Choosing the Right Business Structure for Your Indian Business.

India is one of the world's major economies, with the fastest pace of growth. India is going through an unmatched phase of economic freedom, and by making its huge and diverse market more accessible, it is encouraging foreign direct investment. Many businesses are now thinking about growing their operations by having a presence in India as a result.

Selecting the proper business structure is very important when starting any business. Foreign investors can choose different types of business structures in India, depending on factors such as the company’s goals, purpose, and duration of business.

This blog post will look at various business structures in India, such as liaison offices, branch offices, project offices, and company subsidiaries, to help you decide which is best for your purposes in India.

Benefits of starting a business in India:

  • Massive population:With a population of over 1.3 billion,India offers a diverse and sizable consumer base across urban and rural areas. This market diversity allows businesses to tailor products and services to various segments and regions.
  • Comprehensive tax system:India’s GDP growth rate has been consistently positive, making it one of the world's fastest-growing major economies. This growth is driven by factors like increasing urbanisation: IT services, and customer services.
  • Business-friendly laws:India has streamlined business regulations through initiatives like the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC). These measures simplify business processes, making it easier to operate within a clear legal framework.
  • Low operational cost:India offers a cost-effective business environment with lower labor costs and a skilled workforce, making it an attractive option for optimizing operational expenses.
  • Vast trade network:India provides companies with different export and import prospects due to its strong global trade connections and involvement in international trade organizations.
  • Startup India movement:The Startup India project provides financial assistance, mentorship, and incentives to businesses while also creating a dynamic ecosystem for foreign investors in India to connect with innovative businesses.
  • Initiatives by the Indian government:Government initiatives like 'Make in India,' 'Digital India,' and 'Skill India' promote manufacturing, technology adoption, and skill development, creating favorable conditions for foreign investors.

Types of Business Structures in India:

  • Liaison Office:

A liaison office, also referred to as a representative office, serves as a vital communication bridge between a foreign company and potential Indian clients or business partners. This strategic setup facilitates seamless interaction, enabling foreign investors to explore the Indian market with minimal risk and cost.

Approved by the Reserve Bank of India (RBI), it provides a low-risk, cost-effective way for international corporations to explore the Indian market before making larger commitments.

The liaison office is not permitted to carry out any commercial or revenue-generating activity. As the name suggests, it is only permitted to liaise with Indian customers, vendors, and partners on behalf of the parent. It is also optional for the liaison office to file tax returns or pay taxes in India.

Steps to set up a liaison office in India:

  • Select either the RBI or the government approach.
  • Request the RBI's three-year renewable clearance.
  • Apply for an AD who is an authorized Indian banker.
  • For starting a business in India under FEMA 1999, choose Automatic Route (100% FDI) or Approval Route (non-automatic sectors).
  • Get an RBI Unique Identification Number (UIN) and clearance.
  • Get a Certificate of Establishment and register with the MCA and ROC.
  • Fill out legal paperwork and obtain TAN and PAN for tax purposes.
  • Branch Office:

A branch office in India is like the arm of a foreign company, allowing it to do business here while remaining a separate legal entity. Approval from the Reserve Bank of India (RBI) is needed, and certain rules must be followed.

Having a branch office is beneficial for foreign businesses, as it lets them expand in India without setting up a new legal entity, making operations smoother and less complicated.

In India, a branch office is capable of conducting business and producing income. As a result, it is required to submit tax returns and pay taxes in India. Also, it is mandatory to designate an "authorized representative," who has the responsibility of adhering to all Indian regulatory requirements.

Steps to set up a branch office in India:

  • Apply to the RBI for AD Bank with the required documents.
  • Send the parent company’s KYC to AD Bank for verification.
  • Seek RBI approval if activities are outside the automatic path.
  • ROC register after RBI approval.
  • Open a bank account and obtain your PAN and TAN in India.
  • Obtain an IE code for import/export activity and register for GST if you are providing goods or services.
  • Project Office:

A project office is often known as a project management office (PMO). In India, a project office is a specialized structure used by multinational corporations to successfully manage and carry out any projects or contracts within the country's borders.

It serves as the center of attention for project-related activities, providing a disciplined approach to project management and facilitating project implementation. This one-of-a-kind business model enables international enterprises to focus only on the project at hand, ensuring efficient operations and regulatory compliance.

A project office is liable to pay taxes on the income generated in India and therefore liable to file tax returns with Tax authorities.

It is mandated to nominate an ‘authorized representative’ in India, and this representative is responsible for all statutory compliances in India.

Steps to set up a Project Office in India:

  • Gather the required documents.
  • Send your application to an AD Category-I bank.
  • Obtain the RBI's Unique Identification Number (UIN).
  • Approval from AD Bank.
  • Open Bank Account
  • Make sure all registrations and legislation are followed.
  • Company Subsidiary:

A company subsidiary in India is a separate entity controlled by the foreign parent company. Foreign businesses are allowed to establish subsidiaries in India under Indian rules and regulations, giving them access to several advantages. Having its own legal identity and limited responsibility, a company subsidiary offers foreign investors tactical advantages and chances for corporate growth and diversification in the burgeoning Indian market.

Steps to Set up a Company Subsidiary in India:

  • Get an online Director Identification Number (DIN).
  • Obtain a Digital Signature Certificate online (DSC).
  • Apply for incorporation online by completing the form.
  • Obtain a certificate of operation.
  • Business names are registered via the Registrar of Companies (ROC).
  • A copy of the articles of association (AOA) and the memorandum of association (MOA).
  • Get a Permanent Account Number (PAN).
  • Obtain TAX registration.
  • Value Added Tax (VAT) registration.


Foreign investors in India are an appealing location due to its status as one of the largest economies in the world, its rapid expansion, and its unequaled economic independence. Many businesses are considering expanding their operations by establishing a presence in India due to the government's attempts to make its large and diversified market more accessible.

For foreign investors entering the Indian market, choosing the appropriate corporate structure is crucial. Since each business form has certain advantages and considerations, consulting legal professionals is crucial to ensuring a successful enterprise. Foreign businesses may choose wisely and take advantage of the numerous prospects in this booming economy with the right guidance and awareness of India's regulatory environment.

At KDP Accountant, we value the significance of establishing a strong financial base for businesses looking to expand into the Indian market. We provide a wide range of services to aid foreign investors in navigating the complexities of India's financial landscape. With our professional guidance, foreign investors can confidently comply with regulatory requirements and make well-informed financial decisions.

The above note is subject to further study and clarifications. This note does not form an opinion from our end and before taking any decision based on above, it is recommended to consult our experts on the subject. Kamdar, Desai & Patel will not be liable for any damages (including, without limitation, damages for loss of business projects, or loss of profits) arising in contract, tort or otherwise from the use of or inability to use this article, or any of its contents, or from any action taken (or refrained from being taken) as a result of using this article or any such contents.

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