To start a company in India is very easy and a viable idea because India offers one of the most promising emerging markets and business policies globally. With India being one of the most progressive countries worldwide, developments via the inflow of foreign direct investments (FDI) as well as new business innovations and entrepreneurship incentives makes the country offer a fertile land for foreign business startups in the country.
Even though setting up a foreign business in India is considered quite easy, there are still rules that apply to the operations of the company in the country as well as registration processes that facilitate proper incorporation of the company. It is, therefore, important to familiarise oneself with the rules and carefully plan the strategy needed to thrive in the market to avoid unnecessary hassles.
The entry into the market for foreign bodies looking to start a company in India can be via registering as an Indian entity which entails registering as a Private Limited Company or setting up as a branch, project, or liaison office in the country.
Choosing to start up a company in India as a Private Limited Company is considered to be the easiest way of incorporation of a foreign company into the Indian market. About 100% foreign direct investment is said to occur automatically in a foreign company registered as a private limited company. It does not necessarily need permission from the Central Government of India.
Likewise, choosing a strategy that involves entry as a branch, liaison or project office in India is not as easy as the former as approvals for full incorporation is to be acquired from the Reserve Bank of India (RBI). This is considered time-consuming and cost-intensive, but quite effective.
Requirements for Starting a Foreign Business in India
To start a company in India, regardless of the entry strategy, the requirements are at least two directors, and an address. For the Private Limited Company, an addition of two shareholders is also required, and as mandated, one of the directors must be an Indian citizen and resident who must have stayed for over 186 days.
Furthermore, in the case of a company registered as a foreign company and set up as offices, it is preferable that another director be added to the mandated two, with two of them being foreign directors from the parent company and the last one, an Indian citizen.
It is to be noted that there are no rules or regulations that mandate the Indian citizen to be recognised as a shareholder. As far as the law in India goes, the foreign companies can, by choice own all 100% of the company shares. This is considered a plus about setting up a company in India.
It is necessary to note that an address or location, which would be the registered office address for the business venture, is mandated. As a foreign company, the metro cities of India might be considered depending on the choice of business ideas.
Documents Mandated for Registration
The foreign firms looking to start their company in India will be mandated to submit a copy of their passport, along with a proof of address which could be an electricity bill or bank statement. These copies will be recognised if notarised by a Notary or Indian Embassy in the home country.
For a foreign company entering the market as a would-be shareholder in an Indian company, the investment must be authorised by the Board Resolution from the Company and is based on the decisions of the company directors. A copy of the Board Resolution should be attached to a copy of the incorporation certificate of the foreign company.
Company Registration Costs in India
Registration costs in India are quite easy to cope with. The payment of stamp duty and the Registrar of Company Fees should be prepared for. Most of the registrations are done via online applications. Therefore, full incorporation is done within a few weeks.
What to Do and Expect After Company Incorporation
Upon the full incorporation of the company in India, an official bank account for the company should be opened by any of the directors of the company, but preferably the Indian Director. After this is done, the FDI flow into the company should be accordingly reported to the Reserve Bank of India which is easily done by a legal or accounting personnel practising in India.
Post this, the tax compliances as well as other mandatory compliances required in the country should be well-observed and paid attention to before starting operations. This allows a smooth transition into the India markets.
