Starting a business and registering a company in India for foreigners

Citizens, residents, and non-residents can open a business in India. The process of setting up a company involves several steps: choosing a unique name, obtaining a digital signature certificate, and registering the company online. Foreigners increasingly demand doing business in India due to the country’s rapid economic development, loyal tax policy, and low salary costs. India’s favorable geographical position makes it easy to enter Asian markets. The country’s strong trade relations with many countries, including EU and US members, allow businesses to successfully enter the global market.

Legal requirements for foreigners doing business in India

Non-resident foreigners can open and run businesses in India under the same conditions as citizens. However, business registration is only available to migrants for a limited number of activities:

• Indian companies: joint ventures or subsidiaries;
• Foreign organizations: liaison offices (representing the parent firm in the country), company branches in India, and project offices;
• Limited liability partnerships: available in sectors that do not require operating permits.

Immigration specialists can tell you in which countries opening a business implies the greatest number of privileges.

In India, there is no mandatory authorized capital, so founders can rely solely on their business plans and personal capabilities. However, each form of company activity has requirements regarding the minimum and maximum number of participants and directors; transferability of ownership rights; subscriptions to shares; annual reporting; and other aspects. Regardless of who the company’s promoter is, the business must have at least one resident director who has been in India for at least 182 days in a financial year.

Foreign entrepreneurs must operate within the legal framework of the country, particularly in accordance with the provisions of the regulations “On Companies,” which govern all types of organizations. Applicants must regularly pay taxes and submit reports within designated time periods. Only country residents have the right to purchase real estate, including for a corporate legal address.

Should you start a company or buy a ready-made business in India?

There are two options for a foreign entrepreneur who intends to do business in India: buying an existing business or establishing and developing a company from the ground up. Buying and selling a business is easier than setting up a company. However, when buying an existing business, it is important to objectively assess its profitability because unprofitable projects are often sold. The buyer should consider the company’s current state, including any existing debts, and develop a business plan for promoting the enterprise after the transaction.

Offers for businesses for sale can be found through specialized resources or agencies. Foreigners should ensure that the niche is promising, the office/store location is convenient for attracting clients, and the brand has a decent reputation among locals. At the same time, many company processes will be already in place, allowing the entrepreneur to devote more time to marketing and establishing new, useful partnerships.

Starting a business requires more effort, time, and finances from foreigners than registering and running an existing business. However, there is an opportunity to organize processes in a way that is convenient for you and gradually build the company’s reputation in India, free from the constraints of previous owners and their mistakes. Each entrepreneur should choose the approach that best aligns with their goals, desires, and opportunities.

Step-by-step guide to registering a company in India for foreigners

1. Choosing a company name. In India, the company name should be unique in the market. It can reflect the company’s activity or be abstract. The entrepreneur should select the best option and reserve it through RUN, a special service that will hold it until the business is registered.
2. Selecting the business form. For foreigners, the best options are to set up a limited liability company, a public company, or a branch of a foreign firm. The type of business structure should be chosen based on the scale of business plans and requirements according to the law.
3. Obtaining a digital signature certificate (DSC) and identification numbers (DIN). A DSC is mandatory for at least one appointed director and DINs are mandatory for all managing directors of a company in India. These requests are made online through the SPICe+ form on the Ministry of Corporate Affairs website.
4. Submitting an electronic memorandum and articles of association. These requests are also made through the SPICe+ form. Foreigners are additionally required to file these documents in hard copy.
5. Registering the company. The applicant’s submitted data is processed by the Central Registration Center (CRC), which may request additional information or changes. After the authorized body evaluates the request positively and processes the fee payment, the applicant receives a company registration certificate and is assigned a CIN (Company Identification Number), PAN (Permanent Account Number), and TAN (Tax Deductions and Levies Account Number).

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If the Indian company has equity capital, it must file a declaration of opening along with proof of office registration and a deposit of a bank account within 182 days from the date of incorporation. An LLP (limited liability company/partnership) cannot be incorporated through the SPICe+ system; instead, separate electronic forms must be submitted on the Ministry of Corporate Affairs website.

Though the Indian business incorporation procedure is online, it involves many formalities and requires the correct entry of data and careful completion of forms to be successful.

Key aspects of company registration in India

The procedure for registering a company in India usually follows a standard process, however, many details depend on the chosen business activity and economic zone, where additional requirements may apply. While India offers favorable conditions for business development, it is also known for its complex bureaucracy. This means that entrepreneurs may need to obtain various permits and certificates.

Legal forms of business activities

The following business structures are available for registration by foreigners:

• Private company with limited liability. The minimum number of company members is 2, and the maximum is 200. There must be at least two directors, but no more than 15. Company ownership is transferable; public subscription of shares is prohibited; and remuneration of management personnel is unrestricted. Directors are liable for default under the law. An annual report is filed with the Registrar of Companies (ROC), and audited financial statements are filed annually.
• Public company with limited liability. The minimum number of community members is 7, but there is no maximum upper threshold. The prescribed number of directors is between 3 and 15. Ownership may be transferred to third parties and shares may be sold. The community is required to issue a prospectus (a call for its bonds), while exceeding the limits on remuneration requires shareholder approval. Directors are liable for specified obligations. According to the law, annual reports on economic activities must be filed.
• One Person Company (OPC). This type of company is formed by one founder, with a maximum of 15 directors. In the event of the owner’s death, ownership can be transferred to a nominee. Public subscription of shares is prohibited, and issuing a prospectus is optional. Directors are held liable for their own liabilities. Standard accounting documentation is filed annually.
• Limited liability company. Two or more partners can establish a company in India in this form, and the total number of participants is unlimited. There is also no maximum number of directors, but two appointed partners must be among them. Share ownership can be transferred to third parties, and remuneration distribution is strictly based on the provisions of the memorandum of association. The partners are liable for any legal violations. The company must submit an annual solvency and profitability report.

Required documents

Regardless of the company’s form of activity, an applicant must prepare a basic dossier:

• Digital Signature Certificates (DSC);
• A completed application for company registration (Form 1);
• The DIN numbers of all proposed directors of the organization;
• Official name assignment letter for the company;
• Details about the directors, managing directors, and secretaries filed in Form 32;
• Company address notice (Form 18).

Costs and processing times of opening a company

Generally, registering a company in India can take several months. Within 60 days of name approval, you must submit a request to establish the organization. You can expect a response to your application for incorporation within 48 to 72 hours. However, it will take more time to complete the previous stages and prepare the documents. Although the country has a simple algorithm for opening a business online, bureaucratic aspects can slow down the process, especially for those facing such tasks for the first time.

The cost of registering a company in India depends on the authorized capital amount. The fees are clearly presented in the table below:

Tax rates and obligations for foreign-owned businesses in India

The country has a tax system in which rates are determined by a company’s status. The basic rates for 2023-2024 are (excluding surcharges and deductions):

• 25% if the total or gross income for the last year does not exceed USD 48,300,000;
• 25% for companies that fall under Section 115BA of the Income Tax Act;
• Under Section 115BAA: 22%;
• Under Section 115BAB: 15%;
• For any other domestic company, the rate is 30%.

Every business organization is liable for Minimum Alternate Tax (MAT), which is levied at a rate of 15% of book profits. However, companies that fall under sections 115BAA and 115BAB are exempt from this tax.

According to the law, surcharges are additional taxes applied to companies that earn above the established limits. These surcharges are charged on the amount of income tax.

• 7% if income exceeds USD 121,000 but is less than USD 1,201,000;
• 12% if income exceeds USD 1,201,000;
• 10% if the company is subject to taxation under sections 115BAA or 115BAB;
• Foreign enterprises, considered branches or project offices of foreign organizations, pay 40% of their profits to the Indian treasury.

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Best business ideas in India for foreign entrepreneurs

India is an agrarian country that has industrialized rapidly in recent years, developing a robust industrial and manufacturing sector. Foreign entrepreneurs can consider business ideas in this field to occupy vacant markets. When choosing a destination, consider the low solvency of local residents and the underdeveloped public services, especially transportation. Considering current trends, the following business ideas can be worth exploring:

• Opening a café, canteen, or a bar. In India, a new establishment should focus more on affordability and tasty cuisine than on originality and creativity. Locals mainly request low prices and simple, familiar food. If these needs are met, the entrepreneur can count on the profitability of the business. The point of catering should be opened in larger cities because the demand will not be high enough in small towns. It should be located in popular, passable areas. The optimal business structure is a limited liability company, with an estimated budget of around USD 10,000, depending on the size of the space and the amount of necessary equipment and furniture.
• Logistics. A cab service or postal transportation delivery service is a niche that is underdeveloped in the country and therefore promising. There is a wide range of services that can be provided in this area, and there is an opportunity to start a small business with one car and gradually scale up. Emphasize the service’s availability so that as many local residents as possible can use it. The form of operation should be chosen with business plans in mind. For example, a one-person company could provide localized car services with a budget limited to a few thousand dollars, or an LLC could recruit staff and create a more expanded system with capital of at least USD 10,000.
• Tourism. There is one large, promising, and popular resort in Goa, India. Foreign entrepreneurs can create a travel agency to sell tours, or open a hotel, restaurant, or other entertainment facility on the spot. In this case, the focus can be on a more affluent audience with a creative approach to business in order to impress vacationers. The most common form of organization for such businesses is a limited liability company, and the amount of investment required depends on the type of business. For example, a travel agency requires less investment than a hotel or restaurant complex.

Business immigration: obtaining a residence permit through company registration

Entrepreneurs who intend to conduct business activities in the country can apply for a business visa to enter the country and register as residents. Visa authorization is requested at the country’s diplomatic mission. The administrative service fee varies depending on the applicant’s nationality, ranging mainly from USD 100 to 200.

If you wish to stay in India for more than 180 days in a calendar year, you can apply for a residence permit through the Regional Foreigners Registration Office (FRRO) process. The process is usually completed within 24 hours, and applicants are required to pay a registration fee of approximately USD 1.20. Failure to contact the FRRO in time will result in a fine. The initial residence permit is valid for the period indicated on the visa, typically five years, and can be renewed thereafter. To renew the permit, applicants must apply to the registration authority at least two months before the current document expires.

Assistance with obtaining legal residency in India

Although non-resident foreigners can open a company in India, it is much more profitable to conduct business activities as a resident. Residents can use banking services without restrictions, apply for loans and grants to develop their companies, and purchase real estate. Therefore, foreigners should obtain resident status first to take advantage of these opportunities to develop or relocate their businesses.

With professional support, you can obtain the desired status in the shortest possible time and avoid unnecessary time expenditures. Lawyers monitor statistics and reasoning behind refusals, guiding applicants toward successful outcomes. P4 specialists determine the best immigration option based on your individual needs.