A foreign entity can establish a business in India through various forms: 1) a joint venture company with an Indian partner where ownership is typically 51-49%, 2) a wholly owned subsidiary where 100% foreign ownership is allowed in some sectors, 3) a liaison/representative office which can gather market intelligence but not conduct commercial activities, 4) a branch office to conduct approved manufacturing and trading activities, or 5) a project office to execute a specific contract. The document then provides details on the requirements and regulations for each business establishment type.

1. Startup Business In India By
Foreign Entity
A foreign entity can set up its business in India in various
forms:
1. In form of a Joint Venture Company
2. Through Wholly Owned Subsidiary Company (WOS)
3. As a Liaison Office/ Representative Office
4. In form of a Branch Office
5. In form of a Project Office
Joint Venture Company
· no legal definition
· two or more individuals/companies, one of whom may be a non-resident,
who come together to form an Indian private/public limited company,
holding agreed portions of its share capital
· Foreign Companies can set up their operations in India by forging
strategic alliances with Indian partners.
· Generally, Indian JVCs have a 51%- 49% equity ratio between the foreign
and Indian partners
· Foreign company can invest in an Indian company through a joint venture
agreement in the sectors open for foreign investments, some areas are
prohibited that are exclusively reserved.
· Joint Venture may entail the following advantages for a foreign investor:
1. Established distribution/ marketing set up of the Indian partner

2. 2. Available financial resource of the Indian partners
3. Established contacts of the Indian partners which help smoothen the
process of setting up of operations
Wholly Owned Subsidiary Company (WOS)
· Foreign companies can set up wholly-owned subsidiary in sectors where
100% foreign direct investment is permitted under the FDI policy.
· A WOS can be formed either as a private or public company, limited by
shares or guarantee, or an unlimited liability company.
· Most often due to the unique advantages Private Limited Company is the
most preferred form for a WOS. This structure gives the most flexibility
and protection to a foreign investor.
Liaison Office/ Representative Office
· Liaison office acts as a channel of communication between the principal
place of business or head office and entities in India.
· Liaison office cannot undertake any commercial activity directly or
indirectly and cannot, therefore, earn any income in India.
· The Liaison Office can setup to establish business contacts or gather
market intelligence to promote the products or services of the parent
company.
· As a no-income earning entity it is not subjected to tax in India.
· However, the Liaison Office would be required to withhold tax from
certain payments.
· Approval for establishing a liaison office in India is granted by Reserve
Bank of India (RBI).
· Partnership / Proprietary concerns set up abroad are not allowed to
establish Liaison Offices in India.

3. Branch Office
· Foreign companies engaged in manufacturing and trading activities
abroad are allowed to set up Branch Offices in India for activities
expressly approved by the RBI.
· Permission to set up such offices is initially granted for a period of 3
years and this may be extended from time to time.
· RBI has given general permission to foreign companies, subject to certain
conditions, for establishing branch/unit in Special Economic Zones (SEZs)
to undertake manufacturing and service activities.
· Branch offices are extensions of the foreign company and do not
constitute a body corporate of its own. The foreign parent company is
liable for the acts of the branch office.
· Branch offices are permitted to acquire property for their own use and to
carry out permitted/incidental activities but not for leasing or renting out
the property.
· Branch Offices established with the approval of RBI, may remit outside
India profit of the branch, net of applicable Indian taxes
· Partnership / Proprietary concerns set up abroad are not allowed to
establish Branch Offices in India.
Project Office
· A foreign corporation, which has secured a contract from an Indian
company to execute a project in India, is allowed to establish a Project
Office in India.
· RBI has now granted general permission to foreign entities subject to
certain conditions. If conditions are not fulfilled, RBI approval is required.
· The project office is treated as an extension of the foreign corporation in
India and is taxed at the rate applicable to foreign corporations.
· Project Offices may remit outside India the surplus of the project on its
completion.

4. · Partnership / Proprietary concerns set up abroad are not allowed to
establish Project Offices in India.
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