Business entities in India

Requirements for setting up business in IndiaChoosing the right vehicle is essential when starting a business in India. Healy Consultants Group PLC has the expertise and experience to advise on the optimum approach. There are several vehicles through which to do business in the country, the most popular being a private limited company.

  • Local business entities available

    Indian Limited Liability Company (private limited company)

    • The key features of a private limited company in India are that it can be incorporated with i) a minimum paid up capital of US$1,650 (INR100,000) ii) two directors and iii) two shareholders. Although the shareholders can be any nationality, at least one director must be India-resident;
    • All directors and shareholders must register their personal details for public records. All directors must also obtain Director Identification Number (DIN) and Digital Signature Certificate (DSC) numbers. Read more about 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 the local market and limit the liability of foreign investors. This entity is ideal for export and direct sales, manufacturing and software development. Foreign investors can access a wide range of government subsidies with this entity.

    India limited liability partnership

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

    India Free Zone Company (Export Processing Zone (EPZ) company)

    • Registering a company in an EPZ is attractive for investors planning to manufacture products in, and export from, India. Company registration requirements are the same as those for a standard limited liability company, although some free zone authorities require owners to allocate higher amounts of paid-up capital;
    • See this page for further information on India free zones and tax benefits;
    • Best uses: manufacturing products to be exported to overseas markets.

    India Public Limited Company

    • A public company can be incorporated with i) a minimum paid up share capital of US$8,060 ii) three directors and iii) seven shareholders. Although the shareholders can be any nationality, at least one director must be India-resident;
    • A public limited company must have its financial statements audited annually;
    • 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 an entity.

    India Private Trust

    • A private trust in India is governed by the Indian Trusts Act, 1882 and involves three parties: i) a settlor, also known as the author of the trust ii) a trustee and iii) a beneficiary;
    • A trust can be revocable or irrevocable, depending on Client needs;
    • The subject matter of the trust is called trust property, which must be registered under the Registration Act, 1908;
    • Best uses: For multi-generational Indian families to create succession in business and wealth, education, medical relief and religious motives.

    India Private Trust

    • A one-person company can be established in India with one director and one member. However, only a natural person, who is both an Indian citizen and resident in India, is eligible to be a member and nominee of this company;
    • The paid-up share capital cannot exceed 50 lakh rupees (US$65,960) and the annual turnover cannot exceed two crore rupees (US$263,843);
    • The Ministry of Corporate Affairs (MCA) claims to incorporate this structure 20 business days after name approval;
    • Best uses: For India-resident entrepreneurs looking for a faster solution with a simple corporate structure.
  • Registration by a foreign company

    Branch Office

    • This entity functions only 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;
    • A branch incorporated in a Special Economic Zone (SEZ) can only conduct business activities within the zone itself;
    • To incorporate a branch office, approval must be obtained from the Reserve Bank of India (RBI);
    • Best uses: registration of an India branch office is not advisable. This entity is subject to 43% corporate tax, and presents a higher risk to liabilities directly borne by the parent company.

    Representative office (liaison office)

    • In India, a representative office is known as a liaison office. A liaison office assists the parent company in i) promoting exports/imports to and from India and ii) promoting technical and financial collaborations with other resident firms. Consequently, this entity acts as a channel of communication between the parent company and potential customers/suppliers in India;
    • Best uses: a liaison office is a good option if you want to test the Indian market before committing major resources by setting up a permanent establishment in the country. It is a non-revenue generating entity, so is also ideal for providing 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 is terminated;
    • The operations of a project office are taxed as those of a branch office. Remittance of profits outside India is allowed, subject to prevailing exchange controls;
    • A project office is much easier to de-register than a permanent establishment (branch and/or subsidiary);
    • Best uses: registration of a project office is ideal for one-off projects.
  • 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
    Immigration
    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$17,305US$39,465US$19,305US$18,455US$21,255US$19,555US$19,385US$19,555
    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