The Ideal Business Structures for Anyone Aiming to Launch a Company in India
The first step for international companies thinking about entering the Indian market is “choosing the right business structure for incorporation of foreign companies in India.” The entity form that best fits their business needs must be selected by foreign entities. Similar to a domestic firm, a foreign company’s business growth can be significantly influenced by the choice of structure. The various business structures that are allowed for foreigners wishing to launch their own firm in India will be discussed in this blog.
The world is aware that India is becoming one of the most alluring locations for entrepreneurs and foreign investors because of its thriving economy, sizable consumer base, numerous government initiatives to promote “ease of doing business,” and a few additional elements. The first step in entering such a prospective Indian market is choosing a business structure and choosing to register a foreign company in India.
This action further establishes the foreign company’s operating flexibility as well as its tax and compliance responsibilities. Learn how to choose the appropriate company structure for international enterprises wishing to enter the Indian market from this article.
1.Wholly owned subsidiary (WOS)
A wholly owned subsidiary (WOS) is a business that is entirely owned by a foreign corporation and functions as an independent entity. It may be a part of a different industry or the same industry as its parent overseas firm.
2. Joint Venture (JV)
A joint venture is a partnership between two or more individuals or entities mutually agreed to share their capital or goods into a uniform project. This business structure is the most popular structure for the sectors that have restricted FDI.
3. Branch Office
A branch office is an excellent option for a foreign company to conduct specific business activities in India without incorporating a separate entity requiring lesser compliance and tax obligations to fulfill.
4.Liaison Office (Representative Office)
A liaison office may be established by foreign businesses looking to enter India. This office, sometimes referred to as a representative office, is not allowed to do any business in India and can only operate as a mediator between the Indian company and the foreign parent company. This office is supported by the inward remittances received from its foreign parent firm because it is unable to engage in any commercial or trading activity.
5.Project Office
Foreign companies can establish a project office in India if they have received a contract from an Indian company to execute a project in India. This form of office can be set up for a limited time span, e.g., until the fulfillment of the project (s).
6.Limited Liability Partnership (LLP)
Shortly after the passing of the Limited Liability Partnership Act 2008, LLP emerged as a popular business structure in India. In 2015, the FDI Policy was amended to make it suitable for even foreign companies to set up their business in India. After the amendment in this policy, investment in LLPs in sectors permitting 100 percent FDI via the automatic route will not require any government approval.
Choosing the Right Business Structure
As a foreign entity, now you are aware of the various business structures that foreign companies can choose from to expand their business in India. However, it’s essential to consider various factors before choosing the right business structures in India. Those key factors may be;
Nature of Business Activities: Depending upon your business vision and goal or its nature, picking the most suitable business structure is crucial. For instance, a wholly owned subsidiary may be ideal for full-scale operations. On the other hand, a liaison office is sufficient for market research or liaison work.
FDI Regulations: Many sectors in India restrict FDI, or 100% FDI is not allowed under the automatic route. These sectors mandatorily require government approval for foreign investment.
Tax Implications: Different structures have different tax obligations to follow for the foreigner companies in India.
Long-Term Goals: Having a clear goal even before registration of your business is advisable. Such goals may be expansion plans, funding needs, and control requirements. Considering it can also help in choosing the right business structure for your business expansion in India.
Conclusion
Foreign entities or companies willing to enter the Indian market require deep analysis, planning and expert consultation to ensure smoother and expedited entry to the Indian market. These practices would help them pick the best business structure available, expand their customer base, and make good profits.
Reaching out to a professional compliance company and seeking their assistance can help foreign entities choose and register their businesses hassle-free in India. Make your presence in this vibrant market offering immense opportunities through establishing an ideal legal entity in India.
