How to Establish an Indian Subsidiary: A Comprehensive Guide for Foreign Companies
Table of Contents
Introduction
Establishing an Indian subsidiary is an excellent way to expand your business and enter new markets.. It is a straightforward online process. In this post, we’ll walk you through the procedure and help you register your subsidiary business effectively.
What is a subsidiary company?
In India, a firm known as the parent or holding company owns and manages a subsidiary company. The parent company owns or controls more than half of the subsidiary company’s stock, which indicates that it has a controlling interest in the business.
Legally speaking, subsidiaries and their parent corporations are separate entities. They retain executive leadership and are subject to the states’ laws where they are incorporated and have their headquarters.
How Can I Open an Indian Subsidiary?
Establishing a subsidiary company in India is a challenging and drawn-out process. Most companies decide whether to form a private limited or a public limited subsidiary based on how active they plan to be in the country.
The following steps are part of the incorporation procedure:
- Apply online for a Director Identification Number (DIN).
- Acquire an online Digital Signature Certificate (DSC).
- Use the Registrar of Companies to register the company name.
- Draft the Articles of Association and Memorandum.
- Complete the online application for incorporation.
- Get a certificate to start your business.
- Make a seal for your business.
- Obtain a PAN or permanent account number.
- Become a member of the Employee Provident Fund Association.
- Obtain a VAT registration.
Advantages of the Indian Subsidiary Company
The establishment of a subsidiary in India has many advantages. Among them are:
A distinct legal identity
A distinct legal personality is advantageous for an Indian subsidiary company as it can offer substantial liability protection.
Organizational Structure
In India, a subsidiary firm has a separate management structure from that of the leading company. This may result in more independence and adaptability in decision-making.
Constant Flow of Money
By purchasing additional shares in the subsidiary business, the parent firm can ensure a steady supply of funding and avoid the costs associated with taking on debt.
Taxation
The tax structure of an Indian subsidiary will be the same as that of an Indian domestic business. The parent firm may benefit tax-wise from this.
Joint Businesses
A subsidiary business in India may permit partnerships with other companies.
Synergistic Costs
Cost synergies can be achieved by incorporating a wholly-owned subsidiary in India and pooling administrative and other expenditures between the parent company and the subsidiaries through a shared financial system.
Development of the Economy
Numerous job possibilities created by subsidiaries contribute to the nation’s economic growth and income.
Various Indian Subsidiary Companies
A subsidiary that is wholly owned
When a wholly-owned subsidiary is incorporated in India, the parent business owns 100% of the subsidiary’s shares. However, wholly-owned subsidiaries can only be established in industries that accept 100% FDI.
In India, up to 100% investment is permitted through the automatic route in non-critical industries such as mining and agriculture, and no Ministry of Home Affairs (MHA) security approval is needed.
However, prior approval from the MHA is required for sensitive industries like the media and defence.
Partnership
A joint venture is a subsidiary in which two or more businesses collaborate to establish a new business.
Under this kind of subsidiary arrangement, the parent foreign corporation typically collaborates with an Indian company. Joint ventures can be established as distinct legal entities in India.
Liaison Office
The OA liaison office is a subsidiary created to advance the parent company’s commercial objectives in India. Conducting business in India is strictly prohibited.
Subordinate Office
A branch office is a kind of subsidiary created to conduct business in tandem with the parent firm. It is permitted to carry out business operations.
The Registrar of Companies must receive the branch office’s registration. It is subject to the same laws as a totally owned subsidiary.
Following these steps, you can easily register and start operating your subsidiary company in India.
It is imperative to acknowledge that the particular prerequisites and protocols may differ depending on the nature of the enterprise you are initiating and the subsidiary’s geographical location.
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