How Stripe Atlas Helped rtCamp start a US subsidiary

⚠️ Disclaimer – This guide is based on our experience and interpretation of legal and tax advice we received. As law and tax are complicated concepts, I request you to verify things at your end. We won’t be responsible for any loss arising from any incorrect advice presented here. We are programmers. Not lawyers. Not tax consultants. ⚠️


Four months ago, we set up rtCamp, Inc – a US company.

rtCamp Inc. is a C-Corporation and wholly owned subsidiary of the Indian company – rtCamp Solutions Private Limited.

We did this through Stripe Atlas and want to share our entire experience in this post. I hope it helps you in some way!

This is a long post so you may want to skip to the Post Incorporation TO-DO list if you are familiar with Stripe Atlas or already an Atlas user.

A brief background

rtCamp was started in 2009 as a WordPress consultancy agency. Like most agencies, we also had an itch to try our hands on products. 😉

We launched our first paid product around 2013. That was a point we first encountered the sorry state of affairs of payment gateways in India.

The fact that we were using Stripe and its beautiful API on client projects to achieve amazing things made us even more frustrated with our inability to use Stripe ourselves.

The other options apart from PayPal available in India are too ugly. PayPal in India itself has a very limited feature set. The key limitation? Indian PayPal users cannot buy from Indian PayPal merchants.🤦

In 2015, we decided to work on a SaaS offering that forced us to consider Stripe for recurring payment. Since Stripe requires you to be registered in the US (or one of a few other countries it supports), it was at this point that we started playing with the idea of starting a US company.

The amount of work and compliances involved were daunting. The idea of starting a US company just to access a payment gateway seemed crazy. But I found a few people doing just that already!

Frustrated, I reached to many people, including the proponents of Make in India ☹️

And then, our prayers seemed to be answered by Stripe itself. On the 24th of February, just 3 weeks after my tweet, Stripe launched Atlas. Was this a coincidence? The universe balancing everything out? I’m still not sure.

We got an Atlas invite within a month of the launch. But actually ended up waiting for 15-months before using that invite.

Incorporating with Stripe

The incorporation process is quite straightforward. Atlas’ guide and docs are a massive help.

A major reason for the delaying our US company setup was the incorporation type Stripe Atlas offered. Atlas only offers a C-Corp incorporation. My initial plan was to register the US company as an LLC.

Because of this sticking point, we evaluated several incorporation services, talked to many industry experts, lawyers, CPAs including a free consultation with PwC (PricewaterhouseCoopers) offered by Stripe Atlas to clear our doubts.

We finally decided to proceed with Stripe and C-Corp. But moving ahead we again faced two choices – I as an individual could own the new US company or the Indian company could become the parent of a wholly owned US company. I was more worried about overheads rather than ownership structure.

In the end, I decided to go with the parent-subsidiary model as it aligns with my round-table vision and decentralization efforts.

There is really not much to write about the incorporation process itself, as Stipe Atlas really made it as easy as few clicks. But I have a lot to share what we did after incorporation! In fact, this part is my main motivation for writing this long post event through my busy travel schedule.

Post-Incorporation TO-DO list

Even though Stripe is not a law firm or accounting firm, the number of things they help you with is commendable. There are still a few things that you need to take care of, though.

Stock Purchase Agreement

You will need to get a stock purchase agreement executed through which the parent company purchases the subsidiary company’s shares.

Atlas provides a template for this and also a discounted package on UpCounsel where a real lawyer can help you out. We went with the lawyer recommended by Stripe.

The default investment amount for stock purchase template provided by Stripe is only $100. You may invest more, but be careful about it as this may affect your annual Delaware Franchise Tax.

Transfer Pricing Agreement

Wikipedia explains this concept in detail, so I won’t get into the details.

Having already decided on a subsidiary structure, we tried to write down transactions between parent and subsidiary in as many details as possible. This helped our CA firm and lawyer draft a transfer pricing agreement for us.

In India, your CA needs to conduct a transfer pricing audit report every year. So it’s better to get your CA firm involved at an early stage.

Mail Forwarding Address

The Delaware-based address you see in Stripe Atlas dashboard is the address of your registered agent. The address is good to receive legal notices and government communication. The registered agent will likely forward them to you.

You will need another general purpose address for where your clients can courier checks or even get something shipped.

We decided to use a mail forwarding service from virtualpostmail.com. Mail forwarding services need a form 1583 filled and notarized. There are notarization services online.

Once you pay them for their services, they will need to verify you online via a video call. In India, I got this form notarized in a local courthouse for a sum of less than $5.

Our biggest concern using virtualpostmail.com was since they are based in California, it might have force us to register a company in California and handle state taxes there too. A discussion with VirtualPostMail clarified that just setting up a mail forwarding service in a state won’t be termed as a nexus, so we were good to proceed with them.

Getting a debit/credit card

Silicon Valley Bank (SVB) usually offers you a debit card linked to your business, but due to RBI regulations, this option is not available for businesses from India.

You will require a debit/credit card to buy products and services for your businesses. Your choices are:

  1. Open a US bank account in another bank on next US trip. It’s really easy.
  2. Use Bento – a physical prepaid card which can be used anywhere a debit/credit card is accepted. Bento draws funds directly from your SVB account in advance.
  3. Use Privacy.com – this really cool service generates a virtual credit card that can be used for recurring payments. They do not provide physical cards. They also draw funds from SVB bank but on a per charge basis.

We are actually using all three of the above!

Dealing With Multiple Addresses

Once you get a mail forwarding address, you will end up with three addresses. The problem is figuring out when to use each address. I asked a few people but did not get any help.

  1. Physical Address – the address where you live! This is the physical address of your US company. This will be used in banks and for government-related papers.
  2. Delaware Address – the address of your registered agent. So if you change your registered agent, this will also change. We use this for legal contracts. Your registered agent can forward you legal notices, so it should be fine.
  3. Mail Forwarding Address – a US-based address you have set up to receive mails and shipping on your behalf. We use this as a shipping address. We also use this as the billing address for Privacy.com/Bento cards when shopping online. Using the same billing/shipping address saves us time.

If you know a better way to handle the addresses, please let us know via the comments below or this Atlas forum thread.

PayPal US Account

Even if you are a happy Stripe customer, there may be cases where you need a PayPal account. If you accept all payments via Stripe, you may need PayPal to make payments to another business using PayPal.

PayPal requires SSN, something that is not available to non-US residents. Many users just use EIN in place of SSN. Your PayPal account might get activated instantly but this is something that will likely cost you in future, especially if you start accepting payments using the PayPal payment gateway.

I will never recommend using EIN in the place of SSN. Even though some services allow it, make sure you talk to them about it and have the approval on record.

PayPal doesn’t seem to have a policy on this and issues are sorted case by case. Talking to PayPal to get approval for using EIN instead of SSN is on our to-do list, but since Bento and Privacy are working nicely for us, we are not in a hurry.

A note about US Bank account and routing number

Your bank account and ABA (Routing Number) are critical pieces of information. In many countries (including India) nobody can draw money from your bank by just knowing your account number.

However, within ACH networks, others can charge your account just by knowing your bank account and ABA numbers. They might need some more details, such as business name and address, but these are often already public.

I was surprised at how some services managed to withdraw money from my account using only my bank account and routing number. And I am not the only one surprised by this either!

Protect your US bank account and routing numbers. I think that the big companies who publish these details publicly have a special account where they can only receive money.

Accounting Setup

There are two parts – bookkeeping and filings.

We are using Xero.com for our accounting needs. Xero doesn’t support Stipe as a bank but you may find our alternative solution useful in that case.

Our Indian CA firm has a US contact and together they are taking care of compliances and filing. Stripe Atlas offers few options and packages too.

Our suggestion would be to pick one on time to avoid penalties and bigger issues.

US Taxes

It’s better to read PwC’s tax guide from Stripe Atlas docs for in-depth details on this.

Just by setting up a US company, you are subjected to a few taxes and compliances (e.g. Delaware franchise tax)

For Indian Entrepreneurs

If you are a business in India, you might find a few oddities. Here are a few learnings that are specific to the Indian context.

Overseas Direct Investment (ODI)

Remember the Stock Purchase Agreement you signed as the first thing after setting up the company? You need to wire transfer the share purchase price to the US company and report it under Overseas Direct Investment (ODI) to the Reserve Bank of India. The ODI reporting part is done by your bank.

Apart from one time ODI reporting, you will also need to file an Annual Performance Report (APR) every year.

We are still in the process of doing these, so I will update this section based on my actual experience.

US Taxation from Indian Perspective

Tax Deducted at Source (TDS)

Within the US, your clients don’t deduct tax when paying to you. On the flip side, you don’t deduct any tax when paying to your vendor either. This is often referred to as tax withholding.

Your Indian Company may need to submit form W8BEN-E to your US company to avoid tax withholding in cross-country payments.

Advance Tax

Business in India is subject to a quarterly advance tax. In the USA, this is called “estimated tax”. You only need to file for this when you expect to make more than $50,000 in profit.

This is different than in India where even for Rs. 1 in expected profit, you are expected to file for advance tax.

Indirect Taxes (GST equivalent)

US doesn’t have anything like federal indirect tax, i.e. IGST, or service tax equivalent. There are state level indirect taxes but Delaware doesn’t have one. So you don’t need to charge your customers any sale tax.

This may change when you hire employees on a US payroll or open up warehouses or physical stores in other states. These will make you liable for state income tax.

State Income Tax

In India, we only have one form for filing income tax, and we pay it to the central government.

In the US, there is a state-level income tax too. Fortunately, Delaware doesn’t have one!

Hiring in the US compared to India

Hiring Employees

The moment you hire full-time employees, you need to start handling payroll taxes.

Like India, it involves managing a 401K (the equivalent of the provident fund), tax withholding (TDS on Salary), and few more compliances. We haven’t hired any full-time employees yet. I will post more details when we do!

Hiring Contractors

Hiring part-time contractors on a retainer basis is easy. There is no tax withholding involved if the contractor is a US entity. So far we haven’t been charged any sales tax by any vendor.

For independent contractors, we need to submit a form 1099. This is the only compliance we need to deal with. There are no monthly TDS deductions or quarterly TDS returns like we have in India.

A note about full-time contractors

An independent contractor working full-time only for a US company could raise a red flag. Our advisor said that this could be seen as an attempt to bypass employment benefits to a person.

Why Did We Use Stripe Atlas?

You may see, even with Stripe Atlas there was a lot to do! The fact is, if you do it any other way, you will likely have to do even more work yourself.

Atlas provides many obvious benefits:

  • A US business bank account without a need to visit the USA
  • AWS credits. We got $5000 for hosting bill and another $5000 for business support. Also, some free credits to use with AWS courses on QwikLab.com
  • Connect with legal and tax experts

All of this greatly offsets the $500 one-time fee, which is lower than going through other incorporation options.

But the real value of Stripe Atlas is the community around it. Atlas entrepreneurs help each other in amazing ways, whether over the official Atlas forum or unofficial channels, such as this Facebook group started by Ashwin.

Even if they had removed all their freebies and upped their fees to match other incorporation services, I would have still used Atlas just for its active community and amazing support.

We are grateful for the help we received from the Stripe Atlas community. In fact, this huge article is motivated by our desire to pay it back, or better, pay it forward.

If you are a company looking to take the next step in your growth, consider Atlas. We recommend it.

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