Business Setup in outside India

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Being a fastest major emerging economy of the world, Indian entrepreneurs are finding themselves in a sweet spot to explore opportunities in international trade and increasingly recording their presence at global level. Economic reforms in India have opened up important avenues for promoting global business by Indian entrepreneurs. Liberalised monetary policies have given wings to entrepreneurs of all sizes to explore international market for their products and services and inducing them to set-up their business outside India to realise true potential of their business.

Setting up or to relocate a business outside India, is quite a challenging task that requires an astute mix of proper management planning, logistical support, financial flows, precise jurisdictions, tax incentives, knowledge of marketing policies, etc. The Indian entrepreneur looking to set-up business outside India has to keep in mind not only the legal requirements of the host country but also of the Indian legislation.

Setting up of business outside India requires following steps:

1). Research the legal and regulatory requirements of the host country where you want to set up your business. Each country has its own laws and regulations governing the establishment and operation of businesses, and it is important to understand these requirements before proceeding.

2). Choose a legal entity for your business, such as a corporation, limited liability company (LLC), or partnership, based on the laws and regulations of the host country where you are planning to set up your business. Selection of the legal entity should be done after due consideration of the advantages and disadvantages associated with each entity type.

3). Register your business with the local authorities and obtain necessary licenses and permits required to operate in the host country.

4). Develop a business plan that includes your market analysis, financial projections, marketing strategy, and other relevant information.

5). Open a bank account for your business in the host country where you wish to operate.

6). Hire local employees or engage local service providers to help in the operations of your business.

7). Obtain any necessary financing to fund your business operations, such as loans or venture capital investment.

8). Establish a tax strategy for your business, including compliance with local tax laws and regulations.

9). Develop a system for accounting and financial reporting that complies with local laws and regulations.

Some of the common means available to Indian entrepreneurs for setting up businesses outside India include:

Liaison Office (LO):

A liaison office is defined as a place of business to act as a channel of communication between the principal place of business or head office by whatever name called and entities in India. The rules and regulations governing the establishment and operation of liaison offices may vary depending on the country’s laws. Indian entrepreneurs planning to set up a liaison office in a foreign country must comply with the relevant laws, regulations, and procedures applicable in that country.

Branch Office (BO):

A branch office is a type of business establishment that represents an Indian company’s extension abroad. The primary objective of a branch office is to promote and support the parent company’s business activities in the foreign country. The rules and regulations for establishing a branch office in a foreign country may vary depending on the country’s laws. Indian entrepreneurs planning to set up a branch office in a foreign country must comply with the relevant laws, regulations, and procedures applicable in that country.

Wholly Owned Subsidiary Company WOS):

An Indian entrepreneur can set up a wholly owned subsidiary company in the foreign country where they wish to do business. An Indian entity can directly invest outside India by way of contribution to the capital or through subscription to the Memorandum of Association of the foreign entity.

Raising capital

For any business, capital is similar to what is blood to the human body, without which the business cannot survive. Apart from bootstrapping, there are other ways by which you can raise money for your business including angel investors, venture capitalists, business incubators, bank loans, government schemes or crowdfunding. Preparing a detailed business plan that includes market analysis, financial projections, organization management, sales and marketing strategies and so on plays quintessential role in impressing potential investors.

Joint Venture (JV):

A JV means a foreign concern formed, registered, or incorporated in a foreign country in accordance with the laws and regulations of that country with sharing ownership and control with a local partner in the foreign country. The Indian entrepreneur may own minority or majority shareholding/ control over the foreign entity formed under JV.

Acquisition of an existing company

An Indian entrepreneur may invest in and acquire an existing company in the foreign country where they wish to do business. This approach can provide an existing customer base, established infrastructure, and employees etc., which facilitates direct access to market in the host country or may be used as intermediatory for doing business in other countries as a tool of tax planning and other relevant business considerations.


The most important legislation in India is the Foreign Exchange Management Act, 1999 (FEMA) which has recently reframed regulations relating to overseas investments. Foreign Exchange Management (Overseas Investment) Rules, 2022 (OI Rules) and the Foreign Exchange Management (Overseas Investment) Regulations, 2022 (OI Regulations) are the primary regulations governing overseas investment by an Indian Entrepreneur. In addition, the RBI has also issued the Foreign Exchange Management (Overseas Investment) Directions, 2022 (OI Directions) which are to be read in conjunction with OI rules and the OI Regulations. Collectively the OI Rules, OI Regulations and OI Directions are called the “OI Framework”.


Through aforesaid amended framework, Government of India has attempted to simplify and liberalize the regulatory framework relating to overseas investments by persons resident in India and to promote ease of doing business. Considering the evolving business needs and increasingly integrated global market, several relaxations and changes have been introduced resulting in majority of overseas investments/transactions under the automatic route.

There are mainly two methods available to Indian Entrepreneurs for setting up business outside India, namely: –

  • Liberalised Remittance Scheme (LRS): LRS allows resident Indians including minors, to remit up to USD 250,000 per financial year (April-March) for any permissible current or capital account transaction or a combination of both. Business-related remittances such as investment in foreign companies, setting up a subsidiary or branch office abroad, and acquisition of immovable property outside India by Individuals are eligible under the LRS. The remittance can be made through an authorized dealer (AD) bank, which requires submission of the necessary documents and declarations while making remittance for overseas investments.
  • Overseas Investments under Overseas Investment Framework: All eligible entities are permitted to make overseas investments including investment in foreign companies, setting up a joint venture, subsidiary company, branch office abroad, and acquisition of immovable property outside India under the newly introduced OI framework. These frameworks provide detailed guidelines as to quantum, nature and type of investments besides regulatory filings relating thereto. One has to abide by these regulations and wherever an otherwise permissible transaction doesn’t fall into automatic route has to resort to approval route.

Depending upon the nature of business, amount of investment, country of investment, and entity making investment, there are two routes prescribed under the FEMA Regulations: –

  • Automatic Route: – Under the automatic route, the investor does not require any approval from RBI or the Government of India for the overseas investment. Overseas investment by a person resident in India under the automatic route (subject to prescribed limits and conditions), can be made in a foreign entity engaged in bona-fide business activity, directly or through step-down subsidiary (SDS) or through the special-purpose vehicle (SPV). The following conditions must be adhered to for making Overseas Investment under the automatic route:
  1. Financial commitment i.e maximum Investment that can be made by Indian Party should not exceed USD 1 billion or 400% of its net worth (whichever is lower).

2. The Indian Party should not be on RBI’s Exporters’ caution list/list of defaulters or under investigation by any investigation/enforcement agency or regulatory body.

3. The Indian Party should route all the transactions related to investment in a JV/WOS through a single branch of AD Bank, designated by the Indian Party.

4. Valuation requirements should be complied with.

  • Approval (Government) Route: – Under the Government Route, prior approval of the Government of India, Ministry of Finance, Foreign Investment Promotion Board (FIPB) is required. Overseas investment not falling under the automatic route, or to be made into a company incorporated in Pakistan (including by way of swap of securities) or such other country as may be decided by the Central Government, from time to time.
How Can MNRS Help?

MNRS can help guide you through the process and ensure that you comply with regulations applicable to Indian residents /entities making overseas investment. We can also assist you in incorporation and business set-up services in the host country of your choice or may get overseas entity incorporated on your behalf. Following are some of the areas where MNRS can help: –

  • Guiding Indian residents/entities in choosing the right business structure for their venture, such as proprietorship, partnership, or corporation, depending on the nature and scope of the business, and the legal and tax implications in the foreign country.
  • Assisting in regulatory compliance such as FEMA relating to overseas investments including securing Unique Identification Number (UIN), filing of form FC, issuing valuation certificates, seek prior approval from concerned ministry, wherever applicable, compilation and filing of Foreign Liabilities & Assets Return (FLA), Annual Performance Return (APR), disinvestment etc.
  • Assisting clients in making outward and inward remittances w.r.t. overseas investments and issuance of necessary certificates e.g. Certificate in Form 15CB.
  • Assisting in understanding the tax laws and regulations in the foreign country and help in complying with the same. They can also provide advice on tax planning, such as minimizing the tax liability by taking advantage of tax incentives and exemptions.
  • Complying with the regulatory requirements of the foreign country, such as obtaining the necessary licenses and permits, complying with the labour laws, and filing the required reports and returns.
  • Maintaining accurate and up-to-date accounting records and bookkeeping, which is crucial for monitoring the financial performance of the business and complying with the tax and regulatory requirements.
  • If the Indian residents are setting up a subsidiary or a branch in a foreign country, a we can help in setting the transfer pricing policies, which determine the prices charged for goods and services transferred between the Indian and foreign entities.
  • Through its networking associates in some of the major countries, we also provide company formation services outside India and helps relocate existing business across the world.