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India has become an increasingly popular Destination for Foreign companies for looking to expand beyond their home Market, with an ample amount of Customer base, and a Strong talent pool, India offers a great opportunity across industries working under different sectors such as technology, Manufacturing, services and e-commerce.
Hence, entering a New Market is not just about finding new customers, one of the most important decision taken by the Company is choosing the Right business Structure to start business in India.
Foreign companies can enter India through Various mode of business such as setting up of a Subsidiary company, opening of Branch office, liaison office and Project offices in India, setting up of Limited liability Partnership firm and entering into Joint Venture with an Indian Partner.
The Benefits of Entering in business in India
- Large and Growing Market – India having a wide population of 1.4 Billion people with rapidly increasing of Middle class population, hence created a big Market for product and services across different sectors like technology, healthcare, retail and Manufacturing and Renewable energy
- Fast Growing Economy – India has become one of the Fastest growing Economy in the world due to continuous economic reform, infrastructure development creating many opportunities every year.
- Skilled & Cost effective workforce – India has a large pool of skilled Professional in IT, Engineering, finance and other sectors and also have a large amount of Labour and the Operational cost is lower as compared to European companies, help increasing Profitability
- Favourable foreign investment Policies – India allows 100(%) Foreign Direct investment in automatic route in many sectors helps in investing without prior Government Approval.
- Improving Infrastructure – Indian Government has made a Major Investment in setting up of highway, ports, airports and digital infrastructure aids in improving connectivity and supports industrial Growth.
Types of Business structure in India
1. Private Limited Company
Private Company in India is a separate Legal entity distinct from its shareholders, this means
- The Company can own property in its own Name
- It can be sued or sue.
- Shareholders personal asset are protected.
- Liability is limited.
However, net capital is not simply the total shares held by each shareholders as Company structure includes:
- Authorized Share Capital
- Issued Share Capital
- Paid-up Share Capital
Under the Companies Act, 2013 the following conditions shall be applicable
Directors
- Minimum: 2 Directors
- Maximum: 15 Directors (can be increased with shareholders)
- At least One Director shall be Indian Resident
Shareholders
- Minimum: 2 shareholders
- Maximum: 200 Shareholders
Share Capital
No Minimum Authorized Capital Requirement. (Earlier Rs.1 lakh requirement has been removed)
Restriction on Share Capital
- Shares cannot be publicly traded
- Transfer of Shares is restricted, but not completely prohibited
2. Subsidiary Company
A Subsidiary Company is not a separate structure like a Private Limited Company or LLP.
It’s a Structure where one Company (Holding Company) controls another Company.
Under Section 2(87) of the Companies Act, 2013, a company is considered as Subsidiary Company If holding company:
- Controls the composition of Board of Directors
- Exercises or controls more than 50% of the total Voting share – Directly or together with one or more of its Subsidiaries, this means Control direct or indirect
Foreign Holding Company & Indian Subsidiary – A foreign company can establish an Indian Company (usually a Private Limited Company) and holds share in it.
In Such cases:
- The Indian Company become the Subsidiary
- The Foreign company becomes the Holding Company
This is one of the most common entry route for foreign investor into India.
Types of Subsidiaries in India
A. Wholly owned Subsidiary
- it’s a Company in which parent company holds 100% of the Shares
- There is No Minority Shareholders
- Allowed only where 100% FDI is permitted (Automatic & Government Route)
Even through 100% ownership is allowed, India law still requires Minimum 2 Shareholders for a Private Company, In Practice One share is often held by a Nominee of Parent Company.
B. Subsidiary Company (Majority Holding)
- It’s a company where Parent Company holds more than 50% but less than 100% of the Shares.
- Parent Company holds controlling Interest
- Minority shareholders may exist.
3. Limited Liability Partnership (LLP)
A limited Liability Partnership (LLP) is a Hybrid business structure that combines
- The Flexibility of traditional Partnership
- The Limited liability protection of the Company.
Keys Features of Limited Liability Partnership
- Limited Liability
- Flexible Internal Structure
- Separate Legal Entity
4. Liaison Office
A liaison office is a representative office set up in India by foreign company to
- Act as a Communication channel between Parent Company and Indian Customers
- Promote product/service of the Parent Company
- Conduct Market Research
- Explore business opportunities
It’s not a separate legal entity, it’s simply an extension of a Foreign Parent Company
Approval is generally required from the Reserve Bank of India (RBI) through an Authorized Dealer bank.
5. Branch Office
A branch office is an extension of a Parent Company established in India. It’s not a separate legal entity and the Parent Company remains fully liable for its operation and obligations in
India. A Branch Office is permitted to conduct the same business activities as the parent company, subject to regulatory restrictions.
A foreign company can establish a Branch Office in India to undertake the following activities (provided it is engaged in manufacturing or trading activities in its home country):
- Exporting and importing goods
- Providing professional or consultancy services
- Conducting research work
- Promoting technical or financial collaborations
- Representing the parent company as a buying or selling agent
- Providing IT services and software development
- Offering technical support for products supplied by the parent company
6. Joint Venture
A Joint Venture is a strategic partnership in which two or more businesses come together to achieve shared goals. In this arrangement, entities—sometimes including a foreign company—combine their resources, expertise, and capital to pursue specific business objectives.
Joint Ventures are a popular way for foreign companies to enter the Indian market, as they allow them to leverage local knowledge, networks, and market experience while minimizing the risks associated with operating independently in a new environment.
Elements of Joint Ventures are:
- Collaboration between parties together to achieve common objectives while maintaining their separate identities.
- Parties contributes capital, technology or other resources to strengthen the ventures
- Joint Ventures shares responsibilities like ownership, management and Decision making based on mutual terms.
- Both partners shares profit, losses and risk according to the agreement.
7. Public Limited Company
A Public limited Company is a type of company that can offer its shares to the general public and can be listed on a stock exchange. Unlike a Private Limited Company:
- It has no restriction on the maximum number of shareholders
- Shares can be freely transferable
8. Project Office
Project Office means a place of business in India to represent the interests of the foreign company executing a project in India but excludes a Liaison Office.
Foreign Companies can establish POs in India:
- Provided they have secured a contract from an Indian company to execute a project in India.
- Project must have secured the necessary regulatory clearances;
- Is funded directly by inward remittance from abroad;
- Or the project is funded by a bilateral or multilateral International Financing Agency, or a company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the Project.
The validity period of the project office is for the tenure of the project.
Business Entity Comparison Matrix – India
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Conclusion
The choice of business structure in India depends on the company’s objectives, scale of operations, investment plans, and risk appetite.
Foreign entities may opt for a Liaison Office, Branch Office, or Project Office for limited or specific activities, while those seeking long-term growth typically establish a Subsidiary, Joint Venture, Public/Private Company, or LLP.
Each structure differs in terms of liability, taxation, compliance, and operational flexibility. Therefore, selecting the right entity should align with strategic goals and regulatory requirements.
👉 Confused about the right structure for your India entry?
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