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3 questions to ask before setting up a company in India



3 questions to ask before setting up a company in India

3 questions to ask before setting up a company in India

1. What documents are required for setting up a business in India?

These items may vary depending on the type of company structure and the industry your business is in. The following is a list of the main required items for a business in India:

✔ PAN Card (see article Why is a PAN card mandatory)
✔ DIN-1 application
✔ Online digital signature certificate
✔ Reserve company name with Registrar of companies (ROC)
✔ Mandatory Compliance
✔ Accounting and Auditing reports

2. What type of entity formation should I choose?

It is definitely worth obtaining advice regarding the right entity for the type of business you want to operate in India; each has its pros and cons which should be considered in depth before taking any steps:

JV with Indian partner - A joint venture (JV) entity type allows foreign companies to easily enter the Indian market and enjoy the benefits of linking with an established business. 

Liaison office - Suits companies that only want to have a presence in India for communication intentions. Extremely limited structure with no capability of conducting business transactions.

Branch office - This type of entity can conduct most activities that a limited company can apart from manufacturing. A new condition implemented by the Reserve Bank of India (RBI) requires the foreign company to prove profitability for the last 5 years.

Sole proprietorship - One person is accountable for all business dealings and has complete control.  Major drawback is that the owner is personally liable for all debts incurred by the business.

Partnership - Exactly what it sounds like, it’s a partnership between a minimum of 2 people, and a maximum of 20.  Similar to a sole proprietor, this type also has unlimited liability.  

Limited company - This can be either a public limited or private limited company, depending on the requirements of the business.  It has the advantage that business assets are separated from personal assets. The primary difference is in the number of shareholders each entity type can have.

3. What type of legal and regulatory guidelines need to be followed?

Once again, the legal obligations for a business will obviously differ depending on the business structure type, and the industry it is involved in. The following are areas that need to be considered from a legal and regulatory standpoint:

✔ FDI regulations and procedures

✔ Tax and regulatory compliance

✔ Indian labour laws

✔ Cross border tax

✔ Corporate and local laws

✔ Transfer pricing policies

This article is provided as a guide to gain an understanding of starting a business in India.  However, it is imperative to solicit the assistance of an advisor who is well versed in setting up businesses in India before any actions are taken.

If you would like to know more or discuss further about investment opportunities in India, please call us on 0870 803 1033 or email on contact@qxadvisors.com



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