Setting up a Business in India
Investment in India is ever increasing. The inflow of capital into the nation has become many folds in the last few years. Considering the highest growth rate of the Indian economy and the investment friendly policies of the Indian Government this surely is the most favorable time for setting up a Business in India for any company across the Globe.
Entity Structure for Setting up a Business in India
Whenever a foreign company is setting up a Business in India it needs to choose a legal structure to do so. The foreign entity can choose any legal structure out of the following:
- Setting up a Company in India
- Setting up a Branch Office in India
- Setting up a Liaison Office in India
- Setting up a Project Office in India
- Joint Venture
- Take overs
The choice of entity structure for setting up business in India depends upon many factors like nature of business, control required, functions to be performed in India, duration of business if applicable, decision regarding the markets.
Brief description of different entity structures for setting up business in India
- Setting up a Business in India through Company: Whenever a foreign entity establishes a company in India it is actually establishing a stand alone entity in India.
Though the nexus between the foreign company newly formed Indian company is already established due to shareholding but the Indian Laws consider this Indian Company as a separate legal entity from the Foreign entity. It is taxed separately in India.
- Setting up a Business in India through Branch Office / Liaison Office : A branch office is an extended arm of the Foreign entity in India and the approval for both Branch Office and Liaison Office is taken through the Reserve Bank of India. It is not a separate entity in the eyes of Indian Laws. The transaction between Branch Office and Foreign Entity are monitored very closely.
Difference between a Branch Office and Liaison Office is that a Branch office is allowed to undertake sales in India but a Liaison office is not. Both cannot undertake manufacturing activities.
- Setting up a Business in India through Project Office: As the name suggests the project office is setup for a particular project only. This mode is used when a foreign entity has been contracted in a way that it will function in India only for specific time bound project(s).
- Setting up a Business in India through Joint Venture: This is a partnership between an Indian Company and the foreign entity. Both the parties agree to enter in to a Contract wherein in they perform specific functions in the Venture.
- Setting up a Business in India through Take over of an existing Business: Take over is not a new term in Indian Economy. There are many examples where a foreign company take over an existing company in India along with its assets and liabilities.
A foreign entity needs to choose a structure which is most suitable to its business for setting up a business in India. One should take expert advise before doing so.