India is well known for its diversity and talent pool. Today, there are numerous entrepreneurs, enthusiasts, and business owners who wish to conduct business in India. Starting a business in India or a subsidiary company registration in India is not an easy task. On top of that, to cross-check every little detail of entity formation is a big task.
Entity formation is a lengthy process that includes documentation, formalities, laws, and regulations. This time-consuming process can sometimes hold back your willingness to actually start your business. Though the prospects of starting a business in India are far more tempting. Any business that can sustain here, is sure to sustain worldwide!
Before starting a business we need to understand the basics first. If you are an entrepreneur outside India, wanting to start a business here, read ahead. This blog might contain just the inputs you need.
What is an entity or a subsidiary company registration in India?
In simplest terms, a business entity has a separate tax identity. It needs to follow all the legal and regulatory compliances. An entity is a business organization created by an individual or a group of individuals to conduct business. It also is to engage in business or partake in similar activities. There are various types of business entities — corporation, sole proprietorship, partnership, LLC ( Limited Liability Company), etc.
- Essentials before starting a business in India or foreign company registrations in India:
From a regulatory perspective, authorities in India expect you to have the following prerequisites checked off before you can begin your India operations.
- A current account will be used for company transactions.
- Tax Registration, for filing taxes, claiming input tax credits, and complying with the tax regulations of India.
- Business license registration, so you are formally registered to start and run your business in India.
While registering for a business license, you will need to specify the structure of your business entity.
There are typically 4 types of business registration:
- Corporation: A corporation is a legal entity that is separate and distinct from its owners. A registered business license is a must for operating a corporation. Under the law, corporations possess many of the same rights and responsibilities as individuals. Corporations can enter into contracts, loan,s and borrow money. They can also sue and be sued, hire employees, own assets, and pay taxes.
- Sole Proprietorship: A sole proprietorship is a business that is run by an individual for his/her own benefit. It is the most basic form of a business organization. Proprietorships are not separated from their owners. The liabilities of the business are part of the personal liabilities of its owners. Although a sole proprietorship is not a separate legal entity from its owner, it is still a separate entity for accounting purposes.
- Partnerships: A general partnership is an agreement between two or more people who join together to run a business. Each partner contributes capital in the form of labor, money, or skill, and the profits and losses are shared. The partners are liable for the debts of the company.
In a limited partnership, the liability of each partner is limited to what they have invested in the business. If a business goes bankrupt, it cannot lose its personal possessions. Though this might happen with unlimited liability.
- Limited Liability Company (LLC): Owners of a limited liability company (LLC) can take advantage of operational flexibility and income benefits. They also have limited liability. An LLC provides its owners with significant flexibility in structuring the business.
In many places, an LLC has one owner only; they operate like a sole proprietor but have the advantage of limited liability. However, due to its high degree of flexibility, the creation of an LLC can be a rather lengthy and tiring process.
Each business entity comes with its own advantages and disadvantages. Such as limited liability and increased administration by the government. A red flag in all of this, though, is the restrictions imposed. Restrictions on overseas companies interested in starting a business in India.
Overseas companies can only register as Private Limited or Limited corporations and not as sole proprietors or partners.
According to the economic times 78 foreign companies were registered in India in the last fiscal year.
After all, this information gathering, what if you do not wish to register as a corporation just yet? You just wish to test the Indian market. No doubt there are undeniable risks involved.
This is where PEO (Professional Employer Organization) comes into the picture.
- PEO and business operations:
A professional employer organization (PEO) is an organization that enters into a business relationship. It is with an employer by providing employees to the employer. Thereby, allowing the PEO to share and manage many employee-related responsibilities and liabilities. This allows employers to outsource their human resource functions. This includes employee benefits, compensation and payroll administration, workers’ compensation, and employment taxes.
Given the fact, that PEOs undertake all your pain points. It gives you a lot of time and peace of mind to conduct your business peacefully. A PEO is an answer to starting a business in India without entity formation.
How to select a PEO?
Below are three quick factors to select a PEO:
- Local proximity:
Choose a PEO located near the area of your business operations. This will help in finding the right talent for your business. It will be able to obtain talent within and around the location of your business by understanding the prevalent market conditions
A well-experienced PEO in the industry is aware of your business needs. It will understand what foreign companies are looking for and how to provide the same. Due to several fluctuations in the market, they know how to cope up.
Look for testimonials. Testimonials from previous clients and employees. Go through a thorough check on the internet. Read reviews about clients talking about the PEO/PEOs in India you are thinking of engaging with. Also, trust your gut!
How Remunance will help your business take off
At Remunance, we help businesses start and scale up their business operations in India. Through repetitions of understanding your objectives, assessing your goals, and considering your restrictions. We come together on the perfect plan for moving ahead. Through solid customer focus and experience, we help overseas companies. And, not just to meet their goals, but to surpass them. So, if you wish to expand and test the Indian market, Remunance will help you just the right way.