Forming a US LLC to get paid? That's a ₹20 lakh mistake
A YouTube tutorial convinced you that a Wyoming LLC is the answer to all your payment problems. You registered online, got a US address, and opened a Mercury bank account. Six months later, you missed a filing you never knew existed. The IRS now wants $25,000.
This is not a hypothetical scenario. It is happening to Indian freelancers right now.
India has over 15 million freelancers, making it the world's second-largest freelance workforce. Thousands of them register US LLCs each year to receive international payments through Stripe, PayPal, and US bank transfers. Formation agencies like Doola, Firstbase, and Stripe Atlas sell packages between $500 and $2,000, promising seamless global payments. What they rarely mention is the compliance nightmare that follows.
In February 2026, The Tribune, The Wire, and Outlook India all reported on the rising wave of Indian freelancers forming US companies without understanding the regulatory risks. The trend is accelerating, but so are the consequences.
Before forming any foreign entity, explore the best ways for freelancers to receive international payments in India using RBI-compliant channels.
Why freelancers rush to form US LLCs
The appeal of a US LLC for Indian freelancers is easy to understand. Stripe works smoothly with US business accounts but creates friction with Indian sole proprietorships. Invoicing from a US entity reduces the "credibility gap" with Western clients. The LLC pass-through structure means no US corporate tax if you have no "effectively connected income" in America.
Wyoming leads the pack with a $100 filing fee, $60 annual report, no state income tax, and owner privacy. Delaware charges $90 to $110 for filing, but also imposes a $300 annual franchise tax. New Mexico costs about $50 with zero annual fees.
Here is what the formation pitch leaves out. Non-residents cannot apply for an EIN online. You must fax or mail Form SS-4, and processing takes 2.5 to 3 months. Mercury, the most popular neobank for non-resident LLC owners, tightened its requirements significantly in 2025. Many applicants are now denied outright. The total timeline from formation to a working bank account stretches to 3 to 4 months.
The Form 5472 penalty that catches everyone off guard
Every foreign-owned single-member LLC must file Form 5472 with a pro-forma Form 1120 by April 15 each year. This applies even if your LLC earned zero revenue. The form reports all transactions between the LLC and its foreign owner, including capital contributions, distributions, loans, and service payments.
The Form 5472 penalty for late, missed, or incomplete filing is $25,000 per form. Each additional 30-day period of non-compliance after IRS notification adds another $25,000. There is no statutory maximum. There is no statute of limitations for unfiled returns.
You cannot e-file this form for foreign-owned disregarded entities. It must be mailed or faxed to the IRS in Ogden, Utah. Professional preparation costs $500 to $1,500 per year. Tax professionals report that awareness of this requirement among Indian freelancers remains extremely low. Most discover it only after missing the deadline.
Your US LLC bank account may also trigger FBAR filing requirements. If the LLC holds foreign financial accounts exceeding $10,000 in aggregate, you must file FinCEN Form 114. Non-willful FBAR penalties reach $16,536 per form. Willful violations can cost up to $165,353 or 50 per cent of account balances.
What it actually costs to keep a US LLC alive each year
The formation fee is just the beginning. Here is the realistic annual maintenance cost for a Wyoming LLC owned by an Indian freelancer:
| Expense | Annual cost |
|---|---|
| Wyoming annual report | $60 |
| Registered agent | $125–$200 |
| Form 5472 + CPA preparation | $500–$1,500 |
| Indian CA for FEMA + ITR with Schedule FA | ₹10,000–₹50,000 ($120–$600) |
| Virtual US address | $120–$360 |
| US bank account maintenance | $0–$120 |
| Total | $925–$2,840 |
Industry analysts estimate the break-even point at $3,000 to $4,000 in monthly revenue. Below that, compliance costs make the structure financially impractical. Most Indian freelancers earning $1,000 to $2,000 per month are losing money on their LLC before they earn a single dollar through it.
A single missed Form 5472 costs $25,000. A single penalty under the Black Money Act for undisclosed foreign assets costs ₹10 lakh. The risk-adjusted cost of running a non-compliant LLC is devastating.
FEMA compliance for US LLC owners living in India
This is where most Indian freelancers get blindsided. Under FEMA Overseas Investment Rules 2022, forming a US LLC counts as Overseas Direct Investment. Even though the LLC is a "disregarded entity" for US tax purposes, FEMA treats it as a separate legal entity with full compliance requirements.
Indian residents can legally own a US LLC under the automatic route without prior RBI approval. However, they must route all investment through an Authorised Dealer bank, not a personal credit card via Stripe Atlas or Firstbase. They must obtain a Unique Identification Number from the RBI before sending funds abroad. They must file Form FC and Form A2 for every outward remittance. They must submit an Annual Performance Report, certified by a Chartered Accountant, by December 31 each year.
The most common violation is straightforward. Freelancers use Doola or Firstbase to incorporate and pay formation fees via personal credit cards, bypassing the AD bank routing requirement entirely. This is a FEMA contravention carrying penalties of up to three times the amount involved under Section 13 of FEMA, plus ₹5,000 per day of continuing violation.
Investment is also subject to LRS limits of $250,000 per financial year per individual. The August 25, 2025, deadline to reregularize-2022 ODI reporting violations via the Late Submission Fee route has already passed. Compounding with a penalty is now the only path.
The new FEMA 2026 changes for Indian service exporters add further complexity that every freelancer and small business owner must understand.
The Black Money Act and India's NUDGE campaign are watching.
Indian tax residents must pay tax on worldwide income under Section 5 of the Income Tax Act 1961. All US LLC profits are taxable in India in the year earned, whether or not you move money back from your US account.
You must report your LLC ownership in ITR-3 under Schedule FA for foreign assets and Schedule FSI for foreign source income. The Black Money Act 2015 imposes a penalty of ₹10 lakh per assessment year for failing to report foreign assets. Undisclosed foreign income is taxed at a flat 30 per cent with no deductions, plus a penalty of three times the tax. That is effectively a 120 per cent total charge. Willful concealment can lead to a sentence of six months to seven years' imprisonment.
The CBDT launched its NUDGE 2.0 campaign in November 2025, using FATCA and CRS data shared automatically between the US and India. Thousands of Indian taxpayers have already received SMS and email notices about undisclosed foreign assets. ITR refund processing is being held for flagged individuals.
The Indian tax department has the data. They are acting on it.
A multi-currency account for freelancers solves the actual problem.
The core reason freelancers form US LLCs is to receive international payments in India without friction. A new generation of India-based fintech platforms now delivers this exact benefit, without requiring a foreign entity.
These platforms provide local account numbers, including US ACH routing numbers, European IBANs, and UK FPS details. Your clients make domestic transfers into these accounts. Funds settle in INR to your Indian bank account within 1 to 3 business days. The platform generates automatic FIRAs for FEMA and GST compliance.
Here is a cost comparison of $5,000 in monthly payments:
| Platform | Approximate monthly cost | Annual cost |
|---|---|---|
| PayPal | ~$400 (7–8%) | ~$4,800 |
| Payoneer | ~$100–150 (2–3%) | ~$1,200–$1,800 |
| Wise | ~$85 (1.7%) | ~$1,020 |
| Winvesta | ~$53 ($3 + 0.99%) | ~$636 |
| Skydo | ~$29 (flat fee) | ~$348 |
| Xflow | ~$50 (1%) | ~$600 |
| US LLC route | $80–250 maintenance | $1,100–$4,000 |
Winvesta offers global collection accounts in USD, GBP, EUR, CAD, and AUD at $3 plus 0.99% per transaction, with zero FX markup on USD. It serves over 13,000 businesses and freelancers across 180 countries. Other strong options include Skydo, with flat fees starting at $19 per transaction, and Xflow, backed by JPMorgan Chase, with a 1% flat fee.
Every platform listed above generates automatic FIRAs, maps purpose codes correctly, and settles through FEMA-compliant banking channels. A raw US LLC bank account provides none of these compliance features.
The only freelancers who should consider a US LLC
A US LLC still makes sense for a narrow group. You bill $5,000 to $10,000 or more per month. You need full Stripe integration and U.S.-entityycredibility for enterprise clients. You budget for professional CPA and CA support from day one. You understand FEMA ODI filings, Form 5472 deadlines, and Schedule FA requirements.
For everyone else, the "international" LLC is an expensive illusion. India's tax authorities, armed with FATCA data and NUDGE campaigns, are increasingly equipped to find you. Multi-currency platforms like Winvesta, Skydo, and Xflow deliver the same functionality at a fraction of the cost and with zero regulatory risk.
Stop paying ₹20 lakh in compliance costs and penalties to solve a problem that a ₹500-per-month platform already fixes.
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute financial or legal advice. Winvesta makes no representations or warranties about the accuracy or suitability of the content and recommends consulting a professional before making any financial decisions.
Get paid globally. Keep more of it.
No FX markups. No GST. Funds in 1 day.
Table of Contents
A YouTube tutorial convinced you that a Wyoming LLC is the answer to all your payment problems. You registered online, got a US address, and opened a Mercury bank account. Six months later, you missed a filing you never knew existed. The IRS now wants $25,000.
This is not a hypothetical scenario. It is happening to Indian freelancers right now.
India has over 15 million freelancers, making it the world's second-largest freelance workforce. Thousands of them register US LLCs each year to receive international payments through Stripe, PayPal, and US bank transfers. Formation agencies like Doola, Firstbase, and Stripe Atlas sell packages between $500 and $2,000, promising seamless global payments. What they rarely mention is the compliance nightmare that follows.
In February 2026, The Tribune, The Wire, and Outlook India all reported on the rising wave of Indian freelancers forming US companies without understanding the regulatory risks. The trend is accelerating, but so are the consequences.
Before forming any foreign entity, explore the best ways for freelancers to receive international payments in India using RBI-compliant channels.
Why freelancers rush to form US LLCs
The appeal of a US LLC for Indian freelancers is easy to understand. Stripe works smoothly with US business accounts but creates friction with Indian sole proprietorships. Invoicing from a US entity reduces the "credibility gap" with Western clients. The LLC pass-through structure means no US corporate tax if you have no "effectively connected income" in America.
Wyoming leads the pack with a $100 filing fee, $60 annual report, no state income tax, and owner privacy. Delaware charges $90 to $110 for filing, but also imposes a $300 annual franchise tax. New Mexico costs about $50 with zero annual fees.
Here is what the formation pitch leaves out. Non-residents cannot apply for an EIN online. You must fax or mail Form SS-4, and processing takes 2.5 to 3 months. Mercury, the most popular neobank for non-resident LLC owners, tightened its requirements significantly in 2025. Many applicants are now denied outright. The total timeline from formation to a working bank account stretches to 3 to 4 months.
The Form 5472 penalty that catches everyone off guard
Every foreign-owned single-member LLC must file Form 5472 with a pro-forma Form 1120 by April 15 each year. This applies even if your LLC earned zero revenue. The form reports all transactions between the LLC and its foreign owner, including capital contributions, distributions, loans, and service payments.
The Form 5472 penalty for late, missed, or incomplete filing is $25,000 per form. Each additional 30-day period of non-compliance after IRS notification adds another $25,000. There is no statutory maximum. There is no statute of limitations for unfiled returns.
You cannot e-file this form for foreign-owned disregarded entities. It must be mailed or faxed to the IRS in Ogden, Utah. Professional preparation costs $500 to $1,500 per year. Tax professionals report that awareness of this requirement among Indian freelancers remains extremely low. Most discover it only after missing the deadline.
Your US LLC bank account may also trigger FBAR filing requirements. If the LLC holds foreign financial accounts exceeding $10,000 in aggregate, you must file FinCEN Form 114. Non-willful FBAR penalties reach $16,536 per form. Willful violations can cost up to $165,353 or 50 per cent of account balances.
What it actually costs to keep a US LLC alive each year
The formation fee is just the beginning. Here is the realistic annual maintenance cost for a Wyoming LLC owned by an Indian freelancer:
| Expense | Annual cost |
|---|---|
| Wyoming annual report | $60 |
| Registered agent | $125–$200 |
| Form 5472 + CPA preparation | $500–$1,500 |
| Indian CA for FEMA + ITR with Schedule FA | ₹10,000–₹50,000 ($120–$600) |
| Virtual US address | $120–$360 |
| US bank account maintenance | $0–$120 |
| Total | $925–$2,840 |
Industry analysts estimate the break-even point at $3,000 to $4,000 in monthly revenue. Below that, compliance costs make the structure financially impractical. Most Indian freelancers earning $1,000 to $2,000 per month are losing money on their LLC before they earn a single dollar through it.
A single missed Form 5472 costs $25,000. A single penalty under the Black Money Act for undisclosed foreign assets costs ₹10 lakh. The risk-adjusted cost of running a non-compliant LLC is devastating.
FEMA compliance for US LLC owners living in India
This is where most Indian freelancers get blindsided. Under FEMA Overseas Investment Rules 2022, forming a US LLC counts as Overseas Direct Investment. Even though the LLC is a "disregarded entity" for US tax purposes, FEMA treats it as a separate legal entity with full compliance requirements.
Indian residents can legally own a US LLC under the automatic route without prior RBI approval. However, they must route all investment through an Authorised Dealer bank, not a personal credit card via Stripe Atlas or Firstbase. They must obtain a Unique Identification Number from the RBI before sending funds abroad. They must file Form FC and Form A2 for every outward remittance. They must submit an Annual Performance Report, certified by a Chartered Accountant, by December 31 each year.
The most common violation is straightforward. Freelancers use Doola or Firstbase to incorporate and pay formation fees via personal credit cards, bypassing the AD bank routing requirement entirely. This is a FEMA contravention carrying penalties of up to three times the amount involved under Section 13 of FEMA, plus ₹5,000 per day of continuing violation.
Investment is also subject to LRS limits of $250,000 per financial year per individual. The August 25, 2025, deadline to reregularize-2022 ODI reporting violations via the Late Submission Fee route has already passed. Compounding with a penalty is now the only path.
The new FEMA 2026 changes for Indian service exporters add further complexity that every freelancer and small business owner must understand.
The Black Money Act and India's NUDGE campaign are watching.
Indian tax residents must pay tax on worldwide income under Section 5 of the Income Tax Act 1961. All US LLC profits are taxable in India in the year earned, whether or not you move money back from your US account.
You must report your LLC ownership in ITR-3 under Schedule FA for foreign assets and Schedule FSI for foreign source income. The Black Money Act 2015 imposes a penalty of ₹10 lakh per assessment year for failing to report foreign assets. Undisclosed foreign income is taxed at a flat 30 per cent with no deductions, plus a penalty of three times the tax. That is effectively a 120 per cent total charge. Willful concealment can lead to a sentence of six months to seven years' imprisonment.
The CBDT launched its NUDGE 2.0 campaign in November 2025, using FATCA and CRS data shared automatically between the US and India. Thousands of Indian taxpayers have already received SMS and email notices about undisclosed foreign assets. ITR refund processing is being held for flagged individuals.
The Indian tax department has the data. They are acting on it.
A multi-currency account for freelancers solves the actual problem.
The core reason freelancers form US LLCs is to receive international payments in India without friction. A new generation of India-based fintech platforms now delivers this exact benefit, without requiring a foreign entity.
These platforms provide local account numbers, including US ACH routing numbers, European IBANs, and UK FPS details. Your clients make domestic transfers into these accounts. Funds settle in INR to your Indian bank account within 1 to 3 business days. The platform generates automatic FIRAs for FEMA and GST compliance.
Here is a cost comparison of $5,000 in monthly payments:
| Platform | Approximate monthly cost | Annual cost |
|---|---|---|
| PayPal | ~$400 (7–8%) | ~$4,800 |
| Payoneer | ~$100–150 (2–3%) | ~$1,200–$1,800 |
| Wise | ~$85 (1.7%) | ~$1,020 |
| Winvesta | ~$53 ($3 + 0.99%) | ~$636 |
| Skydo | ~$29 (flat fee) | ~$348 |
| Xflow | ~$50 (1%) | ~$600 |
| US LLC route | $80–250 maintenance | $1,100–$4,000 |
Winvesta offers global collection accounts in USD, GBP, EUR, CAD, and AUD at $3 plus 0.99% per transaction, with zero FX markup on USD. It serves over 13,000 businesses and freelancers across 180 countries. Other strong options include Skydo, with flat fees starting at $19 per transaction, and Xflow, backed by JPMorgan Chase, with a 1% flat fee.
Every platform listed above generates automatic FIRAs, maps purpose codes correctly, and settles through FEMA-compliant banking channels. A raw US LLC bank account provides none of these compliance features.
The only freelancers who should consider a US LLC
A US LLC still makes sense for a narrow group. You bill $5,000 to $10,000 or more per month. You need full Stripe integration and U.S.-entityycredibility for enterprise clients. You budget for professional CPA and CA support from day one. You understand FEMA ODI filings, Form 5472 deadlines, and Schedule FA requirements.
For everyone else, the "international" LLC is an expensive illusion. India's tax authorities, armed with FATCA data and NUDGE campaigns, are increasingly equipped to find you. Multi-currency platforms like Winvesta, Skydo, and Xflow deliver the same functionality at a fraction of the cost and with zero regulatory risk.
Stop paying ₹20 lakh in compliance costs and penalties to solve a problem that a ₹500-per-month platform already fixes.
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute financial or legal advice. Winvesta makes no representations or warranties about the accuracy or suitability of the content and recommends consulting a professional before making any financial decisions.
Get paid globally. Keep more of it.
No FX markups. No GST. Funds in 1 day.
