Business entities in India

Requirements for setting up business in IndiaChoosing the right vehicle and strategy for starting a business in a new jurisdiction is an important decision to make, especially in countries like India where red tape is plentiful. Healy Consultants Group PLC has the expertise and experience to advise our Clients regarding setting up a company in India. There are several ways of doing business in this country, most popular being through a private limited company in India. Please read further for additional information on the different types of business entities available in India.

  • Local business entities available

    The Indian Limited Liability Company (private limited company)

    • In India, this entity is officially called the Private Limited Company (Pvt. Ltd). The key features of a private limited company in India are that it can be incorporated with i) a low minimum paid up capital of US$1,650 (INR100,000); ii) 2 directors; and iii) 2 shareholders. Although the shareholders can be of any nationality, at least 1 director must be an Indian resident;
    • All the directors and shareholders will be required to register their personal details for public records. All directors are also required to obtain DIN and DSC numbers (directors identification numbers). See this page for further details on the steps required to register an Indian limited liability company;
    • Best uses: Setting up a private limited company in India is our recommended strategy to enter into the local market and limit the liability of foreign investors, especially for export and direct sales, manufacturing and software development companies. Foreign investors with this permanent establishment will have access to a wide range of government subsidies that incentivize re-investment into the country.

    The India limited liability partnership

    • Foreigners can register limited liability partnerships in India. Under the Limited Partnership Act of 2008, all partners can now benefit from limited liability for the activities of the partnership and no minimum contribution is fixed. Partnerships formed by non-resident foreigners are required to appoint one resident manager in India;
    • An LLP in India is required to submit its annual financial statements to the Indian tax authority every year. Such statements must be audited, unless the partnership is receiving income below US$500 (INR40,000) and has assets below US$375 (INR25,000);
    • Best uses: A limited liability partnership is a flexible vehicle, subject to less compliance rules than an LLC. Its income is also directly taxed at the partners’ level.

    The India free zone company (EPZ company)

    • For our Clients willing to manufacture and export their products from India, registration of a company in an export processing zone is often an attractive solution. Registration requirements are the same as those applicable to a standard limited liability company, although the free zone authorities can require the owners to allocate higher amounts of paid-up capital;
    • See this page for further information on Indian free zones and their taxation benefits;
    • Best uses: manufacturing products to be exported to overseas markets.

    The Indian Public Limited Company

    • A public company can be incorporated with a minimum paid up share capital of US$8,060 and 3 directors and 7 shareholders. Although the shareholders can be of any nationality, at least 1 director must be an Indian resident. Such company is also required to go through an annual audit of its financial statements;
    • Best uses: although it is not mandatory for a public limited company to be listed on the Indian stock exchange(s), an IPO is usually the purpose of the registration of such entity.
  • Registration by a foreign company

    Branch Office

    • This entity only functions within the scope defined by the parent company. In India, a branch office can engage in trade, professional consultancies, export/import of goods, invoicing and signing contracts. In order to incorporate a branch office, our Client will be required to obtain approval from the Reserve Bank of India (RBI). A branch incorporated in a Special Economic Zone (SEZ) can only conduct business activities within the zone itself;
    • Best uses: registration of a branch is usually not advisable in India. An Indian branch of a foreign company has indeed not only as much administrative requirements as a subsidiary but also the disadvantages of incurring 43% corporate tax and presenting higher risk to liabilities directly borne by the parent company.

    Representative office (liaison office)

    • In India, this entity is called the liaison office. A liaison office assists the parent company in i) promoting export/import to and from India and ii) promoting technical and financial collaborations with other resident firms. Consequently, this business entity acts as a channel of communication between the parent company and potential customers/suppliers in India;
    • Best uses: a representative office is a good option if you want to test the Indian market before committing major resources through the setup of a permanent establishment in the country. As RO is a non-revenue generating entity, it is also the ideal setup to provide after sales customer support to local clients.

    Project Office

    • This entity may be set up to carry out a specific contract for a specified time period within India. After the project is complete, the entity will be terminated. The operations of a project office will be taxed in the same way as the operations of a branch office. Remittance of profits outside India is allowed, subject to the prevailing exchange controls;
    • Best uses: registration of a project office is a good vehicle for one off project. They indeed are much easier to de-register than a permanent establishment (branches and subsidiaries), which can turn into a complex affair.
  • Table of comparison between business entities

     LLCFast solution LLCLLPEPZ companyPLCBranchRep officeProject office
    Operations and logistics
    Bank Signatory must travel?NoNoNoNoNoNoNoNo
    Is doing business in India permitted?YesYesYesYesYesYesNoYes
    Allowed to sign contracts with local clients?YesYesYesYesYesYesNoYes
    Allowed to invoice local clients?YesYesYesYesYesYesNoYes
    Can rent local office premises?YesYesYesYesYesYesYesYes
    Tenancy agreement required before incorporation?NoNoNoNoNoNoNoNo
    Allowed to import raw materials?YesYesYesYesYesYesNoYes
    Allowed to export goods?YesYesYesYesYesYesNoYes
    Accounting and tax
    Corporate tax payable?34%34%0%Up to 0%34%43%None43%
    Corporate bank account?SCB IndiaHSBC IndiaHDFC IndiaHSBC IndiaSCB IndiaCitibank IndiaAxis IndiaCitibank India
    Statutory audit always required?NoNoYesNoYesYesYesYes
    Annual tax return to be submitted?YesYesYesYesYesYesNoYes
    Access to double taxation treaties?YesYesNoYesYesYesNoYes
    Company law
    Issued share capital required?US$1,650US$1,650US$1US$1,650US$8,060NoneNoneNone
    Resident director/manager required?YesYesYesYesYesYesYesYes
    India shareholder/trustee/partner required?NoNoYesNoNoNoNoNo
    Minimum number of directors/managers?22123111
    Minimum number of shareholders/partners?12217Parent companyParent companyParent company
    Individual shareholders/partners allowed?YesYesYesYesYesNoNoNo
    Corporate director(s)/managers allowed?NoNoNoNoNoNoNoNo
    Public register of shareholders and directorsYesYesYesYesYesYesYesYes
    Can the entity hire expatriate staff?YesYesYesYesYesYesYesYes
    Fees and timelines
    How long to set the company up?2 months1 week2 months3 months2 months3 months3 months3 months
    How long to open corporate bank account?1 month1 week1 month1 month1 month1 month1 month1 month
    Estimate of engagement costsUS$15,355US$39,465US$17,355US$16,505US$18,355US$17,605US$17,435US$17,605
    Draft invoiceView invoice PDFView invoice PDFView invoice PDFView invoice PDFView invoice PDFView invoice PDFView invoice PDFView invoice PDF

  • Conclusion

    Healy Consultants Group PLC would be glad to guide you through the procedures to set up a company in India.

Frequently asked questions

Contact us

For additional information on our business setup services in India, please contact our in-house country expert, Mr. Simon Guidecoq, directly:
client relationship officer - Simon