WHAT TYPE OF COMPANY SET-UP DO YOU NEED FOR INDIA?
Choosing the right company structure for your business is an important first step for any company entering the Indian market
| Private Limited (PLC) | Limited Liability Partnership (LLP) | Branch office (BO) | Liaison Office (LO) |
Legal Status | Independent Legal Entity | Independent Legal Entity | No separate legal status – extension of parent co. | No separate legal status – represents parent co. |
Permitted Activities | Commercial activity | Commercial activity | Commercial activity – but not manufacturing | No commercial activity. Only represents Parent Co. |
Expenses to be met | Share capital / revenue earned | Partners’ contribution / revenue earned | Funds from parent co. / income generated in India | Funds received from parent company only |
Income Tax | 25%- 30% (depends on turnover) + 7-12% surcharge (on high net income and 3% cess | 30% + 12% surcharge (on high net income) and 3% cess. | 40% + 2-5% surcharge (on high net income) + 3% cess
| No tax as no commercial activity
|
Repatriation of profit
| Shareholders paid surplus profit subject to DDT1 | Partners paid surplus of profit. No DDT applicable | Surplus profit repatriated after tax. No DDT applicable | Not Applicable |
Setting up of branches | Any number | Any number | One per region of India subject to RBI approval | One per region of India only |
Annual Filing | Annual filing with ROC & RBI + audited financials No parent co.’s details. | Annual filing with ROC & RBI + audited financials No parent co.’s details. | Audited books of account of BO and Parent Company +annual listing of parent co’s details & visits to India | Parent co’s balance sheet, profit and loss account +annual details of employees visiting India each year |
Risk | Company and directors responsible | Company and partners responsible | Parent company is directly liable. | Parent company is directly liable. |
Compliance Requirements | Many compliances based on companies Act, Income Tax Act, FEMA Act, labour etc. | Relatively lesser compliances based on LLP Act, Income Tax Act, FEMA Act, labour etc. | Relatively lesser compliances based on Income Tax Act, FEMA Act, labour etc. | Lesser compliance as no commercial transactions |
Requirement of Resident Director
| One Partner (Indian or Non-Indian citizen) must be resident – min. 182 days per year. | One Partner (Indian or Non-Indian citizen) must be resident – min. 182 days per year. | Authorised Representative with PAN2 and Passport – and must be Indian resident3. | Authorised Representative with PAN and Passport – and must be Indian resident. |
Dividend Distribution Tax (DDT) | Dividend declared from the surplus profit. +20.36% payable at the time of distribution | Not applicable | Not applicable | Not applicable |
Acceptability | Very accepted | New concept, not yet established with traders and manufacturers. | Well-known entry route for foreign companies. | Well known entry route for testing the water. |
Timeline | 7 to 10 weeks | 7 to 10 weeks | 13 to 18 weeks (requires approval of RBI) | 13 to 18 weeks (requires approval of RBI) |
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