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Expats Owning and Operating a Business in India

Submitted: October 2013

If you are an expat wishing to set up your own business in India, the first step is to ensure you have the legal right to live and work there. Expats wishing to start their own business, will generally need to apply for a Business visa. As part of the requirements you will have to prove that you have sufficient financial means to set up the business, and relevant expertise in your field.

Visa applications should be made online using the Indian Government’s Online Indian Visa Form. After completing the form, applicants will be asked to upload a photograph and pay the applicable visa fee. To read more see the Government pages on Indian Visa and Visa Services.

For other immigration matters see the Expat Briefing guide on Immigration in India.

Business Plan

The Indian market is getting increasingly competitive, therefore it is vital to have a good business plan before starting your own business.

First of all, you should have a clear idea of what you wish to do and in how far your business idea is feasible. Make sure to research which businesses already operate in your field and determine your potential customers, partners and competition. At the same time, take ample time to consider your best financing options. Based on your research you can then develop a proper business plan which sets out your business objectives, target market, commercial strategies, potential obstacles and financial projections.

To read more on business plans see the Indian Government’s guidelines on Creating a Business Plan.

Legal Structure, Registration and Obligations

Another important step is to decide which legal structure is best suited for your business. The legal structure will determine the nature of your legal, financial and tax obligations. The most common business structures in India are the Sole Proprietorship and the Private Limited Company.

Private Limited Company

The advantage of setting up a business as a Private Limited Company is that it forms an independent legal subject and its finances are separate from your personal finances. It is typically led by a director and has members who own shares in the company. It is also subjected to regular reporting requirements and must comply with the rules and regulations set out in the Indian Companies Act 2013.

The process of setting up a limited liability company generally involves the following steps:

For further requirements and detailed guidance on how to register your company, have a look at the Steps to register a new company on the Indian Ministry of Corporate Affairs website.

Once the company has been established, businesses will also need to register it with the applicable state Income Tax Office to obtain a Tax Account Number (TAN). Businesses that exceed the registration threshold for VAT purposes, should also register for value added tax (VAT). Note that the thresholds and registration procedures differ from state to state.

or more information see the website of the applicable state tax office, for example:

To read more on taxation in general, see Taxation in India.

Sole Proprietorship

The advantage of setting up your business as a Sole Proprietorship is that you will have full ownership and control over the business and all profits after taxes will remain yours. At the same time, however, you will be personally liable for all losses your business might make.

The process of starting a sole proprietorship is quite simple. First of all, you will need to make sure that you have the required licence to carry out your business activities. Then you will need to register with the relevant state tax authority and obtain the Permanent Account Number (see above). If you wish, you might also register a business name.

Other forms and further information

Other business forms include partnerships, cooperatives, and public limited companies. For more information see the Business Portal of India.

Employing staff

As employer, you will have to ensure that your business complies with India’s labour regulations. You should familiarise yourself with different types of contracts, minimum wage requirements, equal opportunities policies, work permits and recruitment options. Employers will also have to register with the Employee’s Provident Fund Organisation.

Further information

The Government runs an online business portal which provides ample information on setting up and operating business in India. Detailed information is also available on the website of the Ministry of Corporate Affairs.

 

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