatsApp us at +1 315 961 2956 or email enquiries@ucbsolutions.com.