Wholly Owned Subsidiary or Foreign Subsidiary
For foreign companies eyeing India's market, one viable route is through a wholly owned subsidiary (WOS). This means that the foreign holding company has complete control and is responsible for its business activities. It is a popular choice for small and medium-sized businesses because India has simplified compliance procedures through digitalization. Our services streamline the process of company incorporation in India and facilitate FDI in India. A WOS can be a private limited company (PVT LTD) or a Limited Liability Partnership (LLP).
- Private Limited Company: PVT LTD is a privately held small business where liability is limited to shares, and it has fewer than 50 shareholders with no public trading of shares. Incorporating a PVT LTD offers a simpler compliance regime for foreign companies starting operations in India.
- Limited Liability Partnership (LLP): An LLP combines the features of a private limited corporation and a partnership, offering separate legal status and liability restrictions. The Indian government encourages foreign investors to use LLPs, as they are easier to manage and have fewer compliance requirements. LLPs also offer several tax advantages for domestic market entry in India.
Joint Venture/Equity Participation
Another popular approach after wholly owned subsidiaries is through joint ventures or equity participation. In a joint venture, a foreign company forms a strategic alliance with an Indian partner. Two companies, one foreign, and one Indian, join together to create a joint venture. The Indian partner should already be operating in the same field or area. There are two types of JVs
- Incorporated JV: These JVs are formed as separate legal entities and follow the laws set by the government. A popular format is Private Limited as explained above
- Unincorporated JV: These JVs are formed through a contract and do not have a separate legal entity, instead, they are governed by the terms and conditions of the contract. A popular format is LLP as explained above
Branch Office, Liaison Office or Project Office
- Branch Office (BO) is an extension of a foreign company's operations. It lets the company do business while keeping its separate legal identity. To start, entities need approval from the Reserve Bank as per FEMA 19992 rules. The Business Process Outsourcing (BPO) industry in India, which offers services like customer support and data entry, is a popular sector for foreign companies due to its skilled workforce and cost-effective solutions.
- Liaison Office: Foreign entities often set up a liaison office in India as their first step into the market. This office’s main role is to gather market data and introduce the company to potential customers in India. It serves as a bridge between the foreign parent company and the Indian market. However, it’s important to note that a liaison office cannot engage in any business activities. Its operations are funded by money sent from the foreign parent company.
- Project Office: A Project Office is another way for foreign entities to enter the Indian market. It’s a temporary establishment that allows foreign companies to execute specific projects in India. Unlike a Liaison Office, a Project Office can undertake commercial activities related to the project. It’s an effective method for foreign entities to have a presence in India, specifically for project execution. It’s a strategic move that aligns with the concept of FDI in India, paving the way for future growth and expansion.
