Top 15 FAQs on Setting up Business in India by Foreign Individuals or Foreign Corporations: India Business Entry
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1. Can foreign individuals or foreign corporations set up a business in India?
Answer: Yes, foreign individuals and foreign corporations can set up a business in India subject to certain rules and regulations.
2. What are the different forms of business entities that can be set up in India?
Answer: Foreign individuals or foreign corporations can set up a business entity in India as a private limited company, limited liability partnership (LLP), branch office, liaison office, or project office.
3. What is the most common form of business entity chosen by foreign investors in India?
Answer: The most common form of business entity chosen by foreign investors in India is a private limited company.
4. What are the requirements to set up a private limited company in India?
Answer: To set up a private limited company in India, at least two shareholders and two directors (with one director being an Indian resident) are required. The company must also have a registered office in India.
5. Can foreign individuals be directors in an Indian company?
Answer: Yes, foreign individuals can be directors in an Indian company.
6. Are there any restrictions on the percentage of foreign shareholding in an Indian company?
Answer: The foreign shareholding percentage in an Indian company varies depending on the sector and is subject to the FDI policy of the government.
7. What are the steps involved in setting up a business in India?
Answer: The steps involved in setting up a business in India include obtaining the Director Identification Number (DIN), obtaining the Digital Signature Certificate (DSC), name reservation, filing incorporation documents, and obtaining the Certificate of Incorporation.
8. Are there any minimum capital requirements to set up a business in India?
Answer: There are no specific minimum capital requirements for most sectors in India. However, certain sectors may have specific capital requirements based on the nature of the business.
9. Is it necessary to have a local partner or Indian shareholder to set up a business in India?
Answer: No, it is not necessary to have a local partner or Indian shareholder to set up a business in India. Foreign individuals or foreign corporations can fully own and operate a business in India in certain sectors, subject to the FDI policy.
10. Can foreign companies establish a branch office in India?
Answer: Yes, foreign companies can establish a branch office in India with the approval of the Reserve Bank of India (RBI).
11. What is the difference between a branch office and a liaison office?
Answer: A branch office is allowed to carry out commercial activities on behalf of the foreign company, while a liaison office is limited to promoting the parent company’s business interests and acting as a communication channel.
12. Are there any specific sectors where foreign investment is prohibited in India?
Answer: Yes, certain sectors such as atomic energy, lottery business, gambling, and certain defense-related activities are prohibited for foreign investment in India.
13. Can foreign companies open a bank account in India?
Answer: Yes, foreign companies can open a bank account in India after completing the necessary registration and incorporation procedures.
14. What are the tax implications for foreign companies setting up a business in India?
Answer: Foreign companies setting up a business in India are subject to Indian tax laws, including corporate tax and other applicable taxes. Double taxation avoidance agreements (DTAAs) between India and the foreign company’s home country may provide relief from double taxation.
15. Is it mandatory to comply with Indian labor laws while setting up a business in India?
Answer: Yes, it is mandatory to comply with Indian labor laws, including employment contracts, minimum wages, provident fund contributions, and other statutory obligations.
Authored By: Adv Anant Sharma
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