The most common legal structures for foreign companies in India
Foreign companies have four primary options for establishing a legal presence in India. Each has different requirements, cost structures, and strategic implications.
- Private Limited Company (Pvt Ltd)
The most popular structure for European companies intending to conduct commercial activity in India. Allows 100% foreign ownership in most sectors, full profit repatriation subject to withholding tax, and access to Indian banking and credit facilities. Requires a minimum of two directors (at least one must be an Indian resident) and two shareholders.
- Liaison Office (LO)
Permitted only for market research and information gathering — no commercial transactions allowed. Requires Reserve Bank of India (RBI) approval and must be renewed every three years. A low-commitment entry point for companies in early exploration.
- Branch Office
Allowed in certain sectors with RBI approval. Can undertake commercial activity but faces more restrictions than a Pvt Ltd company. Less commonly used by European SMEs.
- Project Office
Used specifically for executing a single project in India — common in construction and engineering sectors. Limited to the scope of the specific project.
Step-by-step incorporation process for a Private Limited Company
- Obtain Digital Signature Certificates (DSC) for all proposed directors.
- Apply for Director Identification Numbers (DIN) for all directors.
- Reserve company name through MCA portal (2–5 days).
- Draft Memorandum of Association (MoA) and Articles of Association (AoA).
- File incorporation documents with Registrar of Companies (RoC).
- Receive Certificate of Incorporation (COI) — typically 7–14 days from filing.
- Apply for PAN (Permanent Account Number) and TAN (Tax Deduction Account Number).
- Open corporate bank account.
- Register for GST within 30 days of commencing business.
- Register for other applicable licences depending on sector.
Timeline
The full process from decision to operational company typically takes 6–10 weeks if documentation is complete and no queries are raised by the RoC. Costs vary depending on share capital structure, legal counsel fees, and any sector-specific licensing requirements.
Foreign Direct Investment (FDI) rules by sector
India allows 100% FDI under the automatic route (no government approval required) in the majority of manufacturing, trading, and services sectors. Government approval is required in sectors including defence, media, insurance, and retail (some sub-categories). The FDI policy is updated periodically and should be verified for your specific sector before incorporation.
RAW India Advisory handles the full incorporation process for European companies — from initial structure advice through to first GST filing. Contact us at info@relationsatwork.com.
