Setting Up A Subsidiary Of A US Based Company: A How-To

Image That Represents the Types of Business Entities.

The Various Kinds Of Business Entities In India

At present, there are a number of business entities that can be set up in India. The most common are listed below:

• Private Limited Company
• Public Limited Company
• Unlimited Company
• Limited Liability Partnership (LLP)
• Partnership
• Sole Proprietorship
• Representative Office
• Project Office
• Branch Office
• Joint Venture Company
• Subsidiary Company

When it comes to setting up a business of a US-based company in India, both foreign and Indian promoters can do so. The types of business entities they can incorporate are:

· Private Limited Company
· Public Limited Company
· Limited Liability Partnership
· Unlimited Company
· Partnership
· Sole Proprietorship

A foreign company like one based out of the United States can also opt for the following categories, instead of setting up a complete company:

· Liaison Office/Representative Office
· Project Office
· Branch Office
· Joint Venture Company

It should be noted that a JV company is not considered as a distinct legal entity, which Image That Shows The Concept of Private Limited why it can only be a:

· Private firm
· Public company
· Unlimited company

A similar restriction is placed on a completely owned subsidiary of a US based company in India. These can be:

· Branch Office
· Unlimited Company
· Private Limited Company
· Public Limited Company

The Most Popular Form Of Company In India

While there are many options available for a US based company to set-up shop in India, the most opted one is a Private Limited firm. The reason for this is the high popularity of the business entity in the country. For a foreign company to incorporate a Pvt. Ltd. firm, they need to:

· Have two shareholders
· Have two directors of which one must be a resident of India

The foreign holding company can have 100% shares of the Indian private limited firm. To fulfil the necessity of a minimum of two shareholders, one share can be given to the nominee of the foreign establishment.

The current government has made incorporating a wholly-owned subsidiary in India fast and hassle-free. The entire process can be completed online with minimal disruption. It also ensures that the promoters of the company or the nominees needn’t fly back and forth to India to setup the business entity.

If the parent company in the US has a Trademark Registration and they want to use the same for their Indian subsidiary, it is possible. To get the name approved the parent company has to prove no objection which can be done through Board resolution. They also need to submit a trademark registration certificate. Do note that the registered trademark can be in India, US or anywhere else.

All foreign investors or shareholders, be it corporate or individual, need to gain approval from the Government before Investing in India. In a few instances, the approval of the following may also be required:

· Foreign Investment Promotion Board
· Reserve Bank of India

There are some business sectors that gain automatic approval under the RBI.

Picking The Right Business Entity Is Vital

Picking The Right Business Entity Is Vital

Being a foreign investor, choosing the precise business entity to incorporate in India is vital. It guarantees that the entity suits your purpose while ensuring that there are no tax planning or liability problems. To save taxes within the purview of international tax treaties and Indian laws, a US based company who wishes to setup a business in India should consider focusing on corporate structure and Entry Strategies in India for Foreign Investors.

While establishing a business in India by a foreign company is possible online, there are some conditions that needed to be fulfilled before and after incorporation. For example, the directors will need to obtain:

· Director Identification Number (DIN)
· Digital Signature Certificate (DSC)

Therefore, it is always recommended to take the advice of legal experts before taking any step for establishing a subsidiary or branch of a foreign company in India. They will be better able to serve you on restrictions and conditions placed on such business entities such as sweat equity.