How Indian LLPs Can Work With Their Own US LLC: A Compliance Guide

Introduction

We recently handled a real case where founders were operating an Indian LLP alongside their own US LLC and faced multiple questions related to GST, foreign payments, invoicing, payroll, and overall regulatory compliance.

The business structure itself was common and legally valid. However, confusion began once foreign payments started coming in and Indian compliance requirements had to be followed. This blog summarises the key questions raised in that case and explains the practical solutions that were applied.

If you are running a similar setup and have doubts about how compliance works between an Indian LLP and a US LLC, this guide will help you understand what needs to be done.

Understanding the Indian LLP and US LLC Relationship

A common question is whether an Indian LLP and a US LLC owned by the same founder are treated as related entities.

In this case:

• The Indian LLP and the US LLC are separate legal entities.
• Common ownership does not automatically make one a subsidiary or holding company.
• The US LLC deals with clients, while the Indian LLP delivers the services.

Since there is no holding or subsidiary relationship, the structure is treated as a service provider model, which is important for GST and transfer pricing evaluation.

How Services Are Delivered Between the US LLC and Indian LLP?

In this case, the service delivery is split clearly between the two entities based on their roles.

• The US LLC deals with US-based clients and signs service contracts.
• Clients engage with the US LLC and make payments to the US entity.
• The Indian LLP carries out the actual medical billing work and delivers the services.

Since the services are performed in India and delivered to an overseas entity, the arrangement is treated as an export of services. This classification becomes important later for GST treatment and foreign remittance documentation.

How Money Flows From US Clients to the Indian LLP?

Another frequent question is how service delivery is viewed in such structures.

Here, the model is simple:

• The US LLC signs contracts with US clients.
• The Indian LLP performs the actual services.
• Services are delivered from India to an overseas entity.

Because the services are provided from India to a foreign entity, they are treated as export of services under Indian GST laws.

Foreign Remittance Documentation: FIRC, FIRA, and BRC

One of the most common questions in such setups is whether FIRC or FIRA is mandatory when the Indian LLP receives foreign payments for services.

In this case, FIRC or FIRA is generally required as proof of export of services, especially for treating the supply as zero-rated under GST. Since earlier payments were received through Wise and the USD to INR conversion was done by Wise and not by the Indian bank, FIRC was not issued for those transactions.

How this was handled and what should be done:

• For the earlier transactions, the following were kept as supporting documents:

1. Wise transaction statements
2. Bank credit advice from the Indian bank
3. Export invoices raised by the Indian LLP

These documents are commonly accepted in practice when FIRC is not available.

• For future transactions, the safest approach is to route USD directly to the Indian bank and allow the bank to convert USD to INR so that FIRC or FIRA is issued.

As for BRC, it is required for export of services. Banks usually generate BRC once the foreign remittance is realized. If funds are routed through platforms like Wise and BRC is not auto-generated, FIRC along with bank credit advice generally works as an alternative.

GST Implications on Services Provided by an Indian LLP

In this setup, the services are performed by the Indian LLP and delivered to an overseas entity. Such services are treated as export of services under GST and qualify as zero-rated supply, which means GST is not charged on the invoice.

However, to treat the supply as zero-rated, the Indian LLP is required to file a Letter of Undertaking (LUT). The LUT allows the LLP to export services without charging GST and report the transactions correctly in GST returns. Without a valid LUT, the zero-rated treatment may not be available.

What needs to be done:

The Indian LLP should ensure that the LUT is filed before continuing export of services. Once the LUT is in place, export invoices can be raised without GST and reported accordingly in GST returns.

Billing the US LLC: Frequency, Pricing, and Structure

This billing structure ensures consistency, transparency, and alignment with compliance requirements when services are provided by an Indian LLP to its own US LLC.

Invoice Type, Currency, and SAC Code Selection

The Indian LLP should raise an export invoice to the US LLC for the services provided.

• The invoice should be issued in USD.
• GST should not be charged, as the supply is treated as export of services.
• The applicable SAC code depends on the nature of services:

1. SAC 9985 applies for support services.
2. SAC 9983 applies for professional, technical, or business services.

• If the existing GST registration already reflects the correct service category, no change in SAC code is required.

Action point:

Continue issuing USD export invoices without GST using the SAC code that correctly matches the nature of services provided.

Transfer Pricing and FEMA Considerations

Transfer pricing audit or agreement is not required where there is no holding, subsidiary, or associate relationship and the overall revenue is below ₹15 lakh. Common ownership alone does not trigger transfer pricing compliance.

No RBI approval is required to operate a US LLC. ODI reporting is required only if Indian resident funds are invested in the US entity.

Action point:

No transfer pricing audit is needed. Ensure ODI reporting only if Indian funds are invested in the US LLC.

Employees, Salary Payments, and TDS Applicability

A common concern was whether TDS needs to be deducted on employee salaries.

Here, each employee earns less than ₹25,000 per month, which keeps their annual income below ₹12,00,000 under the new tax regime. Since the income does not cross the applicable threshold, TDS does not apply at this stage.

What to keep in mind:

There is no requirement to deduct or file TDS for these salaries right now. This should only be revisited if employee compensation increases beyond the threshold in the future.

Handling Expenses Paid by Partners or Directors

Another question that often comes up is whether partners or directors can pay business expenses from their personal accounts.

Ideally, all business expenses should be paid directly from the LLP’s bank account. That keeps records clean and avoids confusion later. However, if a partner pays for a business expense personally, it is still acceptable as long as proper bills and supporting documents are maintained.

What needs to be done:

Such expenses should be recorded as reimbursements in the LLP’s books and paid back to the partner accordingly. Any amount paid by a partner for business purposes should be clearly supported and reflected correctly in the accounting records.

How Much Money Can Be Remitted From the US LLC to the Indian LLP?

The amount that can be remitted from the US LLC to the Indian LLP depends entirely on the value of the invoice raised by the Indian LLP.

Only the invoiced amount can be legally transferred to the Indian LLP. If the intention is to remit the entire amount received by the US LLC, the Indian LLP must raise an invoice for that full amount. Doing so will increase the LLP’s total revenue, which will then be taxed at the applicable rate of 30 percent.

Straight answer:

You cannot freely transfer all funds unless they are backed by a valid invoice. Remittances must always match the invoice value raised by the Indian LLP.

Ongoing Compliance and Payment Process Going Forward

For future transactions, the compliance and payment process should follow a clear and consistent flow.

1. The Indian LLP should raise a monthly export invoice to the US LLC at an arm’s length price.
2. The US LLC should remit payment strictly against the invoice.
3. Funds should ideally be received directly in the Indian bank account, with USD to INR conversion done by the Indian bank.
4. FIRC or FIRA and BRC should be obtained for each foreign remittance.
5. The transaction should be reported under GST as export of services (zero-rated supply).

Following this process ensures that payments, documentation, and GST reporting remain aligned and compliant going forward.

Key Compliance Takeaways for Founders

1. An Indian LLP and a US LLC can work together legally even if they are owned by the same founder.
2. Services delivered from India to a US entity are treated as export of services under GST.
3. Filing an LUT is required to treat such services as zero-rated and avoid charging GST.
4. Foreign payments should ideally be received through an Indian bank to obtain FIRC or FIRA.
5. Remittances from the US LLC must always match the value of invoices raised by the Indian LLP.
6. Monthly billing with a reasonable markup helps maintain clean and compliant records.
7. Transfer pricing audit is not required if there is no holding or subsidiary relationship.
8. Employee salaries below the applicable threshold do not require TDS deduction.
9. Business expenses paid personally must be reimbursed with proper supporting documents.

Frequently Asked Questions