All you Need to Know about Setting up Business in India

The arrival of liberalization in India did not manage to encourage confidence in business entrepreneurs or investors and to set up a company or business and to operate it in India, continued to seem like a daunting job.

India now gives a wide range of opportunities to investors in setting up a business in India, ensuring that it is no longer just a dream not just to set up a location in India but progress exponentially.

1. Starting Operations in India

There are diverse options available to a foreign investor requiring to set up a functional business in India. Considering that the foreign equity in Indian companies can go up to 100%, subject to the equity caps in the particular areas of the activities under the policy of Foreign Direct Investment (FDI).

Indian Company:

A foreign company that aims to commence its functionality in India can commence its functions either via

1. Joint Ventures or
2. Wholly Owned Subsidiary (100% FDI permission for the activities being performed)

 

Foreign Company:

India facilitates more cost-effective options to a foreign company wanting to test the waters before plunging into full fledge operations in one go.

2. INDIA: An attractive destination for businesses

The Indian economy is one of the fastest-growing economies in the world which shows that India boasts of a thriving and stable economy and has already entered the league of emerging markets. Thus, making it a feasible option for the foreign investors.

The common methods of setting up a business in India are listed as follows:

• Private Ltd Company (PLC),
• Public Ltd Company (PC),
• Limited Liability Partnership (LLP)

If we have a take from the foreign company’s point of view,  PLC would be highly recommended to start a business in India. It offers limited liability for its shareholders with specific restrictions placed on the ownership. An LLP comprises partners, who own and manage the company whereas, in a PLC and PC, directors may be different from shareholders.

3. Steps for the formation of a company

1. The first step for setting up of a company in India is to apply for reservation of a unique name for the proposed company.

The applicant has an option to place two choices of names in the application. The proposed names have a probability of either being accepted or rejected based on the scrutiny by the Registrar, Central Registration Centre (CRC).

In case, the names applied for are not available and approved by the department, then further two more titles can be provided and after that used for. An approved character is valid for 20 days from the date of approval.

2. The next step is to obtain a DSC for proposed directors and shareholders and DIN for proposed directors. For the incorporation of a PLC, minimum 2 directors are required, and one of them needs to be a director resident in India. Also, all proposed directors must have a valid DIN.
3. Once the name gets approval, the drafting of company incorporation documents such as declarations by directors and shareholders, MOA and AOA and the other documents relating to registered office’s address of the proposed company and filing it on the web portal of MCA, the registry shall be done.
4. The PAN and TAN are also applied simultaneously for the company incorporation purpose.
5. As per the recent developments, a web-based filing called SPICE shall be undertaken for the incorporation of a company and it will be accompanied by an e-form AGILE-PRO for the mandatory application for the following the additional registrations stated as under: -

• Goods and Service Tax Identification Number (GSTIN)
• Employees’ Provident Fund Organization (EPFO) registration
• Employee State Insurance Corporation (ESIC)
• Profession Tax Registration
• Opening of Bank Account

6. Once the CRC approves the application, a Certificate of Incorporation (COI) is issued to the company as a proof of registration of the company with the Ministry of Corporate Affairs.
7. Furthermore, a company having share capital, shall not initiate any business or exercise any borrowing powers unless it receives the certificate of commencement of business from the ROC.

Role of MAG & Co. in Setting up Business in India:

We provide advisory on the entry strategy and structuring of the most viable business startups in India. MAG can also assist in the identification and selection of the place of business as per the specific needs of the client and with corporate bank account opening.

In conclusion, despite the initial challenges, India now offers a wide range of opportunities for investors to set up and operate businesses. With a thriving and stable economy, foreign investors can choose from various options such as joint ventures or wholly-owned subsidiaries. The process of company formation involves steps such as name reservation, obtaining digital signatures and director identification numbers, drafting incorporation documents, and applying for necessary registrations. With India's emergence as an attractive destination for businesses, foreign investors can turn their dreams into reality and achieve exponential progress in the Indian market.

"Unlock the Potential of Setting up a Business in India. Contact us at info@manishanilgupta.com for expert guidance and seamless assistance in starting operations, company formation, and entry strategy in India."

Disclaimer: The information provided in this blog is for general purposes only and should not be considered as professional advice.