How should Indian founders capitalise their US C-Corp? (and the par-value tax trap)

Capitalisation sounds like a finance-department word, but for an Indian founder it’s three practical questions: how much money goes in, how it legally gets there, and what the numbers you pick at incorporation quietly commit you to. The third one is where the trap lives, so let’s earn our way to it.

How much money should actually go into the C-Corp?

Enough to run the company until its next funding event — typically 12-18 months of the US entity’s own costs (the Delaware fees, software, any US spend) plus what it will send the Indian subsidiary for the team, via arm’s-length invoicing. There’s no magic number; there is a magic direction: decide the company’s need first, then size everything upstream from it. Undercapitalise and you’ll be doing a second ODI round-trip within months — each remittance is paperwork, so fewer, larger, planned remittances beat a drip.

Why does the LLP’s 400% rule set your floor?

Because of how the money legally travels. In the LLP route, each founder’s LLP subscribes to the C-Corp’s shares, and an Indian entity’s total overseas financial commitment is capped at 400% of its net worth. A fresh LLP’s net worth is zero, and 400% of zero is zero — so the real sequence is: pick the C-Corp’s number, divide by founders, then capitalise each LLP with at least a quarter of its share, plus running costs. The subscription size and the LLP capital are one decision wearing two entities. (The full mechanics live in the LLP route guide and the cost & timelines guide.)

What are “authorised shares” and “par value,” and why the weird numbers?

At incorporation you’ll authorise a pool of shares — the startup convention is 10,000,000 — and assign them a par value, conventionally $0.0001. Authorised is the ceiling you may issue; issued is what founders and investors actually hold. Par value is a legal floor price per share, deliberately set microscopic so founders can buy their stock for a few hundred dollars while the company can later sell the same class to investors for real money.

Ten million shares isn’t vanity; it’s arithmetic hygiene — whole-number option grants, clean percentage math, room for pools and rounds without amending the charter. And the microscopic par value is what makes founder stock affordable at day one: 4,000,000 shares × $0.0001 = $400. In the LLP route, that subscription cheque — tiny as it is — is the ODI remittance that makes your LLP the stockholder, which is why even this token amount moves through the UIN-first machinery, not a casual wire. Which platform you incorporate through (Stripe Atlas or a Clerky-based service) decides whether you start at this convention or need a later restructure — that’s its own guide.

The trap: how par value decides your Delaware franchise tax

Here’s the bill nobody mentions at the pricing page. Delaware charges every corporation an annual franchise tax, and lets you calculate it by two methods — you pay the lower, but you have to know to ask.

The Authorized Shares Method taxes you on how many shares you authorised — and for a startup with 10 million authorised shares it produces a five-figure bill that arrives, every year, like clockwork. The Assumed Par Value Capital Method instead looks at your gross assets and issued shares — and for a typical early-stage startup with modest assets, it lands at or near the minimum of a few hundred dollars. Same company, same year: one method says tens of thousands of dollars, the other says a few hundred. Delaware’s default notice often shows the scarier number; the method is your election.

This is also where par value earns its keep a second time: the assumed-par-value method interacts with your issued shares and par value such that the conventional tiny-par, 10M-share setup keeps the calculation friendly. Set a high par value, or authorise an enormous pool “to be safe,” and you’ve quietly signed up for a bigger annual bill.

Size the company’s 12-18-month need first; capitalise each LLP at a quarter of its share plus buffer; move money in planned, few, ODI-clean remittances. At incorporation, take the boring convention — 10 million authorised at $0.0001 par — and every March, calculate your Delaware franchise tax by both methods and elect the lower. The scary number in the state’s letter is usually the wrong method.