Expanding Your US Business into the Indian Market via Branch Office, Project Office & Liaison Office: Opening Offices in India for US Companies & US Investors for their India Operations

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Introduction to Opening of Offices in India by US Companies
US entrepreneurs and business from states like New York, New Jersey, California, and Texas have been showing increasing interest in the Indian market. Over the years, more and more US businesses have been collaborating with Indian businessmen and companies. The rapid increase in US businesses entering into the Indian market is a proof that India is one of the best place for expansion of business/brand. At times, some of the small entrepreneurs from the US wish to enter the Indian market but do not end up doing the same due to confusions in business structure, compliances, etc., but all these can be put to an end. It is not always compulsory that you enter the market by incorporating a company or an LLP. Incorporating a Company or an LLP can be differed or postponed as a future plan. Initially, you can enter the Indian market and understand the market situation and begin some kind of business transactions, this can be done by opening one of these 3 – Branch office, liaison office, and project office.

Branch Office (under the Companies Act 2013): Opening of Branch Office in India by US Companies
A branch office is an establishment in India incorporated/registered/opened by any individual/company outside India. A foreign company can establish a branch office in India to carry out different operations/activities/functions. The parent company in the US shall comply with the rules and regulation of the Indian Government and the Reserve Bank of India. After acquiring the approval of the statutory authorities, you can set up a branch office and begin your operations.
The branch office can carry out the following functions:
1. Import and Export
2. Providing Consultancy
3. Research and Development
4. Technology development (Software and I.T.)
5. Financial services (in collaboration)

Benefits:
1. By opening a branch office, you can provide services to Indian customers and thus build your own customer base. If you are into manufacturing and selling of goods, then you can build relations with other vendors who provide raw materials.
2. Compared to opening a company or an LLP, a branch office is very cost-effective.
3. By opening a branch office and building relationship with customers and local vendors, your business and brand will get recognized in the country or in the particular region/state. Marketing of your company and business can be done easily.

Most of the US entrepreneurs especially from New York, California, and New Jersey are involved in Technology and Consultancy business. These activities are permissible for a branch office, therefore, such entrepreneurs can easily set up a branch office in India can begin their activities.

Project Office (under the Companies Act 2013): Opening of Project Office in India by US Companies
Project office as the name suggests are an office set up by a company to carry on a particular activity or project. A project office is set up for temporary purpose and cannot carry out any activities other than the project activity. Usually, project office is set up for infrastructure development activities.

Benefits:
1. Project office is best for short-term plans/goals. By setting up a project office, you can settle into the Indian market easily.
2. A project office is a temporary set up therefore, it has fewer compliances.
3. Management of a project office is easy. With just one activity being carried out, one can have better focus on the business.
A project office can be the best option for US entrepreneurs from Texas who are involved in Infrastructure business. Entrepreneurs can open a project office by taking up a project relate to infrastructure development and enter the Indian Market. By completing a project, one can build good relations with other businessmen and entrepreneurs in India. Thus making a gateway for incorporating a company/an LLP in India in the future.

Liaison office: Opening of Liaison Office in India by US Companies
A liaison office is a kind of mediator between the parent company outside India and the business entities/clients/customer in India. A liaison office can be opened when a foreign company is offering online services to customers in India. These customers can be other companies incorporated in India. Mostly, liaison offices are set up to carry out consultancy services, or in collaboration with any Indian company offering financial services or promoting the activities/business of the parent company.

Benefits:
1. A liaison office can be set up to promote the brand of the parent company in India. This can be a good method to enter the market. Once your brand has become known in the local market, you can incorporate your company and begin your business operations in a full-pledged manner.
2. A liaison office is the best way to enter the market. With no commercial activities being carried out, one can focus on marketing aspect for their products and services.
3. A liaison office is very cost effective compared to other two set ups.
US entrepreneurs from New York who are into financial services can collaborate with Indian Companies and open a liaison office. This way they can expand their business market and in the future, thy can incorporate their own company once they have good market and customer base.

Conclusion:
It is clear from the above article that entering into the Indian Market via Branch office, liaison office and project office is more of a strategic move before incorporating a company or an LLP. Each of these 3 entities have their own criterias and benefits, US entrepreneurs from New York, New Jersey, California, and Texas can choose among the 3 based on the nature and duration of the business. Once you have settled into the market, built relations with vendors and customer, you can execute the long-term plan which is to incorporate a company.

FAQs on Different Options available to US Companies for Opening Offices in India:
1. Why should a US entrepreneur consider opening a branch office instead of a company straight away?
Ans: If you have huge capital and are ready to compete with the Indian companies then you can go ahead with opening/incorporating a company or an LLP straight away. However, the more strategic move would be to first understand the Indian market. By opening a branch office, liaison office or a project office you can settle into the market. With a settled brand, starting a business i.e., incorporating a company or an LLP would be very easy task.

2. Can I carry out commercial activities from a liaison office?
Ans: No, a liaison office cannot carry out commercial activities. A liaison office can carry out consultancy activities. It is mostly engaged in brand building activities.

3. Can I incorporate a company immediately after opening a branch office?
Ans: The better way would be to settle in the market and build relations with other vendors who would supply raw materials to you and sell the finished goods to the public. It is also important to first have a customer base. This is ensure tht you don’t have to go looking for customers when you incorporate your company/LLP.

4. How is a branch office different from a project office?
Ans: A project office is set up to carry out one particular activity and is restricted from carrying out other activities. On the other hand, a branch office can carry out any of the permissible activities.
Authored by: Adv. Anant Sharma & Inayat Ahmed

 

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