BUSINESS SET UP IN INDIA
It is considerably easier to setup a company in India. It needs lesser time to start your business in India compared to earlier years. It takes less than 1 month to register a company in any part of the country of India. With the digitization of company registration process the time consumed have come down drastically.
Our team of experts and experience professionals can provide all the assistance in starting a business in India. With the experience we gained from several years with hundreds of clients who have started their successful business ventures in all parts of India, we can assure you the best services. Our services spans from the starting of a company or business till that business becomes a successful enterprise in India and its sustainability of success in India as well as abroad.
Various types of legal documents are involved in starting a business in India other than approvals from Government of India. We can assist you in registering your company or business in India along with getting vital approvals from the government.
A liaison office is the basic form of business presence that a foreign company can have in India. Permission to open a liaison office in India is granted by Reserve Bank of India (RBI). Liaison offices are normally established by foreign companies to promote their business interests by spreading awareness of their product(s) and exploring opportunities for business and investments in India. Foreign insurance companies have a general permission to establish a liaison office in India provided they have obtained permission from the Insurance Regulatory Development Authority of India and they comply with certain prescribed conditions.
Scope of activities for Liaison Office:
Under the current exchange control regulations, a liaison office is permitted to
Represent the parent/group companies in India;
Promote exports and imports from/to India;
Promote technical /financial collaborations between parent/group companies and companies in India;
Act as a communication channel between parent/group companies and companies in India.
A liaison office is not permitted to
Earn any income;
Undertake any industrial, trading or commercial activity;
Enter into any agreement on behalf of the head office;
Borrow or lend money for any commercial activity;
Charge any fee or commission or otherwise earn any income, in respect of liaison activities carried on in India.
An application in the prescribed form has to be submitted to RBI for establishing a liaison office in India. The lead time for processing a liaison office approval typically ranges from three to four weeks, unless the application is referred to the administrative ministry concerned within the Government of India for its comments, which may lead to an increase in the processing time.
As stated above, a liaison office cannot earn any income in India (except for interest on surplus funds lying in its local bank account subject to certain conditions). Therefore, all expenses of the liaison office have to be met out of inward remittances from the head office. Any balance in the liaison office account can be repatriated, only at the time of closure of the liaison office.
As stated above, liaison offices are not permitted to carry on any industrial, trading or commercial activities, nor to earn any income in India. However, sec 139(1) of Income Tax Act, 1961 requires all companies to furnish a return of income. Hence, liaison offices would also be required to file their return of income in India.
Closure of a liaison office normally involves a time frame of five to six weeks. An application enclosing the prescribed documentation is required to be made to the requisite regional office of RBI.
In case a foreign company wishes to establish a business presence in India for the limited purpose of executing a project, it may establish a project office for its Indian operations. The objective behind establishment of a project office is to enable a foreign company to establish a temporary base in India for executing specific projects and contracts.
A foreign company may open a project office in India for executing a contract secured by an Indian company without the prior permission of RBI provided the following conditions are satisfied:
The project is funded directly by inward remittance from abroad;
The project is funded by a bilateral or multilateral international Financing Agency;
The project has been cleared by an appropriate authority;
A company or entity in India awarding the contract has been granted term loan by a public financial institution or a bank in India for the project.
In all other cases, prior approval of the RBI is required to establish a project office in India.
A project office is permitted to open and operate a bank account including a foreign currency account in India. Typically, expenses of the project office in India can be met only out of inward remittances from the head office, or rupee amounts received locally under the approved contract(s). Outward remittances from the bank account are permitted subject to certain compliance requirements.
A project office is considered as an extension of a foreign company in India. Therefore, income earned by the project office is taxable in India in accordance with the taxation provisions applicable to foreign companies under the Income-tax Act, 1961.
Being a restricted business presence in India, the process for closure of a project office is straightforward, and normally involves a time frame of five to six weeks. An application enclosing the prescribed documentation has to be made to the regional office of RBI in case the project office was established under the approval route and to the Authorized Dealer in case the project office was established under the general permission.
In the case where a foreign company wishes to undertake trading or commercial activities in India without establishing/investing into an Indian company, it may establish a branch office in India, with the prior approval of RBI, for undertaking certain specified activities.
Scope of activities
Branch offices are permitted to undertake only those activities, as approved by RBI, that typically enable them to
Undertake the export and import of goods;
Render professional or consultancy services;
Carry out research work in which the parent company is engaged;
Promote technical and financial collaborations between Indian companies and parent/overseas group companies;
Represent the parent company in India and act as buying and selling agents;
Render services in information technology and development of software in India;
Render technical support to the products supplied by the parent/group companies;
Operate as a foreign airline/shipping company.
100% FDI is allowed in setting up a stand -alone branch in a SEZ. A branch has to be set up on a stand-alone basis, i.e. such branch office will be isolated and restricted to the SEZ alone and no business activity/transaction will be allowed outside the SEZ (this includes branches/subsidiaries of its parent office in India).
An application in the prescribed form has to be submitted to RBI for establishing a branch office in India. The lead time for processing a branch office approval typically ranges from four to five weeks, unless the application is referred to the administrative ministry concerned (such as in the case of banking entities) within the Government of India for comments which may lead to an increase in processing time.
As per the provisions of the SEZ Act, no prior approval of RBI is required to set up a branch in a SEZ.
The RBI approval for establishing a branch office permits the opening of a bank account for meeting expenses related to Indian activities, as well as crediting proceeds/income generated in India. Branches are permitted to repatriate profits generated in India on an ongoing basis, after complying with certain procedural requirements.
A branch office is considered as an extension of a foreign company in India. Therefore, income earned by the branch office is taxed in India in accordance with the taxation provisions applicable to foreign companies under the Act. In case the provisions of a tax treaty between India and the country of which the foreign company is resident, are more beneficial than the Act, then it is open to the foreign company to elect being taxed under the provisions of the relevant tax treaty.
Closure of a branch office normally involves a time frame of six to eight weeks. An application enclosing the prescribed documentation has to be made to the Central office of RBI. Apart from obtaining RBI approval for establishing a liaison office, project office/branch office, the foreign company is also required to register with the Registrar of Companies (ROC). An application has to be filed in the prescribed form within 30 days of the establishment of the office in India with ROC. Pursuant to which ROC would issue a certificate of establishment of place of business in India to the foreign company.
ENTRY REQUIREMENTS FOR DOING BUSINESS IN INDIA
Public Limited Company
A company that can offer shares to the public is termed as a public limited company. The Companies Act mandates a list of criteria that have to be met by the public limited companies before they start their business operations in India. A few of these criteria are listed below
It should have at least seven shareholders.
A public company is allowed to start its activities only after procuring the Certificate of Commencement of
The company should release a prospectus or issue a statement to sell its securities.
It must have at least three directors in its board.
The company should conduct statutory meeting from time to time.
Private Limited Company
A private limited company is not owned by any governmental body. It does not offer shares to public. The number of shareholders for a private limited company is restricted to a maximum 50, whereas the minimum required is 2. The shareholders, however, do not have the power to transfer or trade their shares publicly.
TYPE OF BUSINESS ENTITIES FOR STARTING BUSINESS IN INDIA
This is the most common type of business entity. Sole proprietorship means that there is a sole owner who funds as well as operates the business. Being one of the simplest forms of business entities, it is relatively formality free with no rules regarding records required to be kept, no requirement of having your accounts audited and no requirement of filing financial information to the registrar of companies. In short, there is no legal distinction between you and your business.
Partnership is a type of business entity, where you are partner with other individuals to own and run the business. On a higher level, they can be viewed as collection of sole proprietors. In case of partnership form of entity, you get access to a bigger pool of capital, skills and other resources to fund and run your business. All partners contribute capital equally, share profits and losses equally and have an equal say in business decisions, unless otherwise provided in the partnership deed.
Limited Liability Partnership (LLP)
The LLP shall be a body corporate and a legal entity separate from its partners. Any two or more persons, associated for carrying on a lawful business with a view to profit may by subscribing their names to an incorporation document and filing the same with the Registrar, form a Limited Liability Partnership.
Corporate Entity (Company)
This type of business entity is most common and preferred type while starting a business. A corporate entity is a separate legal entity from its founders, shareholders and managers. The liability of the shareholders is limited to the paid-unpaid capital that is issued as part of the company. Thus, in case of bankruptcy, the personal assets of the founders/managers are not affected. A corporate entity needs to keep record of accounts, audit their records and file an annual report and return with the registrar of companies.
Corporate entities are of the following two types:
1) Private Limited Company
2) Public Limited Company
The following services are provided by Vivek R. Agarwal & Co. Chartered Accountants:
1. Advising on implications of operating through a corporate entity, the level of capitalization, etc.
2. Assistance in obtaining name approval from the Registrar of Companies (RoC).
3. Assistance in drawing up the Memorandum of Association & Articles of Association of a Company (MoA & AoA).
4. Registration of the Company with the Registrar of Companies (RoC).
5. Assistance in statutory local registrations under other laws.
SETTING UP BUSINESS IN INDIA BY FOREIGN COMPANIES
A foreign company planning to set up business operations in India has the following options:
1. As an Indian company - (a) Wholly owned subsidiary (b) Joint Venture with an Indian partner
2. As a Foreign company - (a) Liaison Office (b) Project Office (c) Branch Office
Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment (FDI) policy. Details of the FDI policy, sectoral equity caps & procedures can be obtained on a specific request.
Once the entity is set-up in India:
We provide complete, online back office operations. From recruitment of personnel, to general office maintenance, pay roll and other legal & statutory formalities such as Bank account opening in India with all major international banks. Tell us the preference of Bank you want to have bank account with and we will get back to you with all
Foreign Direct Investment (FDI)
One of most important Entry Strategy in India for a Non resident is foreign direct investment (FDI). FDI is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. Open economies with skilled work forces and good growth prospects like India tend to attract larger amounts of foreign direct investment than closed, highly regulated economies.
We at Vivek R. Agarwal & Co. Chartered Accountants provide the following services with respect to FDI:
1. Compliance with FDI regulations and getting regulatory approvals
2.Compliance of the procedure including Chartered Accountants’Certification for repatriation of income/assets from India
3.Transfer of shares from Indian resident to non-resident
Market Entry Strategy
As India rapidly emerges into a major market for global businesses, most firms need to explore the Indian business landscape to tap the growing market, or to seek resources. We at Vivek R. Agarwal & Co. Chartered Accountants develop a strategy for Global Clients to enter the Indian market by leveraging our extensive knowledge of the Indian business environment.
Industry Structure and Landscape
We provide an in-depth analysis of the targeted industry segment and the capabilities required to serve them. Industry landscaping includes a detailed study of the industry structure (current market size, potential market size, and demand supply dynamics), study of the end-user application segments, competitors (current and potential, market share) marketing and promotion strategies, emerging market trends etc.
The track record should demonstrate a disciplined approach and the ability to adhere to the articulated strategy. The money raised should be clearly justified by the magnitude of the perceived investment opportunity and the extent of the manager’s resources. The investment strategy should be attractive in the context of the wider economic landscape, which will impact the market opportunity.
Global Expansion Strategy
Through our alliance around the world, we can help you develop and implement global strategies that will power your organization’s growth.
We at Vivek R. Agarwal & Co. Chartered Accountants combine our strategy expertise with local market knowledge to facilitate your access to new markets.
Partner Selection Strategy
The search for growth and the need to complement capabilities often results in organisations seeking to work with partners around the world. Working with the right partner, however, is critical for success.
We at Vivek R. Agarwal & Co. Chartered Accountants screen and select potential targets for you and assess the strategic and operational fit between both entities, prior to the transaction. We help organisations to clearly establish the drivers, objectives and outcomes of a robust partnering strategy. We research the market for interested partners, seek expressions of interest and assist in the shortlisting 2 – 3 ideal partners, based on clearly defined selection criteria. On the basis of the selected partner we assess & make the arrangement for the strategic and operational fit between both entities.
Strategic and Commercial Due Diligence
We at Vivek R. Agarwal & Co. Chartered Accountants conduct this service for Private Equity/M&A Firms, MNS’s and for Clients considering strategic partnerships, acquisitions, mergers, or investments as an avenue to growth.
Our goal is to help understand how one can really create value through the proposed investment and minimize the risk of failure. We help clients validate the investment hypothesis by clearly articulating the opportunity, expected returns and build an independent and objective view of the proposed investment. This is often supported by a valuation exercise.
CLOSING DOWN OPERATIONS
Closing down a dead operation is usually not a pleasing task for a local accountant. Vivek R. Agarwal & Co. Chartered Accountants see it with a different view. We offer our clients a close down team that specializes in this work.
APPOINTMENT OF LIQUIDATORS
It is inevitable that some companies move into liquidation. The process of liquidation is elongated & also requires high levels of statutory compliance. It involves various complicated, country-specific regulatory norms. Vivek R. Agarwal & Co. Chartered Accountants cannot be the liquidator but we liaise with and support the liquidator by providing him with key historical accounting information.
Closing down a foreign entity generally provokes a tax and value added tax investigation. Company resistance therefore needs to be watertight. Vivek R. Agarwal & Co. Chartered Accountants cessation team ensures, this is the case and works with regulators to ensure their satisfaction and withdraw any objections to a shutdown.
What Vivek R. Agarwal & Co. Chartered Accountants Offers:
We provide an integrated one point of contact solution to better protect you and your company. By using us, you can be rest ensured that finance and administration support to your foreign operations is provided efficiently & effectively and you operate safely abroad. We are an independent self-sustaining provider of services with no links to, or investments in us, by sensitive third-parties such as your bank.
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