Setting Up a Business in India

While setting up an entity in India, foreign companies should choose an entity structure that caters best to their need. Selection of the right entity structure will help the company establish itself as a strong player in the Indian market and reap financial gains.

A foreign investor or company may be set up as an unincorporated entity or incorporated entity.

Unincorporated entities permit a foreign company to do business by establishing a liaison office, branch office, project office, or trust. An incorporated entity, like a limited liability partnership, joint venture, or wholly owned subsidiary, is considered a separate legal entity and has a more structured setup.

Choosing a corporate structure

Depending on the type of activity it intends to conduct, investors can start commercial operations by registering as either a foreign entity or an Indian entity.

Before choosing which type of company to establish, it is important to consifder different aspects of the target entity types, such as differences in structure, legal liability, statutory compliance requirements, the time required to establish it, what types of activities it can engage in, and more.

These considerations help identify the appropriate business constraints, costs, requirements, and risks necessary to enable the company’s future targeted capabilities, developments, and growth. The below links explain these factors for each of the main entity types that can be set up in India.

Key Market Entry Options

Entity Type


Setup time



Liaison Office (LO or Representative Office)

  • Used for networking, exploring market opportunities, and promoting the parent company’s business activities

6 - 8 weeks

  • Beneficial for foreign investors to test the waters
  • Not subject to taxation, unless its income in India constitutes a ‘business connection’ with its Head Office.  
  • Lower tax and import duties
  • Fewer ongoing formalities as compared to other business entities
  • Not allowed to conduct any business
  • LO can only act as a communication channel
  • Permission to set an LO is initially granted for a period of 3 years and may be renewed subject to the approval of RBI
  • Has to sustain itself through private remittances from the parent company

Branch Office (BO)

  • Allowed to conduct same business as the parent company, including import and export of goods, consultancy, and professional services, among others

6 - 8 weeks

  • Permitted scope of business activities broader than the liaison office
  • Fewer compliances compared to a wholly-owned subsidiary
  • Not permitted to engage in retail trading or processing activities
  • Manufacturing is permitted if subcontracted to an Indian manufacturer
  • A high effective tax rate of 43.68%

Project Office (PO)

  • PO can be established if a foreign company receives a contract from an Indian company
  • In case of no contract, prior approval from the RBI is required
  • Proprietary concerns that are established abroad are not allowed to start a project office in India

4 weeks

  • Suitable for executing a specific project such as one-time turnkey or installation projects
  • Exists only as long as the duration of the contract
  • A high effective tax rate of 43.68%

Limited Liability Partnership (LLP)

  • LLP is a hybrid of a partnership firm and a company
  • LLPs are governed by the Limited Liability Partnership Act, 2008

4 - 6 weeks

  • Liability of Partners is limited to the extent of their contribution to LLP
  • No minimum capital requirement conditions
  • Effective tax rate of 34.94%
  • Less compliance as compared to a WOS
  • FDI is permitted under the automatic route in LLPs operating in sectors/ activities where 100% FDI is allowed through the automatic route, and there are no FDI-linked performance conditions
  • Mandatory to have one designated partner who is an Indian resident

Wholly Owned Subsidiary (WOS)

  • Foreign companies can set up WOS in the form of private limited companies in sectors where 100% FDI is permitted

4 - 8 weeks

  • Total control over business activities
  • Fewer restrictions on the scope of activities
  • Effective tax rate of 25.17% for domestic companies and 17.16% for new manufacturing companies established after October 1, 2019
  • Mandatory to have an Indian Resident Director
  • Requirements to conduct mandatory Board Meetings

For more details about any of these entity types, click on the structure type to read from our Types of Business in India guide section.

Requirements for setting up a business in India

Essential Processes and Compliances for Setting Business in India

Setting up legal existence

Obtain Director Identification Number (DIN)

Digital Signature Certificate (DSC) for proposed Directors

Approval for proposed Company/ LLP Name

Finalization of supporting documents

Filing of e-forms with CRC

Verification of documents

Consent to establish & operate

Obtain Permanent Account Number (PAN)

Registration for Tax Account Number (TAN)

Registration of GST

Registering and starting a unit

Registering / categorization of units in the State

Approval for State Incentives (Optional)

IEM/EM Registration

MSME Registration

Pre-commissioning phase

Acquisition of Land

Environment, Forest, and Wildlife Clearance

Permission for Land Use

Pollution Board

Industrial License

Consent to Establish

Factory Layout Plan Approval

Registration of Boilers

Building Plan Approval

Registration under the Contract Labor Act 1970

Registration under BOCW Act

Power for construction

Provisional Fire Approval

Approval for lifts and Escalator

Environment, Forest, and Wildlife Clearance

Permission for Land Use

Pollution Board

Post-commissioning phase

Consent to operate

Building Completion certificate

Final Fire Approval

Water Connection


Authorization for hazardous waste

Professional Tax Registration

Central Excise Registration

Shops & Establishment Act

Employee Registration with ESIC

Employer Registration with EPFO

Trademark/ Brand Registration

Importer Exporter Code (IEC)

Customs- Special Valuation Branch

Grant for Bureau of Indian Standards (BIS) License

Quality Marking Certificate

Opening a bank account

Opening a bank account entails selecting a bank based on your preferences, submitting certain documents, and funding your account. Once the formalities are completed, you can begin using your account, saving both time and money. Companies are only permitted to create and operate current accounts; other features, such as fixed deposits, might be added at a later stage, depending on the needs of the firm.

The Reserve Bank of India’s Know Your Customer Norms (KYC Norms) details the procedures that banks must follow while opening accounts. With the KYC norms as a foundation to secure against fraudulent and criminal activities, each bank may require more documents and information as prescribed by the bank’s internal regulations for the opening of an account.

Intellectual property protection

India has been a World Trade Organisation (WTO) member since 1995. WTO member nations must include some IP protection in their national laws. India is also a signatory to the following international IP agreements:

  • Paris Convention: Under this convention, any person from a signatory state can apply for a patent or trademark in any other signatory state and will be given the same enforcement rights and status as a national of that country.
  • Berne Convention: Under this convention, each member state recognizes the copyright of authors from other member states in the same way as the copyright of its own nationals.
  • Madrid Protocol: Under this convention, a person can file a single trademark application at their national office that will provide protection in multiple countries.
  • Patent Cooperation Treaty: This is a central system for obtaining a ‘bundle’ of national patent applications in different jurisdictions through a single application.

Did You Know
India is not a signatory to the Hague Agreement, which would have enabled the protection of designs in multiple countries through a single filing.

The following laws provide the legal basis for intellectual property protections in India and are periodically reviewed and amended as new technological developments and market reforms necessitate the case to be.

Doing business without an entity

In India, businesses may do business without setting up a formal entity by working with a supplier agent or partner. On hiring an agent or supplier in India, businesses may conduct international trade through these partners.


Diversify your Business to India: Opportunities and Channels of Entry

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Alternately, foreign companies may also use the “employer on record model,” wherein an India-based employer hires an employee on their payroll while the individual works for the foreign company. However, the foreign company takes on the risk of creating a permanent establishment in the country.

Closing a business in India

The liquidation procedure is governed by the Insolvency and Bankruptcy Code. Businesses may opt for the liquidation procedure due to a set of factors, such as faulty management, economic issues, and low demand, among others. According to Indian legislation, the liquidation procedure refers to the way the company’s assets are terminated and distributed to the entitled parties. The liquidation can be triggered on a voluntary basis through the intervention of the company’s creditors or other members. In this case, the procedure can be completed without the intervention of a local court.


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