Accounting
LLP vs Pvt Ltd – Which Business Structure is Right for You?
Introduction Choosing the right business structure is crucial for long-term success. Two of the most popular structures in India are the Limited Liability Partnership (LLP)
Start your business in India with a popular and reliable corporate setup.
Establishing an Indian subsidiary is one of the simplest and most accessible ways for foreign companies to enter the Indian market. The Government of India allows 100% Foreign Direct Investment (FDI) in most sectors when set up as a company, making the private company structure ideal for foreign nationals and entities seeking a presence in India.
The Indian corporate framework, governed by the Companies Act, 2013, offers several advantages. Foreign companies can hold majority or full ownership of shares, requiring only one resident director and a registered business address in India. While the incorporation process is straightforward, adherence to applicable laws and compliance requirements is essential. An Indian subsidiary of a foreign entity is commonly recognized as a foreign company operating in India.
BENEFITS
Entering the Indian market is simpler as a private company compared to other business structures. With liberal policies in place, setting up a company is hassle-free. The incorporation process and post-registration formalities have been streamlined through online procedures and one-window processing, making the entire process faster and more efficient.
Registering a subsidiary in India allows foreign nationals or entities to establish a permanent business presence and a legal entity within the country. An Indian-registered company is recognized as a separate legal entity, distinct from its promoters and shareholders.
This structure enables foreign promoters to retain strategic control over operations and business activities. By appointing at least one Indian resident director, foreign companies can ensure effective supervision and maintain indirect control over their Indian subsidiary.
The main purpose of establishing a foreign branch is to expand business operations. Its limited liability structure provides a major advantage when entering a new market, safeguarding promoters’ personal assets. This setup not only enhances global brand value but also protects the promoters from potential liabilities in the new business environment.
Telephone bill, electricity bill, or the latest bank account statement of shareholders and directors.
Electricity bill or telephone bill of the registered office address in India.
To register an Indian subsidiary as a Private Limited Company, the following requirements must be met:
At least 2 directors must be appointed, with one being a resident of India.
A minimum of 2 shareholders is required for the registration. An individual can serve as both a shareholder and a director simultaneously.
A registered office address in India must be provided as the place of business.
India allows 100% Foreign Direct Investment (FDI) in many sectors under the Automatic Route. Under this route, only a post-investment filing with the RBI is required, detailing the nature of the investment made. However, certain industries require prior approval from the RBI. In such cases, approval must be obtained from the RBI before proceeding with the investment.
Foreign investment is prohibited in businesses involved in or intending to engage in the following activities:
Chit fund business
Nidhi Company
Agricultural or plantation activities (except for floriculture, horticulture, seed development, animal husbandry, pisciculture, controlled cultivation of vegetables, mushrooms, and services related to the agro and allied sector, including tea plantations)
Real estate business or the construction of farmhouses (excluding the development of townships, construction of residential/commercial properties, roads, or bridges)
Trading in Transferable Development Rights (TDRs)
The operational presence of a foreign entity in India is typically registered as a Private Company, which requires a minimum of 2 members to subscribe to shares. To register as a wholly-owned subsidiary, the parent company subscribes to all shares, except for one. This single share is held by one of the directors to meet the legal requirement.
The company name must be formulated as per the guidelines mentioned above. Applicants can provide up to two name options in order of preference through the RUN form. The names must comply with the provisions of the Companies Act and relevant regulations.
You may apply using the name of the foreign entity to establish a connection, but it is important to verify the availability of the name before submitting the application.
Yes, for company registration in India, at least one director must be an Indian citizen and a resident. This requirement must be maintained throughout the company’s existence.
As per the definition of a foreign company, it can operate a place of business either directly or through an agent, either physically or electronically. Therefore, having a physical office in India is not a mandatory requirement.
However, it’s important to note that a “place of business” and a “registered office” are two separate concepts. The registered office must be located in India, as it serves as the official address for all formal communications to the company.
No, none of the promoters need to be physically present during the entire Pvt Ltd company registration process, as it is entirely online. All forms are submitted through the web portal and digitally signed. Additionally, the required documents can be emailed or uploaded on our portal for filing.
Yes, after the incorporation and infusion of equity funds from a foreign source, the Reserve Bank of India (RBI) must be notified about the foreign investment in the company through the proper filing. If the business activity requires government approval for foreign investment, such approval must be obtained before the funds are invested in the company.
Every financial year, the company must hold at least one Annual General Meeting (AGM) and a minimum of four board meetings, one for each quarter. Additionally, the company’s accounts and financial statements must be audited by an independent auditor. Following the audit, the company must file Form AOC-4 and MGT-7 as part of its annual compliance within the specified timeframe.
The company must obtain the foreign KYC from the foreign bank and the Foreign Inward Remittance Certificate (FIRC) from the Authorized Dealer (AD) and submit these documents to LegalWiz.in for filing.
Daily business transactions are recorded in the company’s Books of Accounts by the designated accountant(s). These accounts are then verified by an independent auditor to ensure all statutory compliance requirements are met, and an audit report is provided accordingly.
(Note: submitreturn.com is responsible only for the accounting services provided but will assist in the appointment of an independent auditor for your business.)
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