India’s diverse and expanding market continues to attract foreign businesses seeking sustainable growth. However, before establishing operations, it’s essential to choose the most appropriate business structure. The structure selected impacts regulatory compliance, taxation, liability, and ease of doing business. Here's a clear overview of the various business structures available to foreign companies entering the Indian market.
1. Wholly Owned Subsidiary (WOS)
A Wholly Owned Subsidiary is the most preferred structure for foreign companies seeking full ownership and operational control. Registered under the Companies Act, 2013, it allows the foreign parent company to own 100% equity, subject to FDI norms.
Advantages:
Full strategic and financial control
Separate legal entity
Limited liability for shareholders
Eligibility for tax benefits and local financing
This structure is ideal for long-term investments and scalable operations across India.
2. Joint Venture (JV)
A Joint Venture involves a strategic partnership with an Indian entity. While equity sharing varies, foreign companies can leverage local market knowledge, distribution networks, and regulatory insights.
Advantages:
Access to Indian partner’s existing infrastructure
Easier navigation of regulatory procedures
Shared financial and operational risk
JVs are common in sectors with FDI restrictions under the Government Route, such as defense, media, and retail.
3. Branch Office
A Branch Office can undertake specific business activities in India like export/import of goods, consultancy services, research, and coordination. It cannot engage in manufacturing.
Approved by the Reserve Bank of India (RBI), this model is suitable for companies that want a physical presence without incorporating a separate legal entity.
Limitations:
Not permitted to carry out retail trading or direct manufacturing
Profits are repatriable, but operations are heavily regulated
Taxed at a higher corporate rate (40% plus surcharge and cess)
4. Liaison Office
A Liaison Office acts as a communication channel between the foreign head office and Indian stakeholders. It cannot earn income, invoice clients, or engage in commercial activities.
Suitable for:
Exploring market potential
Representing the parent company
Establishing business relationships
Requires RBI approval and must be funded entirely through foreign inward remittance.
5. Project Office
Ideal for executing time-bound contracts in India, a Project Office is set up when a foreign company is awarded a specific project by an Indian company. RBI or AD Bank approval is generally required.
Key Features:
Limited to the duration of the project
Activities restricted to the assigned project scope
Must be funded through inward remittance or project revenues