3.15Co-founders and the founding team

Co-founding across countries and time zones

Stage: Pre-seedCore

1. Core idea and who it's for#

Deeptech founding teams are often spread across countries. A typical case is a scientist in Bengaluru, a CEO in San Francisco and a hardware lead in Cambridge, or an Indian founder raising from US investors. This can be a strength: access to talent, labs, customers and capital in more than one market.

It also brings two kinds of problem.

Operating problems:

  • fewer shared hours;
  • slower decisions;
  • a sense that one founder is "head office" and the other is a remote outpost;
  • weaker bonds that make conflict harder to resolve.

Structural problems:

  • where to incorporate the company;
  • how each founder is employed and paid;
  • where each founder pays tax;
  • whether a founder's work in another country creates a taxable presence there;
  • foreign-exchange rules on who can hold shares in which entity.

This playbook covers both. Structural choices made early, such as a Delaware "flip" from India, are expensive to undo later.

Who it's for: founding teams in two or more countries, especially across India, the US and the UK, and founders deciding where the parent company should sit.

The one-line rule: design the working rhythm on purpose, put the parent company where your investors, customers and likely exit are, and take cross-border tax advice before anyone signs anything.

2. Evidence#

The Indian "flip" is now often reversed, at a cost. For years Indian founders put a Delaware or Singapore parent over the Indian operating company to raise global money. Many large companies have since moved back. Commenda notes that Razorpay set up its Delaware parent during Y Combinator in 2015 and reverse-flipped back to India in 2025. Zepto received NCLT approval to move back from Singapore, and PhonePe, Groww and others reversed earlier. An eChai summary of Treelife's work points to Groww's reported $160 million tax bill as the clearest example of how costly undoing a flip can be. The lesson, as TaxGuru puts it, is to decide where ownership, IP, capital and the likely exit should sit before incorporating.

Reverse flips have become easier but are still complex. Cyril Amarchand Mangaldas notes that India liberalised its rules in August 2024 to allow the share swaps reverse flips need, and new fast-track merger rules have sped up the process. Treelife warns that a flip itself triggers ODI filings, transfer pricing, place-of-effective-management and GAAR risks, and ESOP re-grants. Treelife also says parallel structures, where founders own a US company and an Indian company side by side, are avoided by investors because they split governance.

A founder working abroad can create a taxable presence. Stripe notes that a founder who moves abroad but keeps running the company day to day may create a permanent establishment in the new country, as can one senior person regularly working from there. The 2025 update to OECD guidance confirms that working from home abroad does not automatically create one, but it singles out cases where one person is effectively the business. People who habitually negotiate or close deals in a country are the classic trigger.

Personal tax residence follows days. Many countries treat 183 days in a tax year as making someone tax resident, though each country's test differs. India's test also depends on income and visit history, and the UK uses a statutory residence test.

3. Method#

Part A: the working rhythm#

  1. Protect an overlap window. Agree 2 to 3 hours a day when all founders are online. Between India and the US East Coast, that usually means early morning in the US and evening in India. Rotate who takes the inconvenient hours.
  2. Write decisions down. Use a short decision log covering what was decided, who owns it, and why, plus written weekly updates. This stops decisions happening in one time zone without the other.
  3. Split ownership by geography where it fits. For example, R&D in India, customers and fundraising in the US. Avoid one founder becoming the bottleneck for everything.
  4. Meet in person regularly. Plan at least 1 to 2 weeks together every quarter, and budget for it. Use the time for strategy, hard conversations and team building, not routine work.
  5. Watch for a "head office" culture. Investors and early hires will drift towards whichever founder is in their time zone. Keep both founders visible in investor updates, board meetings and all-hands.

Part B: the structure#

  1. Choose the parent company deliberately. Ask where the lead investors are, where most customers and revenue will be, where the IP and R&D sit, and where you are most likely to list or be acquired.

    • Mostly Indian market and investors: an Indian parent, with a US or UK subsidiary if needed.
    • US customers and US lead investors, with R&D in India: a Delaware parent with an Indian subsidiary can make sense. Decide this at the start, not as a flip later. UK grants, SEIS or EIS, or UK-based IP: a UK parent.

  2. Set up from the start, not by flipping later. Setting up the right parent on day one is far cheaper than moving a company with value.

  3. Employ each founder locally. Use the local subsidiary or an employer of record, and grant equity from the parent. Don't pay founders as contractors from another country without advice.

  4. Control where decisions are made. Hold board meetings and sign key contracts in the parent's country, and keep minutes. This reduces the risk of creating a taxable presence or tax residence elsewhere.

  5. Plan IP ownership. Decide which entity owns the IP, and make sure every founder assigns to it. Set up an intercompany R&D agreement and transfer pricing between entities.

Worked example (illustrative)#

A battery-materials company has two founders.

  • Founder A: a materials scientist in Bengaluru, running the lab and a team of 6.
  • Founder B: a former industry executive in Boston, who has 3 pilot customers in the US. Investors: the US seed lead wants a Delaware company.

Structure chosen at incorporation:

  • A Delaware parent holds all IP through an assignment.
  • An Indian private limited subsidiary does R&D under a cost-plus agreement.
  • B is employed by the parent. A is employed by the Indian subsidiary.
  • A's founder shares in the parent were checked against India's overseas investment rules before issue.
  • Board meetings are held in the US.

Working rhythm:

  • Overlap from 7:30 to 9:30 a.m. Boston time, which is 6 to 8 p.m. in Bengaluru, Monday to Thursday.
  • Friday written updates.
  • A quarterly week together, alternating between Bengaluru and Boston.

Result: at Series A, due diligence finds a clean structure, with no flip to unwind. A has stayed visible to investors through monthly co-presented board updates.

4. India, US and UK differences#

India#

  • Indian founders holding shares in a foreign parent: this is overseas direct investment under the Overseas Investment Rules 2022, with filings through an authorised bank. The rules restrict when a resident individual can invest in a foreign company that itself has subsidiaries, which is the usual snag in India–US structures. Get FEMA advice before issuing founder shares in a foreign parent.
  • Foreign parent investing in India: this is foreign direct investment, with pricing rules and reporting such as FC-GPR within set deadlines.
  • Place of effective management: if Indian-resident founders effectively run a foreign company from India, it can be treated as Indian tax resident. Keep board meetings and key decisions in the parent's country, and document them.
  • Reverse flips: these are now easier, with share swaps allowed since August 2024 and fast-track inbound mergers. They are still slow and can be very costly in tax, so the first choice matters most.
  • Indian listing: SEBI rules effectively require an Indian-domiciled parent to list in India, which is the main driver of recent reverse flips.

US#

  • Delaware parent: the default for US venture capital. Foreign founders can hold shares directly. Check their home-country rules, and US tax filings if they become US tax residents.
  • Founders outside the US: a founder working from abroad for a US company may create a permanent establishment there. Employ them through a local subsidiary or an employer of record.
  • QSBS: shares in a US C-corporation may qualify for the qualified small business stock exclusion, which is valuable for US-taxpayer founders. The holding period starts when the Delaware company issues the stock, so set up the parent early.
  • Visas: a non-US founder working in the US needs the right visa (1.06). Being a shareholder or director abroad doesn't give the right to work in the US.

UK#

  • UK parent: gives access to SEIS and EIS for UK angels, UK grants such as Innovate UK, and R&D tax relief. US investors will often invest in a UK company, but some require a Delaware flip at Series A.
  • Founders outside the UK: a director who habitually concludes contracts abroad can create a permanent establishment there. A UK company can also become non-UK resident if central management and control is exercised abroad, so hold board meetings in the UK.
  • EMI options: only available to employees of a qualifying UK group who meet the working-time test. Overseas founders may need unapproved options or a local scheme.
  • Statutory residence test: founders splitting time between the UK and elsewhere should track days carefully, because the test is detailed and depends on ties to the UK as well as days.

Scripts#

Setting the rhythm with your co-founder:

"Let's agree our overlap hours and stick to them. I'll take the early mornings this quarter and you take the late evenings next quarter. Anything decided outside those hours goes in the decision log before it's acted on."

To a US investor pushing for a Delaware flip:

"We're open to Delaware if it fits where our customers and exit are. Our revenue and team are mostly in India, and a later reverse flip can be very expensive. Can we walk through the structure with both sets of counsel before we decide?"

To your accountant, before a founder moves country:

"Our CTO plans to spend 6 months in Germany next year while still running engineering. What does that mean for her tax residence and for a permanent establishment there? What should we put in place first?"

To the team, on fairness across locations:

"We're one company in two time zones. Decisions are made in writing, both of us are in every all-hands, and we'll rotate meeting times so it isn't always the same people up at midnight."

Common mistakes#

  1. Flipping by default. Choosing Delaware because it "sounds better", without checking where the exit and customers are.
  2. Parallel companies. Founders owning a US company and an Indian company side by side splits governance, and investors avoid it.
  3. Founder shares issued without FEMA checks. Indian-resident founders taking shares in a foreign parent without the right filings creates penalties and diligence problems.
  4. Running the parent from the wrong country. This can create tax residence or permanent establishment risk.
  5. Paying an overseas founder as a contractor. It looks convenient but can trigger misclassification, permanent establishment and tax problems.
  6. No in-person time. Relationships weaken and conflict grows when founders only meet on video.
  7. One founder controls all investor contact. The other founder becomes invisible, which weakens their authority and the team's story.
  • 1.06 Founder visas: O-1, H-1B cap-exempt, startup visas
  • 3.07 Founder agreements: roles, decisions, deadlocks
  • 3.11 Resolving co-founder conflict
  • 3.13 Paying founders before and after funding
  • 3.16 How each founder's role changes as the company grows

Sources#

This playbook is general information, not legal or tax advice. Cross-border structures involve company, foreign-exchange and tax law in more than one country, so take advice in each country before you incorporate or issue shares. Last checked November 2026.

← 3.14 Couples, friends and family as co-founders3.16 How each founder's role changes as the company grows →