How to Create an Indian Subsidiary for an India Founder: Exploring Different Routes

Expanding a business into India is a significant milestone for any founder, offering access to a large and dynamic market. For Indian founders, setting up a subsidiary in India can be an excellent way to grow your business, establish a more formal presence, and tap into the local market potential. However, the process can be overwhelming due to the variety of pathways available, each with its own regulatory and operational considerations.

Choosing the right route to establish your Indian subsidiary depends on several factors, including the size of your business, your long-term goals, and your need for flexibility and control in operations. Whether you’re looking to attract top talent, maintain operational autonomy, or test the market without significant initial investment, there are multiple ways to establish a subsidiary. Understanding these different routes will help you make the right decision for your business.

Here, we will explore five key routes that Indian founders can take to create a subsidiary in India: the gifting route, ESOP route, parallel route, corporate route, and Employer of Record (EoR) route. Let’s dive into each of these options to give you a clearer picture of what they entail and how to determine which is best suited to your business needs.

Gifting Route

The gifting route involves transferring shares from the parent company to an Indian entity or individual. This approach is typically used when a founder wants to establish an Indian presence without directly involving complex company structures. It offers a simpler way to facilitate expansion while still maintaining control over the business in the parent country.

ESOP Route

Employee Stock Ownership Plans (ESOPs) are a popular route for founders looking to incentivize local talent in India. By offering employees equity in the company, you align their interests with the company’s success while also creating a more engaged and motivated workforce. This route can be particularly beneficial in attracting top talent while expanding operations in India.

Parallel Route

The parallel route involves setting up an independent subsidiary that runs parallel to the parent company’s operations. While it allows for greater autonomy in the Indian market, it also requires careful management to ensure that the subsidiary operates in alignment with the parent company’s long-term strategy. This option provides flexibility and adaptability, allowing the subsidiary to tailor its approach to the unique dynamics of the Indian market.

Corporate Route

The corporate route is the most conventional method of setting up a subsidiary. This involves establishing a Private Limited Company (Pvt. Ltd.) or Limited Liability Partnership (LLP) in India. As a wholly owned subsidiary, this structure provides legal protection, full control over business operations, and the ability to scale efficiently within India. It’s a good choice for founders who are looking for long-term expansion and want a formal structure to manage their operations.

Employer of Record (EoR) Route

For founders looking for a quicker, more cost-effective entry into the Indian market, the Employer of Record (EoR) route offers a streamlined solution. With an EoR, the third-party provider handles all local compliance, payroll, and benefits management for your workforce, while you maintain operational control over day-to-day activities. This route is ideal if you want to hire employees in India without going through the complexities of setting up a full legal entity.

To gain a deeper understanding of each route, including the detailed benefits, challenges, and how to determine the best option based on your situation, check out our YouTube videos. These videos provide a comprehensive breakdown of each approach to help you make an informed decision as you navigate the process of establishing your Indian subsidiary.

Conclusion

Each of these routes offers distinct advantages, depending on your business model, growth plans, and the level of control you wish to maintain. Whether you choose the gifting route, ESOP route, parallel route, corporate route, or EoR route, it’s important to align the decision with your broader business strategy.

To get more insights, check out our YouTube video.