India Entity Setup

A Private Limited Company in India is a privately held small business entity and considered as an independent legal entity on incorporation. It has a minimum of one and a maximum of fifty shareholders. Unlike Public Limited Companies, Private Limited Companies cannot publicly trade its shares. It can have a minimum of two and a maximum of fifteen directors.

Foreign companies engaged in manufacturing and trading activities abroad can set up Branch Offices in India. Branch Offices are not allowed to carry out manufacturing activities on their own but can subcontract those to an Indian manufacturer. Before commencing operations, the branch office requires an approval from the Reserve Bank of India (RBI). Commercial activities of any nature are not allowed for a Branch Office.

A new business entity created through a partnership between foreign and Indian investors, in which the partners jointly share the profits, losses, management responsibilities, and operation expenses. The advantages of joint ventures are that the foreign company can utilize the well-established contact network, distribution, marketing channels, and the available financial resources of the Indian partner. A JV also offers the investors to jointly manage the risks involved with the new business and limit their individual exposure by sharing the liabilities.

All Private Limited Companies have a minimum paid–up capital of Rs. 1 lakh. This meant that Rs. 1 lakh worth of money had to be invested in the company by purchase of the company shares by the shareholders to start the business.

Foreign companies can also set up wholly owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy. … Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies.

At least two directors; new company law regulations mandate the appointment of a local director. Consequently recommend three directors, one from India and two from parent company’s location.

Indian companies must appoint a Company Secretary, where the paid up capital of the company exceeds the prescribed limit (INR 50 million – threshold increased to INR 100 million effective 1 April 2020). Till such threshold can appoint a third-party service provider to manage corporate compliance.

Local office or a virtual office capable of accepting letters/post is mandatory before incorporation. The local office address acts as the Registered office of the entity in the Incorporation documents.

RUN (Reserve Unique Name) is a web service by which one can reserve the name of a company or change the existing name. It helps you to verify whether the company name is unique or not. Before the initiation of RUN form of MCA, all applications concerning company names were available in form INC-1.

In order to register a company a legal firm, corporate secretary or corporate service provider will provide a copy of the official certificate of incorporation issued by NSDL e-Governance Infrastructure. In India, the Income Tax PAN service unit will send the PAN documentation which is unique to your business entity. The Ministry of Corporate Affairs maintains a website portal to manage the company account information.

To apply for company registration, the SPICe+ form is to be filled out and submitted on the MCA portal. To fill out the SPICe+ form and submit documents, the director of the company has to register on the MCA portal. After registration, the director can log in and will obtain access to the MCA portal services which include filing e-forms and viewing public documents. If the SPICe+ form gets rejected due to non-approval of the company name, the applicant has to re-file another SPICe+ form for the reservation of a new name by paying the prescribed fee. However, after the approval of the name filed in Part-A of the SPICe+ form, it will be reserved for a period of 20 days within which the company must fill Part-B of the SPICe+ form and submit the form online. The applicant must provide the details of the company and directors in the Part-B of the SPICe+ form, attach documents, attach DSC, check the form and submit it. 

Once, the registration application is filled and submitted along with the required documents, the Registrar of Companies will examine the application. Upon verification of the application, he will issue the Certificate of Incorporation of the Company. The Certificate of Incorporation is issued with PAN and TAN as allotted by the Income Tax Department. An electronic mail with a Certificate of Incorporation as an attachment along with PAN and TAN will also be sent to the applicant.

Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department, to any “person” who applies for it or to whom the department allots the number without an application.

TIN is a unique identification number required for every business enterprise registered under VAT. A TIN typically contains 11 characters and is provided by the IT department to all the business entities willing to register under VAT or CST.

The ESI scheme is a self-financed comprehensive social security scheme devised to protect the employees covered under the scheme against financial distress arising out of events of sickness, disablement or death due to employment injuries. 

The Employees’ Provident Fund or EPF is a popular savings scheme that has been introduced by the EPFO under the supervision of the Government of India. The employee and employer each contribute 12% of the employee’s basic salary and dearness allowance towards EPF. The current rate of interest on EPF deposits is 8.15% p.a.

GST is known as the Goods and Services Tax. It is an indirect tax which has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017.

The final step is to establish a bank account with a local bank. India has a developing industry but still suffers from bureaucracy and legacy solutions. The process of establishing a bank account can be an unexpectedly long process that many companies do not sufficiently plan for. This can include extensive application documents, notarized director documents, KYC documentation and in person signatures. Common local banks in India include HDFC, State Bank of India, ICICI, IndusInd and Axis.