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Building a Two-Way Street: A Guide for Indian Companies Seeking to Conduct Business in the US

While the US maintains its position as a top-5 contributor of FDI in India, this trajectory has mostly been a one-way flow. But India’s future as a growing contributor of US FDI is under way.

The United States and India should view one another as important strategic business partners regionally and globally. With a common legal system of British heritage, democratic governance and relatively free market economies, one would think the two countries would enjoy more trade and mutual direct investment in one another than in European and other Asian countries. But they do not.

This is changing. Between 2007 and 2017, bilateral trade between the two countries rose nearly 120% to $126 billion, and US foreign direct investment (FDI) into India jumped nearly 300% to $44.5 billion.1 It is projected that India could additionally benefit from the recent trade tensions between the United States and its major bilateral trade partners. According to Henry Kravis, co-chief of KKR & Co Inc., “This [trade war] is very positive for South East Asia and is very positive… for India.”2 In 2019, India rose 23 places to 77th in the World Bank’s Ease of Doing Business Index, thanks to improving metrics in areas such as access to credit and construction permits. As India’s infrastructure improves, its young population continues to innovate and its businesses look outward for growth beyond its borders. If relations between the United States and other countries in Asia grow shaky and if India further relaxes its protectionist tendencies to encourage, or at least not discourage, Indian companies from going global, Indian businesses could witness a spike in US investments in sectors including technology, education, finance, and healthcare.

The United States maintains its position as a top-5 contributor of FDI in India, but this trajectory has mostly been a one-way flow. But India’s future as a growing contributor of US FDI is under way, with companies like automotive giant Mahindra & Mahindra and global technology leader Infosys making recent significant investments, building on earlier investments by Tata Consultancy Services and other pioneers, establishing facilities and creating thousands of jobs in the United States. Job creation attributable to each country in the other is proof that the relationship India and the United States shares is becoming increasingly mutually beneficial. Recent US Department of Commerce data show that US exports of goods and services to India supports an estimated 197,000 jobs; by comparison, the Confederation of Indian Industry’s (CII) survey of Indian investment in the United States shows that Indian investment has helped create approximately 113,000 jobs in the US.

The Landscape of Indian Investment in the United States

A 2017 CII Survey of Indian companies’ investments and operations in the United States shows that Indian companies are one of the fastest growing sources of FDI in the United States by percentage measure. According to the Indian government, the United States is one of the top five destinations for investments from India. Indian investment is growing increasingly diversified and geographically dispersed across the United States. Indian companies have invested in and maintain operations in all fifty states, Washington D.C. and Puerto Rico with the highest concentration in New Jersey, Texas, California, New York and Pennsylvania. However, Midwestern states like Ohio, Indiana, Illinois, and Michigan are becoming popular hubs for Indian investment. Two recent standouts are JSW Steel’s expected investment of $500 million in eastern Ohio in 2019 and automotive company Mahindra and Mahindra’s $230 million operations investment in Detroit in 2018. Indian companies’ contributions to the United States’ economy are not limited to investing money and creating jobs, but also extend to corporate social responsibility initiatives through which companies have actively contributed $147 million to the local economies where they operate. The future of Indian investment and the growth of Indian operations in these sectors in the United States is bright with SelectUSA of the US Department of Commerce reporting that Indian investment into the United States is the ninth-fastest growing of all countries.

Unlocking the Marketplace

As more Indian companies enter the American marketplace, the first questions we’re asked often pertain to the ease and method of conducting business in the United States. While Indian businesses are free to invest in the US with ease, succeeding in this highly competitive market is a challenge. All businesses, foreign and domestic, are subject to a network of rules and regulations that support the US free-market economy and ensure fair competition, protections for employees, and advancement of policies set by local, state, and federal authorities. Each of the fifty states has its own set of laws and regulations. Understanding how the American system works and its compliance requirements are crucial to a business expansion strategy.

General/Legal Regulatory Environment

The United States welcomes foreign investment and the barriers for entry for Indian companies and persons looking to invest in the country or start a business here are very low. Indian companies enjoy the same freedom as domestic companies to establish businesses in the United States, with the rare exception of high-profile acquisitions of assets deemed essential to US national security, though there is no existing example of an Indian business acquisition being rejected on these limited grounds. Unlike in India, companies in the United States are organized under the laws of individual states and national regulation of company matters is generally limited to specific limited areas such as public company matters (companies whose securities are publicly traded), federal tax matters and various nationally applicable workforce laws and regulations.

Investment and Incentives

The federal government does not provide any negotiable economic incentives to either foreign or domestic investors. But individual states and localities compete vigorously for new and retained business locations and expansions by offering a wide variety of financial inducements. These include incentives largely based on the number of jobs to be created or retained and can offer financing, training, technical assistance, site amenities, and tax abatements to an Indian investor. These incentives must be pursued at an early stage as they become largely unavailable once a company commits to a certain location. While most Indian businesses have historically chosen to locate themselves on the east or west coast, the Midwest is an increasingly attractive region, with states like Ohio, Illinois, and Michigan each hosting over fifteen Indian companies with established operations, and Minnesota, Iowa, Indiana, Kentucky and Tennessee each home to 5-15 companies of Indian origin. The attractiveness of the Midwest stems from the availability of economic (specifically tax) incentives, low costs of labor, energy, and rent, and a large pool of talent from some of the best universities in the country. Meeting with service providers well-versed in incentive programs and the general lay of the land across the country early in the process can be hugely beneficial for Indian investors and business owners who may not be fully aware of the country’s business landscape.

Choice of Entity

Each Indian business seeking to conduct business in the United States must choose one of several legal forms. One choice is to register a branch, which results in the Indian company being directly present in the US and itself a US taxpayer. Except for banks, for which a branch is almost the only choice because of regulatory and commercial factors, a branch is rarely used, as it puts the Indian company’s assets at full risk of US operations. Indian business almost invariably choose one of two types of organization to limit their US risks to the capital invested in the US venture -a limited liability company (LLC) or a corporation.

Limited Liability Structures

Most Indian companies seek to establish a US entity that provides limited liability so only the capital contributed to that US entity is subject to any type of risk. States offer a variety of choices to achieve this goal but the most widely used of these are the limited liability company (LLC) and the corporation.

LLC: An LLC provides limited liability to its owners, flexibility in management and the ability to allocate profits, tax treatment and other choices as the owners choose. An LLC can be formed in minutes on-line, generally without any required minimum capital and without publicly disclosing details of ownership or management. Articles of Organization are filed with a state’s Secretary of State, using a name not used by others. The members (owners) normally enter into a private Operating Agreement that sets forth rules and procedures about company ownership and management, administration, inter-member issues and accounting and tax matters. A limited liability company is considered a legal entity separate and distinct from its members (owners) and has the capacity to conduct any type of lawful business without the need to obtain approval for particular activities. This is the form of choice for a growing number of foreign businesses and investors entering the US market. The entity can be its own US taxpayer, or the members can choose to have the LLC taxes as a “pass-through” entity, in which case the members must register as US taxpayers and share the profit or less tax results in proportion to their investment or capital accounts. LLCs do not require annual meetings or regular election of directors or officers, but maintaining such corporate formalities from time to time is recommended to avoid imputing liability to the members (owners).

Corporation: Corporations are established under an individual state’s law. Corporations also offer limited liability restricted to the amount invested in the company and have a much longer history than LLCs (which entered the US scene in the 1970s), so corporations are governed under longstanding statutes and case law. A corporation owned by non-U.S persons will be taxed as a corporation under US tax rules without the flexibility of choosing the pass-through treatment LLCs allow as a choice. A corporation is the form of choice for many foreign businesses starting a US subsidiary. There are virtually no minimum capital requirements to get one started.

Selecting an LLC over a corporation or vice-versa can have tax consequences, so legal counsel and accountants knowledgeable about cross-border company formation should be consulted about the choice early in the process.

In many cases it is helpful to interject between an Indian company and the US operational entity a holding company. This could be another US entity taxed as a corporation or could be an offshore company that is tax-efficient for both India and the US. Singapore and Mauritius are common jurisdictions chosen for Indian/US holding companies.

Acquisitions and Joint Ventures

The quickest paths to establishing a US presence is to acquire an existing one or to form a strategic alliance with a successful US company. This will provide Indian companies with an immediate US presence, work force, management expertise, distribution channel and familiarity with local conditions.


Instead of organizing a subsidiary or establishing a branch, an Indian investor or company could acquire the assets or equity of an existing business (the “target”). The acquisition may be done by purchasing the target’s assets or equity in exchange for cash or equity of the foreign investor or through a merger. Important tax issues arise from how an acquisition is handled, so early discussions with legal counsel and financial/accounting consultants are essential.

Joint Ventures/Strategic Alliances

Joint ventures may be formed for a single, short -term business event or may contemplate a long-term relationship involving multiple transactions. A joint venture or strategic alliance may be a contract between parties or can be in the form of a legal entity. “Joint venture” is not a type of legal entity but embraces both forms of business alliances. The US is generally a “freedom of contract” jurisdiction, leaving parties wide discretion in defining rights and responsibilities in a written agreement. A 100% acquisition gives an Indian company total control and avoids entanglements with co-owners but is more expensive than a minority or majority stake in an enterprise that involves US co-owners. Neither is better or worse – each is a choice.


One of the major concerns from most Indian companies seeking to conduct business in the United States is with regard to immigration for their existing workforce in India. US immigration law, as you may be aware, is complicated, subject to frequent change, and time-bound. However, there are a number of avenues for investors and companies looking to establish business operations in the United States.

Visitor for Business (B 1): B 1 visas allow Indian nationals to travel temporarily to the US for short-term business purposes such as surveying potential sites, negotiating contracts, consulting with business associates, and participating in professional conventions, conferences, or seminars. However, a B-1 visitor must intend to return to a residence outside the US, and his or her services must benefit an employer whose place of business is primarily outside the US.

Intracompany Transferee (L-1): L-1 visas are available to employees of an Indian company with offices in India and in the US, or a company that intends to open a new office in the US while maintaining their office(s) in India. There are two categories of employees eligible for L-1 visas: (a) executives or managers and (b) employees who are in positions requiring specialized knowledge. Generally, the L-1 visa will allow an employee to transfer to a US office after having worked in India for the company or a related company for at least one year prior to being granted L-1 status.

Specialty Occupation Worker (H 1B): The H-1B visa is designed for foreign nationals who are employed in “specialty occupations.” This is the most commonly used visa and has come under great scrutiny recently. This visa type is fairly flexible and permits any company registered in the US to sponsor a qualified worker for a job requiring specific knowledge equivalent to at least a four-year university degree in a specific field. Only 85,000 new H 1B visas are available each year, and demand vastly exceeds supply. All petitions must be filed on 1st April of any given year, and a randomized lottery process determines who gets to proceed.

A country of contracts and rule of law

Some fear the United States is plagued with lawsuits and 40-page contracts where a handshake should suffice. This is a misperception. It is true that substantial business agreements are quite detailed. This is because the US is far less regulated than most countries and most business obligations are contractual. Virtually non-existent public corruption and strong courts dedicated to promptly enforcing rights and obligations agreed upon by parties combine to make the US a country where business can flourish with confidence that they will be protected. Insurance at affordable rates covers most business risks within a reasonable budget.


Every country has its own culture and rules that must be learned by businesses entering that market. CII’s 2017 Survey reports that 85% of respondents intend to invest further in the US over the next five years. Unlocking the US market will be challenging because of its competitive nature but businesses should not be hindered by excessive regulation or fear of the unknown.

For further information on Doing Business in the USA, see our Guide at www.fbtglobal.com.

About the authors

Joseph Dehner

Joe serves as the Frost Brown Todd India Desk Co-Chair. He counsels clients on issues confronting global business, including cross border investment, mergers and acquisitions, joint ventures, global personnel matters, tax, customs and trade issues, structures, distribution and agency agreements and the resolution of international disputes. He represents clients in disputes involving the securities laws and claims involving takeovers, fiduciary duty, fraud, negligence and securities statutes, and is a nationally recognized attorney in structured settlements.


Sunrita Sen

Sunrita serves as the Frost Brown Todd India Desk Co-Chair. Her practice focuses on providing advice tailored to the unique needs and circumstances of her clients as they grow their businesses, look to move operations overseas and restructure their existing businesses. She also provides guidance to companies on cross-border mergers and acquisitions, data privacy and contract negotiation. Her experience includes work in India, the UK and Myanmar. Prior to university, Sunrita was raised and educated in Kolkata, India.




1 Office of the United States Trade Representative, India: US-India Bilateral Trade and Investment (available at USTR).

2 Sankalp Phartiyal, KKR Sees India Benefitting from US-China Trade War (Dec. 12, 2018), available at Reuters.


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