Form 1120 for Indian-owned C-Corps: the parts foreign owners get wrong

The basics

• Who files: every US C-Corp, including one that had no income, no activity or only expenses.
• Federal rate: a flat 21% on taxable income; states tax separately.
• Due date: the 15th day of the fourth month after year-end — 15 April for calendar-year companies, extendable six months with Form 7004 (the extension is for filing, not paying).
• What it includes: income and deductions, the Schedule K “other information” questions, Schedule L balance sheet, reconciliations of book to tax income, and any required attachments such as Form 5472.

The foreign-ownership questions

Schedule K asks whether, at any time during the year, one foreign person owned directly or indirectly at least 25% of the voting power or value of the company’s stock. For most companies founded from India, the answer is yes. Then you:

1. State the percentage owned and the owner’s country.
2. Enter the number of Forms 5472 attached.
3. Attach a Form 5472 for each foreign related party the company had reportable transactions with — capital contributions, loans, service payments, reimbursements.

Schedule G: who owns the company

Schedule G lists owners above certain thresholds — broadly, anyone owning 20% or more directly, or 50% or more directly or indirectly, of the voting stock. Founder names, ownership percentages and countries should match your cap table, your Form 5472s and your Indian ODI records.

Schedule L — and why Delaware cares

Schedule L is the balance sheet per books at the start and end of the year. Delaware’s Assumed Par Value Capital method uses the total assets figure from here to calculate franchise tax — which is how a company avoids the inflated Authorized Shares bill. Close your books properly before 1 March. See the Delaware franchise tax guide.

Early-stage losses

• A loss-making startup still files; the losses become net operating losses (NOLs) carried forward.
• For losses arising after 2017, NOLs carry forward indefinitely but can generally offset only up to 80% of taxable income in a later year.
• Significant ownership changes — such as large funding rounds — can limit the use of earlier NOLs, so keep the history documented.
• Research-heavy startups should look at US R&D credits for qualifying work done in the US.

Filing and deadlines

• E-filing: corporations generally must e-file if they file 10 or more returns of any type in a year (including information returns such as 1099s); most use a preparer’s software regardless.
• Estimated tax: profitable C-Corps pay quarterly estimates on 15 April, 15 June, 15 September and 15 December.
• Payments to your Indian parent or shareholders — dividends, royalties, interest — may need Forms 1042 and 1042-S by 15 March.
• All dates in one place: US compliance calendar.

Common mistakes

• Not filing because “there was no revenue”.
• Answering “no” to the 25% foreign-ownership question, or omitting Form 5472.
• Treating founder capital as revenue, or founder-paid expenses as unrecorded.
• Schedule L that doesn’t match the books — and then a Delaware franchise tax bill based on authorised shares.
• Ignoring state returns where the company has employees or an office — see foreign qualification.

Frequently asked questions

Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.