Steps for incorporating an Indian subsidiary

Setting up a subsidiary in India is a strategic move that can help your business tap into the country’s vast market, access a talented workforce, and expand operations. One of the most common ways to establish an Indian subsidiary is by incorporating a Private Limited Company. However, the process involves several crucial steps that ensure compliance with Indian regulations and set the foundation for smooth operations.

In this blog, we’ll walk you through the essential steps for incorporating an Indian subsidiary.

Step 1: Choose the Right Shareholders and Directors

The first step in forming a Private Limited Company in India is ensuring you meet the shareholder and director requirements.

Shareholders:

You will need at least two shareholders. These shareholders can be based outside of India, especially in sectors like IT where 100% Foreign Direct Investment (FDI) is allowed. This means the founders or investors can be from anywhere in the world.

Directors:

A Private Limited Company also requires two directors, one of whom must be a resident of India. This doesn’t necessarily mean the director must be an Indian citizen, but they should be a person who resides in India. This is a key condition set by the Indian government to ensure that the company has a local point of contact.

Step 2: Obtain Necessary Licenses and Registrations

After establishing the shareholders and directors, the next crucial step is acquiring various licenses and registrations to ensure your business complies with Indian laws.

Key licenses you will need:

• GST (Goods and Services Tax) registration, especially if you are engaged in taxable activities.
• PAN (Permanent Account Number) for the company, which is mandatory for tax purposes.
• Professional Tax registration, which varies by state and is applicable in certain states for companies with employees.
• Establishment Licenses: Depending on your business type, additional labor or other licenses might be required.

These registrations ensure that your business can operate legally and smoothly within India.

Step 3: Open a Bank Account

Once the company is incorporated, the next essential step is to open a bank account in the name of the company. The company’s bank account is where you will transfer the subscription money for the shares of the company. This is an important step to validate the incorporation of the company.

The process includes:

• Transferring the subscription money for the shares to the bank account.
• Ensuring the bank account is operational and ready for business transactions.

Step 4: File for Commencement of Business

After the bank account is set up and the funds are transferred, you need to apply for the Commencement of Business. This is a crucial step as it allows the company to begin its operations.

Once you receive approval for the commencement of business, you can legally start your business activities and transactions in India.

Step 5: Start Business Operations

With all the paperwork in place, licenses obtained, and necessary approvals, your Indian subsidiary can now begin its business activities. You can begin hiring employees, entering contracts, and establishing relationships with clients or suppliers.

Conclusion

Incorporating a subsidiary in India is a process that requires careful attention to detail and compliance with various regulations. By following these essential steps—starting with choosing the right shareholders and directors, obtaining necessary licenses, opening a bank account, and filing for commencement of business—you can ensure a smooth setup for your Indian subsidiary.

Setting up an Indian subsidiary can be a rewarding venture for your business, giving you access to one of the fastest-growing markets in the world. However, the process can take time and effort, and understanding these steps is crucial for successful incorporation.

For a more in-depth look at the incorporation process and additional tips, be sure to check out our YouTube video, where we provide further insights and guidance for setting up a subsidiary in India.