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How to set up a company in India

How to set up a company in India

Thanks to asignificant demographic and economic growth, India it is confirming itself as a country of extreme interest for Italian exports. For this reason, more and more companies are wondering as set up a company in India, with the aim of expanding its business in a nation that ranks fifth among the world's economies.

The numbers in this sense speak clearly: in the second quarter of 2023 The Indian GDP grew by 7.6%, recording a +6.3% compared to the previous year. 

A trend that confirms the numerous investment opportunities for Made in Italy in the Asian country.

How to set up in India

How to set up a company in India: corporate models

In recent years the Indian government has made efforts to optimize all of those necessary procedures For open a branch across the nation, not only by simplifying regulations but also by investing in digitalization. This had a positive impact on the growth ofexports to India, and today Italy is the third largest exporter in the EU after Germany and France. 

In reference to how to start a company in India, the first consideration concerns which corporate model to adopt. 

There are various corporate models to choose from, all governed by the Reserve Bank of India (RBI) in accordance with the Registrar of Companies.

Private Limited Company (Pvt Ltd)

It is one of the most used forms in India. Here business assets are separated from personal assets. Each shareholder is responsible only for his share of the total capital. Limited liability companies must maintain records of financial transactions, board meetings, annual reports, and so on. A Pvt Ltd company is made up of a group of shareholders and the total capital of the entity consists of shares. These shares can be sold/transferred to another individual who then also becomes one of the owners of the company.

Ownership

Sole proprietorship is a form of business entity in which a single individual manages the entire organization corporate. He is the sole recipient of all profits and bearer of all losses. There is no separate law regulating sole proprietorship.

Partnership firm

Partnership is “the relationship between people who have agreed to share the profits of the activity carried out by all or any of them acting for everyone”. It is governed by the Indian Partnership Act 1932 and operates under a partnership agreement between the partners.

Limited Liability Partnership (LLP)

It's a combination of a partnership and a corporation. It is a separate legal entity and the liability of the partners is limited to the amount of their contribution. But LLP cannot issue shares. The capital can only be increased in the form of an additional contribution from existing members or by the addition of new members. The operations and profit/loss ratio of the partners are governed by the LLP agreement between the partners drawn up in accordance with relevant laws. Unlike a simple partnership, it can request registration with the Indian Ministry of Corporate Affairs in order to formalize its presence in the territory.

How to open a branch in India

 

Exporting to India: ways to sell without having a local company

If a company intends to export to India does not want to be present in India with a local company then you can consider these three forms of managing your business.

Liaison Office

The term “Liaison Office” (LO) is used in the Asian country to indicate a representative office. The latter operates as an intermediary between the company resident in Italy and market interlocutors in India, promoting commercial contacts without being able to directly make profits. For this reason an LO is not required to pay taxes on profits. 

Branch Office

A Branch Office (BO) does not represent a distinct company but is one branch of the company in all respects. Differently from the Liaison Office, it can carry out commercial operations in the import/export field, but in general it cannot carry out production activities directly. If your Branch Office is located outside of one of these areas, you will need to outsource these tasks to an on-site manufacturer. In any case, this corporate model is subject to taxes.

Project Office

A Project Office is assimilated to a Branch Office, with the diversity that its operations concern realization of a specific project in the territory. The latter may concern activities that are financed by international or Indian institutions, or construction work in the country.

 

How to open a branch in India: what is the best corporate form?

There choice on which is the best corporate model to open a company in India is determined by several factors, including the company's business model and the type of strategy it wants to adopt to penetrate the country's economy.
Opening a limited liability company may be more appropriate for those companies that intend to approach the market in a decisive and stable way, while a branch office is the most suitable solution for companies that want to market their products with limited investments.

In any case it is recommended to request one advice which delves into the needs of the company, to identify not only the corporate form to adopt but also a strategy capable of achieving the set objectives.
If you are wondering how to set up a company in India, please contact Octagona. Our professionals specialized in internationalization will be able to give you all the information you want and evaluate the best options.

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