For foreign business owners in India, it is very important to choose a right kind of business structure which not only best suits your business objective but also takes care of liability issues and tax planning issues.
Foreign Companies intend to do business in India should pay special attention to Entry laws in India and international tax treaties, A Foreign Company can set up a business in India as per the guidelines laid down in FDI policy of RBI.
Depending upon the sector your company will be involved in, there are mainly two categories under which you can make entry in India for business:
1. Automatic route: There are certain permitted sectors covered under automatic route. The automatic route requires no any prior regulatory approval for investment in equity shares of an Indian business, however company must needs to inform RBI(reserve bank of India) within stipulated period of receipt of investment money in India by filing of prescribed documents and particulars of allotment of shares. Foreign Direct Investment of upto 100% is allowed under the automatic route in most of the activities in India. Before you proceed, you need to check if the activity of your business is eligible under automatic route.
2. Government approval route: In some special cases where Investment in company through automatic route is not available can be made with the approval of govt.
Further there are mainly two ways you can start business in India, by setting up Indian subsidiary company or by opening branch office. Both can be possible through either automatic route or through govt. approval route. Foreign entity can also establish liaison office or project office purely for non commercial activity.
Subsidiary company is the type of company which is fully or partial owned, controlled or managed by another company. For establishing a subsidiary company, a parent company must own more than 50% of shareholding in subsidiary company, and the company which owns 100% of shareholding in subsidiary is known as wholly owned subsidiary company. Thus as a foreign business owner you can start subsidiary company in India with 100% ownership provided that company activity is permitted by govt.
A natural person of age above 18 years can be a director, and at least one director must be resident in India for at least 182 days in previous Financial year, shareholders can be a natural person or a corporate legal entity and any foreign nationals can also be a shareholder.
Time duration for Indian subsidiary Company registration: Normally it takes 20 working days to get the Indian subsidiary Company registered subject to proposed company name availability approval and other approval if required.
