Over the past few years, Ankita Srivastava has helped over 500 founders and businesses navigate the legal complexities of operating across the US and India — from structuring Delaware flips to untangling FEMA compliance, from drafting cross-border employment agreements to building privacy frameworks that satisfy both DPDP and CCPA requirements.
What she’s learned: the founders who succeed aren’t those who avoid complexity, but those who understand it early. Here’s what actually matters.
The Entity Structure Decision
Most venture-backed Indian startups targeting US markets eventually establish a Delaware entity through a “flip” structure. But timing and method matter enormously.
US Parent with Indian Subsidiary suits startups seeking US institutional investment. The Indian entity becomes a wholly-owned subsidiary, with IP typically held by the parent — triggering transfer pricing considerations and careful valuation requirements.
Indian Parent with US Subsidiary works for startups with primarily Indian revenue but US partnership needs. Simpler to establish but may complicate future fundraising.
The flip itself involves FEMA regulations, RBI compliance, and potential tax events for Indian shareholders. Founders who treat this as routine paperwork often discover expensive complications mid-process.
Employment Across Borders
The Contractor Trap: Many startups default to contractor arrangements. Indian tax authorities have grown sophisticated at identifying misclassified relationships. A “contractor” who works exclusively for one company, follows set hours, and uses company equipment is an employee — with corresponding PF, ESI, and withholding obligations.
EOR vs. Subsidiary: Employer of Record services offer compliant employment without an Indian entity. Economics work for small teams but become expensive beyond 15-20 employees.
Equity Complications: Granting US equity to Indian employees triggers perquisite taxation, FEMA reporting, and LRS considerations. Many founders discover these issues only at exit.
Data Privacy: Two Frameworks, One Product
India’s DPDP Act, 2023 brings comprehensive privacy obligations – consent mechanisms, purpose limitation, and penalties up to ₹250 crore. For startups also handling US data, CCPA, HIPAA, and COPPA each impose distinct requirements.
The practical solution: consent mechanisms capturing the highest common denominator, proper data mapping, and incident response calibrated to the shortest notification timelines.
Contracts That Cross Borders
Governing Law: US companies prefer Delaware or New York law; Indian parties push for Indian law. For IP assignments especially, the choice affects whether assignments are effective at all.
Dispute Resolution: Indian litigation can take 5-10 years. Arbitration offers faster resolution – Singapore and London remain popular neutral seats. US judgments aren’t directly enforceable in India; arbitral awards fare better.
Payments and IP
Foreign Exchange: FDI into Indian entities requires FEMA compliance. Most tech sectors permit 100% FDI under automatic route, but documentation must be precise. Related-party payments trigger transfer pricing scrutiny.
Intellectual Property: Indian law requires written copyright assignment. Work-for-hire doctrine is narrower than in the US — creator ownership is the default unless properly assigned. And remember: a US patent provides zero protection in India.
What Actually Works
Founders who navigate this successfully share common approaches:
Structure intentionally. The entity structure at incorporation may not serve a Series A. Restructuring is always more expensive than doing it right initially.
Document everything. Cross-border transactions face scrutiny from multiple tax authorities. Contemporaneous documentation becomes invaluable during examination.
Treat compliance as infrastructure. Build it into operational rhythms rather than treating it as episodic firefighting.
Cross-border operations between the US and India are more viable than ever. The complexity is real but navigable — and founders who treat compliance as strategic input find it creates optionality, not constraint.
Ankita Srivastava is a Harvard Law School LL.M. graduate and founder of Gavel Speaks Inc., helping startups and SMEs navigate cross-border transactions across the US, India, UAE, and EU.
This article provides general information and does not constitute legal advice.
