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How to set up a business entity in India
To incorporate in India, start by choosing the right business structure and hiring knowledgeable liaisons.
India is a lucrative market that’s witnessing a consumption boom fueled by a huge transformation in its demographics. This transformation will only lead to more economic growth and demand, giving you just one of the reasons it might be a good idea to do business in the country.
As it stands, creating a business in India can be a tricky endeavor. But with the right knowledge and expert help, you can incorporate to legally operate in this emerging economy.
What kind of entity makes sense?
Among the many entities for foreign investors who want to do business in India, four are the most common: wholly foreign-owned enterprise, joint venture, partnership enterprise and representative office.
Wholly foreign-owned enterprise (WFOE)
This is a limited liability company entirely controlled by you. You might not be able to set up a WFOE in certain industries, and you may need government approval in other industries.
It’s not quick or easy to set up a WFOE. However, the WFOE is often considered an effective entity for foreign investors because it affords complete control over business activities.
Joint venture (JV)
In a joint venture, you partner with a citizen of India to start a business entity or contractual arrangement. This is a limited liability entity.
Experts warn that a joint venture is unwieldy because partners rarely hold the same business vision. Even still, many individuals choose to enter into joint ventures because they can’t start a WFOE.
Partnership enterprise (PE)
Unlike a WFOE or a JV, you don’t create a legal entity by entering into a partnership. Instead, you simply create a contract between one or more partners to conduct business.
There are other major differences. For example, a PE is an unlimited liability company, so you could be on the hook for full costs incurred through your business. PEs are also excluded from many industries in India.
Creating a representative office is the easiest way to build a business entity in India. It’s also an inexpensive option. However, a representative office excludes you from performing many operations in the country. For example, you can’t sign contracts or even earn money. Essentially, a representative office gives you a presence in India, and not much more.
Should I hire a professional?
It’s an excellent idea to hire a liaison to navigate tricky incorporation waters. Work with someone from India who speaks fluent Hindi or the language in your area of business. They’ll interact with officials on your behalf, and they’ll tell you the appropriate places to register your business entity.
What kind of documentation will I need?
Here are a few documents you’ll need to register your business:
- Certificates of incorporation
- Bank reference letters
- Passport copies
- Resume and photo
- Description of the scope of your business
- Lease contracts of India office address
- Business license
You may need different documentation depending on where you’re registering and which officials you meet with. Strongly consider working with a company that helps foreign investors create businesses in India.
Laws & Legal Docs for International Money Transfers to India
Where do I file my information?
A business registered in any state of India can do business in all states. You’ll submit documentation to your nearest Registrars of Companies in India. Your business may also need to be approved by other authorities.
Other factors to consider
- Naming your business. You’ll need to cross-check your business name against those registered with India’s Ministry of Corporate Affairs. Also keep in mind that if your business name contains certain words — like “Asia” — it could affect the minimum capital required by law to maintain your business.
International billing and payments
Your new business will require you to make and receive international payments, which means you’ll make transactions between currencies and across borders.
You can safely and affordably manage your business payments — with lower fees and stronger exchange rates — by comparing the services of a money transfer specialist.
Use a money transfer to manage your international business payments
It’s important to choose the right business entity to operate in India. Consider working with an organization that specializes in helping foreign businesses incorporate in the country — this will streamline your progress and help you avoid pitfalls along the way.
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