Doing business in India

How quickly can I set up a business?

The type of entity that is chosen for the setting up of the business determines the period within which a business can be established. Broadly it can take around 25 -30 days to set up a business, including a minimum of obtaining requisite business licenses, identifying the proper place of business, obtaining Direct & Indirect Tax registration, an entity incorporation certificate, etc.

It may be noted that incorporating a company and setting up a business are two different aspects. Further, if the activity is one for which approval from the foreign-exchange regulator is required it may take more time – anywhere between 60 days to 90 days.

Further, the business setup process will also include setting up business processes such as accounting, HR, sales & marketing, operations, etc which will take an additional 20 to 25 days time.

What is the minimum investment needed?

The minimum investment is driven more by business requirements, the type of entity that is chosen for setting up a business and the sector in which the company wants to operate. For example, a company looking to be in the financial service sector under the banking regulation will be required to have a minimum investment of approximately USD 270,000. For a private limited company, the minimum authorised capital is approximately USD 1,350.

How can I raise finance?

Finance can be raised by an Indian entity either from its owners/shareholders in the form of capital and/or through debt complying with specific guidelines for raising debt in the case of Pvt & Public Limited entity structure. Also, by pledging adequate tangible security, debt & working capital facilities can be obtained from Indian banks.

Indian banks have various funding facilities to fund capital expansions, working capital, project finance, business loans, etc. required for the day-to-day running of business operations and expansions.

What are the legal requirements for setting up my business?

An entity can be set up in the following structures:

• A Private Limited Company
• A Closely held Public Limited Company
• A Public Limited Company which can also be listed on the Indian stock exchange.
• A Limited Liability Partnership Firm
• A Branch of the Parent entity*
• Project office*
• Liaison office*

* Will be considered as a Permanent Establishment of the foreign entity in India. Also, it requires approval from the foreign exchange regulator.

What structure should I consider?

A Private limited Company is an ideal structure for, to begin with, having a minimum of 2 directors. Some of the benefits of incorporating the Private Limited Company are:

• Separate Legal Entity
• Uninterrupted existence
• Limited Liability
• Free & Easy transferability of shares
• Owning Property
• Capacity to sue and be sued
• Borrowing Capacity

What advice can you give me in regards to payroll and taxation requirements?

The choice of location of the entity is dependent upon the nature of the business. For example, the IT sector is concentrated in few cities because of the availability of the requisite skillset. Also, some of the cities have Economic Zones that have tax benefits and provide subsidies for new establishments. Eligible entities those need to comply with their regulatory requirements.

Payroll and HR are routine functions and not too complicated. It can be managed in-house or can be outsourced to third-party service providers. It is advisable to work with a domain expert or a law firm for drafting an employment contract.

The below list of the regulators with whom the reporting is required to be done is the bare minimum and the same can increase depending upon the business activities of the client:

• Foreign Exchange Regulator
• Income Tax
• Goods and Service Tax
• Registrar of Companies

Is there anything else that I should know?

Apart from the regular entity and applicable tax laws, one should also be mindful of renewing business licenses, compliance with labour laws for HR processes, compliance with banking funding requirements, the renewal of software licenses, updating the Know Your Customer (KYC) changes, etc.

India has opened its economy and has adopted an economic liberalization program as early as 1991 and since then has made numerous changes to favour ease of doing business in India.

India made business regulatory reforms convenient for starting a business, getting credit, paying taxes, and resolving insolvency.