A founder takes a US W-2 role at a portfolio company. The Indian operating company remains in their name. The first US tax filing they make — or fail to make — sets the position for the next several years.
Residency
The substantial-presence test under IRC §7701(b) counts days across a three-year window. The India–US DTAA tiebreaker (Article 4) can override the SPT result where the facts support it. Both calculations live in the file; the position taken on the return needs to match.
FBAR
FinCEN Form 114 reports foreign financial accounts where the aggregate value exceeded USD 10,000 at any point in the year. Signature authority alone — without ownership — triggers the filing. Indian bank accounts, demat accounts, and some PMS accounts all qualify.
Form 5471
A US person who owns a controlled foreign corporation files Form 5471. The category determines the schedules and the depth of information. For a founder who owns 100% of an Indian private limited company, the form is typically Category 4 or Category 5, with full schedules. The penalty for non-filing starts at USD 10,000 per year, per entity.
Form 8938
The FATCA Form 8938 reports specified foreign financial assets at aggregate values that vary by filing status and residency. Overlaps with the FBAR but is not identical; the IRS receives both.
What we tell clients
Make the residency call first, with the workings retained. Then map the entity to the right forms. Then make the filings on time. Most penalties in this area arise from late filings, not from contested positions.