India welcomes foreign nationals and organization to set up their business in India. India is a land of opportunities coupled with various government incentive schemes for start-ups.
It is important to choose an appropriate form of business entity, which would facilitate achieving the desired results. It is the first step towards setting up of any business. A foreign individual or company can set up business operations in India in the form of:
1. Foreign Company Representation
a. Liaison office – The office acts as the communication medium only
b. Branch office – Can do business as an agent of the foreign company
c. Project Office – Suitable in case of executing a single project
2. India Corporate Set-up
a. Wholly owned subsidiary – New Private Limited entity owned fully by Foreign company
b. Joint Venture – A new private limited with an Indian partner
c. Limited Liability Partnership – A new corporate entity in the form of partnership with an Indian player
Considering the popular modes, we have listed the main features of the following kind of structures.
|Liaison office||Branch Office||Wholly owned subsidiary|
|Legal Entity||No separate legal entity||Separate legal entity|
|Incorporation approval||Prior RBI approval||Post incorporation reporting|
|Foreign Direct investments||As per RBI framework|
|Commercial activity||Can act as a channel of communication only||Can act as buying/selling agent, can’t do manufacturing (except within SEZ)||Can operate complete business activity|
|Pre-requisites||Parent Company should have a profitable track record during immediately preceding three years in the home country and the net worth as per latest audited Balance Sheet should not be less than USD 50,000/- and USD 100,000 for opening a Liaison office and Branch office respectively.||No such requirement|
|Income Tax rates||Not applicable, as no business activity allowed||At the rate of 40%||At the rate of 25-30%|
|Tax on Repatriation of profits||None||Approx 17-20%|
|Exit from India||Faster and easy in comparison to other structures||Easier than wholly owned subsidiary||Complex in comparison to other structures|
One may please select upon these structures which cater to the requirements of the planned India entry.