Forms of business presence

Forms

of business presence

Wholly owned subsidiary

An overseas subsidiary can be wholly owned by an Indian company and is considered a separate legal entity from the parent company.

The Indian company's liability is limited to the share capital it has subscribed and its own assets are safely curtailed from the debts and liabilities of the subsidiary company.

An overseas subsidiary is generally treated as a local resident company and in some jurisdictions it is entitled to tax benefits available to local companies.

Joint ventures

Joint ventures refer to a wide range of mutual agreements between contracting parties, often of different nationalities. A joint venture can be established as a partnership or incorporated companies.

Joint ventures can enable a firm to achieve market penetration into new areas overtime, enter and develop new product markets, expand into new geographic areas and participate in new technology driven value activities.

They can also be used by smaller firms protectively as an element of long-range strategic planning. Thus, a small firm in a highly concentrated industry can negotiate joint ventures with several of the industry's dominant firms to form a self-protective network of counterbalancing forces.

Representative office

Indian companies that wish to expand their operations overseas may setup a branch office, subject to RBI guidelines and regulatory framework at the desired jurisdiction. A branch of an Indian company that operates overseas is legally part of the Indian company and is not its own entity. Thus the Indian company's head office bears the ultimate responsibility for any liabilities arising due to the acts of commission or omission of the overseas branch office.

Generally, a branch office is administratively easier to maintain than a company. In addition, closing a branch is easier than liquidating a company.

Branch office

A foreign company that is interested in exploring potential opportunities abroad, may setup a representative office wherever permitted by local authorities. Unlike a subsidiary or a branch office, a representative office is viewed only as a liaison office and as such has no legal status. It cannot conduct any business activities of profit yielding nature.

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