India being a hot destination for business and thereby investment world over, a lot of companies from US, UK, rest of Europe, China, Korea want to set shops in India.
What are the means to create presence in India for Businesses ?
1. Liaison office in India – most convenient option for Creating India presence. The issue with this is the same cannot trade or serve in India only liaison. This can be a good way to study market and establish contacts, scout for takeover or merger opportunities, etc. It can be formed with express permission from RBI through an authorized dealer which is a scheduled bank. The LO or liaison office needs registration in India as foreign company with Ministry of Company affairs MCA. Funds which come in India can be used only for spending on study and administration in India. It needs to comply With all laws as required by any other entity. It cannot enter into any revenue earning contract. Exit option is easier if you have liaison office setup with all compliance in place.
2. Having a 100% subsidiary in India. This is a great way to have full fledged and active presence. It is allowed to trade and serve from this entity without any restrictions once established. Apart from few exceptions in FEMA, 100% foreign subsidiary can be formed for most of the businesses. For restricted businesses FIPB approval is required to be taken. All infusion of funds call for FCGPR formality which is post facto except few exceptions. This companies need to have all VAT, Service tax and excise approvals based on its nature of business. An auditor needs to be appointed within one month of formation and audited accounts need to be submitted within stipulated time frame. Almost all the formalities are like any other Indian owned company. Only additional is having a compulsory Indian resident as director on the board. This model is suitable for those who have clear business plan and expect revenues to flow in a shorter time frame post formation. Exit becomes a bit difficult in this model and also costlier.
What are other crucial issues which need to be looked at to setup business in India?
Apart from the entity structure questions like tax impact on margins, pricing, capital introduction structure, etc are crucial for the incumbents.