Introduction – The Prospect of Opening a Business Account in the USA from India
Over the course of the years between 1980 until 2019, the Indian immigrant population in the United States saw a 130 fold increase. As of 2021, Indian Americans make up about 1.2% of the US population, which comes up to about four million individuals in total. Out of these four million, 55 Indian Americans current occupy key positions in the administration cabinet under Joe Biden. Both, the current US Vice President as well as the President’s lead speechwriter are of Indian American descent. Needless to say, it is a great time for Indians to look towards the “land of the free and the home of the brave” for some courageous business prospects. To do so requires you to open a business account in the US.
Well, once the initial excitement has died down, the devil appears in the details.
Opening a US business account first and foremost requires a lot of various considerations. After the USA Patriot Act was passed in the aftermath of the terrible tragedy of 9/11, foreigners need to go through several formalities in order to open a bank account in the US. You will need an ID, an ITIN or an individual taxpayer identification number, and in the case of most banks, you will also need to be physically present at the bank branch in order to open the account.
So, in face of these stringent guidelines, how can you open a business account in the US all the way from India without setting one foot on American soil?
Choosing your path to the American Dream
In the face of the COVID-19 pandemic, several things have changed, one of the major paradigm shifts being the rampant and widespread adoption of digital banking and online financial services. This transformation has come with several surprises, including new prospects for Indians looking to open a business account in the US.
Here are some of the paths you can take to do so, without worrying about international flight booking, cross-border quarantine requirements, travel bans, restrictions and a load of other very pressing considerations:
Find an American Bank Branch in your Local Region
For all of those among you who still trust and believe in the sanctity of good old physical interactions over digital ones, this path is for you. The first step involves finding a branch of American banks in India, some good examples of which are Bank of America, Wells Fargo, American Express, J.P. Morgan Chase and Citibank.
Once you find a branch near you, you will need to gather up some of the core documents needed to complete the process, namely personal identification documents such as your utility bill which contains proof of your physical address, name, and date of birth. You will then need to verify these details with your passport or a government-issued ID such as the Aadhaar card. If you have already received your green card, student visa or work visa, you can use the same as valid ID proof, specifically by providing your alien identification number.
Most banks do not require you to submit social security number when it comes to opening a business account in a foreign country. However, in most cases, you will require an ITIN for which you need to fill up and submit Form W7 and other necessary documents via mail or through an Acceptance Agent. Finally, you will need to deposit an initial amount to get the bank account activated, which differs from bank to bank. This is the minimum deposit amount that needs to be maintained in the US business account, failure to do so being liable to penalties.
The problem with this particular path is that branches of US banks are not often readily accessible when it comes to Indian residents. There are definitely US bank branches scattered throughout metropolitan cities such as Mumbai, but in other places, this option can turn out to be more cumbersome than expected.
Explore the Potential of Neobanks (Digital Only Banks)
Neobanks are banks that do not have a brick-and-mortar outlet but rather are digitally native and exist only in cyberspace. Several Neobanks support business accounts that can be utilized within the US economic context and managed from anywhere in the world, including from India. Some of the worthy options among Neobanks include Novo, Chase for Business, and BlueVine among others.
Some of these Neobanks charge a monthly fee which can be waived under several circumstances, while others offer completely unlimited and free business account management with no minimum deposit or transaction limits. These options are perfect for small business owners who wish to initiate transactions with clients or business partners in the US, while also being preferable for everyday consumers, like students and freelancers due to the affordability and accessibility they offer.
Several Neobanks in India, such as Jupiter and Fi Money, have tie-ups with large national banks in the USA, such as Federal Bank, making them viable options for those looking to have one foot in the US economy and the other in India.
Even though this is an enticing and convenient option as it allows you to bypass many of the legal formalities of opening a US business account from India, this very aspect is also its downfall. In India, the relationship between the official economic administration and Neobanks is still not consummated completely, meaning that in case of disputes or legal issues, you might not get any support from your home country. If you are ready to brave this prospect though, this might be the perfect path for you.
Examining some Viable Examples
Aeldra is an Indian startup that saw the light of day in 2020 and has grown immensely since then due to its core USP – the Aeldra application provides Indians with the opportunity to open a US bank account with nothing but their Indian passport and their Mastercard debit card.
The app is currently in the beta stage of testing but offers the ability for users to conduct the entire KYC process involved in opening a US business account through its user interface. Currently, Aeldra sees about 30 new accounts being opened every day by Indians in the US through the digital bridge that it offers. The account opening process has been defined as being a simple “10-minute” procedure that involves minimal documentation, requiring only an Aadhaar card number and a valid Indian passport.
Aeldra is specifically a great option for single business owners. For the purpose of filing IT returns, single business owners can obtain annual and quarterly statements from the Aeldra digital app even without the need for submitting a TAN (Tax Deduction and Collection Account Number). As a small business owner, if you wish to avail the tax benefits of DTAA with the US, you will need to obtain a US Tax ID Number (TIN).
Aeldra is a new and upcoming platform, still in its infant stages and can only be joined on the invite. Hence, banking (no pun intended) on it as a mid-sized or large corporation is not advised and to an extent is not even integrated into the app’s infrastructure. As a mid-sized or large business, it would be better if you opt for a different, more holistic option, such as the potential one mentioned below.
Atlas, from the renowned financial software provider Stripe, is an invitation based digital platform that not only helps you open a business account in the US from India but also allows you to complete the entire process of US business incorporation from the comfort of your home.
You can either apply for an invitation here or join through a company in India that is a part of the Stripe Atlas network, which include ICrowd, T Labs, and Nasscom. The process of setting up an entire company on the Atlas platform involves a fee of $500. There are other costs associated with aspects such as stock issuance notices and incorporator actions.
The platform requires you to submit some core information during the onboarding process, such as specifying the product, company directors, and so on. Once the process is complete and the on-boarding fee is paid, the platform will generate all the necessary documents required for incorporation and business bank account opening in the US within a few days (a week or more).
The benefits of the application include the convenience and the holistic nature of its service – it takes off everything from applying for the incorporated company EIN (Employer Identification Number) to opening a bank account in Silicon Valley bank, which is automatically linked to your Stripe account once the process is complete.
There are certain drawbacks of course, as is the case with all ambitious endeavours, digital or otherwise.
Firstly, Silicon Valley bank does not issue debit or credit cards to its customers, thereby relegating you to other means of deposit and withdrawal which are definitely more complicated than the good swipe and take method. Secondly, the price and invitation-based nature of the platform, not to mention its novel and relatively unexplored usage within the Indian context, can seem daunting to many users who are still too attached to the relative safety of the physical world.
According to Forbes Advisor, there is bound to be a major change in the way individuals interact with banks, especially in the wake of changing perceptions about face-to-face interactions as well as digital interactions. This is bound to impact the way in which bank account opening and management occur in a post-pandemic world, especially with regard to overseas businesses.
In such a scenario, there are both opportunities as well as challenges that were never visible before. To navigate this brave new world, it can help consulting professionals and experts who can make things simpler and clearer for you. Get in touch with us if you need help with opening a US business account or if you would like to clear any of the other systemic riddles that are a part of the vaster financial infrastructure, both overseas and in your home country.