Business entities in India in 2021
Choosing 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
- 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.
- 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
LLC Fast solution LLC LLP EPZ company PLC Branch Rep office Project office Operations and logistics Bank Signatory must travel? No No No No No No No No Is doing business in India permitted? Yes Yes Yes Yes Yes Yes No Yes Allowed to sign contracts with local clients? Yes Yes Yes Yes Yes Yes No Yes Allowed to invoice local clients? Yes Yes Yes Yes Yes Yes No Yes Can rent local office premises? Yes Yes Yes Yes Yes Yes Yes Yes Tenancy agreement required before incorporation? No No No No No No No No Allowed to import raw materials? Yes Yes Yes Yes Yes Yes No Yes Allowed to export goods? Yes Yes Yes Yes Yes Yes No Yes Accounting and tax Corporate tax payable? 34% 34% 0% Up to 0% 34% 43% None 43% Corporate bank account? SCB India HSBC India HDFC India HSBC India SCB India Citibank India Axis India Citibank India Statutory audit always required? No No Yes No Yes Yes Yes Yes Annual tax return to be submitted? Yes Yes Yes Yes Yes Yes No Yes Access to double taxation treaties? Yes Yes No Yes Yes Yes No Yes Company law Issued share capital required? US$1,650 US$1,650 US$1 US$1,650 US$8,060 None None None Resident director/manager required? Yes Yes Yes Yes Yes Yes Yes Yes India shareholder/trustee/partner required? No No Yes No No No No No Minimum number of directors/managers? 2 2 1 2 3 1 1 1 Minimum number of shareholders/partners? 1 2 2 1 7 Parent company Parent company Parent company Individual shareholders/partners allowed? Yes Yes Yes Yes Yes No No No Corporate director(s)/managers allowed? No No No No No No No No Public register of shareholders and directors Yes Yes Yes Yes Yes Yes Yes Yes Immigration Can the entity hire expatriate staff? Yes Yes Yes Yes Yes Yes Yes Yes Fees and timelines How long to set the company up? 2 months 1 week 2 months 3 months 2 months 3 months 3 months 3 months How long to open corporate bank account? 1 month 1 week 1 month 1 month 1 month 1 month 1 month 1 month Estimate of engagement costs US$17,305 US$39,465 US$19,305 US$18,455 US$21,255 US$19,555 US$19,385 US$19,555 Draft invoice View invoice PDF View invoice PDF View invoice PDF View invoice PDF View invoice PDF View invoice PDF View invoice PDF View invoice PDF
Healy Consultants Group PLC would be glad to guide you through the procedures to set up a company in India.
Frequently asked questions
What business entity should I setup in India?The most commonly established company in India is the limited liability company due to relatively i) simpler formation procedures and ii) least cumbersome compliance requirements. Hence, we recommend you to opt for the LLC.
Why setup a company in India?India is one of the fastest growing economies in the world today. The Indian government offers several business grants and tax incentives, especially with regards to companies in the Special Economic Zones and the IT parks.
Are ownership details of an India business setup available for public viewing?Yes. The ownership details of a company will be available for public viewing.