A company incorporated under the Companies Act, 2013 is the most preferred route for doing business in India. The other option available is a Limited Liability Partnership (LLP) firm. Depending on the amount of capital the Foreign National intends to invest, the intended nature of the business, and the resources available in India to manage the business; a foreign national may either opt for incorporating a company or forming an LLP. While the LLP structure is simple to form and maintain in terms of compliance, a company would be more advantageous when it comes to accessing funding and allocating shares to investors.

 

If the company has a foreign shareholding, the foreign citizens should bring their contribution to the share capital by transferring from their foreign bank account through normal banking channels. Through the same banking channels, the foreign nationals may also receive their annual dividends/profits, if any. A foreign national can act as Director / Managing Director / Whole-time Director / Manager of an Indian company.

 

For detailed Analysis you can check out Business set up India Section

• Joint Venture: For a foreign company to form a joint venture in India, it will have to connect with a local partner, in the respective location where the business is to be established. The foreign company and the local partner will sign a Memorandum of Understanding (MOU), which outlines the basis for the joint venture agreement.

• Wholly-owned Subsidiary: An Indian company will become a wholly-owned subsidiary of the foreign business when it makes a 100% FDI investment in it. A foreign company can make a 100% FDI to register its business in India.

• Liaison office: A foreign company has the option of setting up a liaison office (also known as Representative Office) for all liaison activities in India. A foreign company will bear all the expenses of a liaison office. A Liaison Office can undertake only liaison activities in India, i.e. it can act as a channel of communication between the Head Office (established abroad) and parties in India. The Liaison Office is not allowed to undertake any business activities in India and cannot earn any income or profits in India.

• Branch office: Branch offices are allowed to be set up in India with specific approval from the Reserve Bank of India (RBI) for companies that are incorporated outside India and are engaged in manufacturing or trading activities.

• Project Office: A foreign company can set up a project office in India to execute projects given to it by Indian companies. However, to establish such a project office, a foreign company is required to obtain approval from the Reserve Bank of India (RBI).

• Sole Proprietorship Concern / Partnership Firm: Investment in sole proprietorship concern / partnership firm by a Non-Resident (including Foreign National) other than NRIs can be done only with the prior approval of RBI. Further, Non-Residents are not allowed to invest in a firm or a proprietorship concern engaged in any agricultural / plantation activity or real estate business or print media.

Apart from a liaison office, all other structures mentioned herein are permitted to remit to the foreign investors any profits earned through the proper banking channels in accordance with the laws in India pertaining to foreign exchange. It is to be noted that while remitting funds, subject to the aforementioned laws pertaining to foreign exchange, the amounts to be remitted must be remitted through the authorized bank (AD) by making an application in the prescribed form (Form A-2) by the applicant/remitter. It is to be ensured that applicable taxes on amount to be remitted outside India has been duly discharged or an arrangement has been made before effecting remittance outside India.