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REGISTRATION OF BUSINESS ENTITY TO START A BUSINESS
Kalpavat is instrumental in establishment of over 100 foreign business entities and 500 Indian entities in India. We aim to provide one roof solution to the Investors to start their business in India with respect to Legal, Taxation and logistics requirements. Investors may opt for incorporation of any of the following form of entities:-
Indian Subsidiary by Foreign Entities
A Complete solution for foreign enterprises starting their Indian operations through incorporation of a Indian private limited company. The foreign companies / individuals to start their operations in India and tap into one of the largest and fast-growing market, to access to some of the best human resources in the world.
A Foreign National (other than a citizen of Pakistan or Bangladesh) or an entity incorporated outside India (other than entity incorporated in Pakistan or Bangladesh) can invest and own a Company in India by acquiring equity shares of the company, subject to the Foreign Direct Investment Policy under Foreign Exchange Management Laws of India. In addition, a minimum of one Indian Director who is a Indian Director and Indian Resident is required for incorporation of an Indian Company along with an address in India.
Liaison office by Foreign Company
A liaison or a representative office can be opened in India subject to approval by Reserve Bank of India. Such an office can undertake liaison activities on its company’s behalf. A liaison office can also undertake:
- Representing parent/group companies in India
- Promoting import/export in India
- Promoting technical/financial collaborations on parent company/group’s behalf
- Coordinating communications between parent/group companies and Indian companies
Branch Office by Foreign Company
Foreign companies can conduct their business in India through its branch office which can be opened after obtaining a specific approval from Reserve Bank of India. A branch office can undertake following activities:
- Import & export of goods
- Rendering professional or consultancy services
- Carrying out research work in area which its parent company is engaged
- Promoting technical/financial collaborations on behalf of parent company/ overseas group company
- Representing parent/group companies in India and acting as buying/selling agent in India
- Providing IT services and developing software in India
- Providing technical support for products supplied by parent company/group
Project office by Foreign Company
If a foreign company is engaged by an Indian company to execute a project in India, it may set up a project office without obtaining approval from Reserve Bank of India subject to prescribed reporting compliances. As applicable in case of a branch office, a project office is treated as an extension of foreign company and is taxed at the rate applicable to foreign companies.
Proprietorship Business
There is no mechanism provided by the Government of India for the registration of a Proprietorship. Therefore, the existence of a proprietorship must be established through tax registrations and other business registrations that a business is required to have as per the rules and regulations. For instance, Goods & Service Tax (GST) Registration can be obtained in the name of the Proprietor to establish that the Proprietor is operating a business as a sole proprietorship. Thus, all the registrations for a proprietorship would be in the name of the Proprietor, making the Proprietor personally liable for all the liabilities of the Proprietorship.
Partnership Business
A Partnership Firm is a popular form of business constitution for businesses that are owned, managed and controlled by an Association of People for profit. Partnership firms are relatively easy to start is prevalent amongst small and medium sized businesses in the unorganized sectors. With the introduction of Limited Liability Partnerships in India, Partnership Firms are fast losing their prevalence due to the added advantages offered by a Limited Liability Partnership. There are two types of Partnership firms, registered and un-registered Partnership firm. It is not compulsory to register a Partnership firm with the Registrar of Firms; however, it is advisable to register a Partnership firm due to the added advantages. Partnership firms are created by drafting a Partnership deed amongst the Partners.
Limited Liability Partnership (LLP)
Limited Liability Partnership (LLP) was introduced in India by way of the Limited Liability Partnership Act, 2008. The basic premise behind the introduction of Limited Liability Partnership (LLP) is to provide a form of business entity that is simple to maintain while providing limited liability to the owners. LLP is one of the easiest form of business to incorporate and manage in India. With an easy incorporation process and simple compliance formalities, LLP is preferred by Professionals, Micro and Small businesses that are family owned or closely-held.
Private Limited Company
Private limited company registration is governed by the Ministry of Corporate Affairs, Companies Act, 2013 and the Companies Incorporation Rules, 2014. To register a private limited company, a minimum of two shareholders and two directors are required. A natural person can be both a director and shareholder, while a corporate legal entity can only be a shareholder. Unique features of a private limited company like limited liability protection to shareholders, ability to raise equity funds, separate legal entity status and perpetual existence make it the most recommended type of business entity for millions of small and medium sized businesses that are family owned or professionally managed.
Public Limited Company
A limited company grants limited liability to its owners and management. Being a public company allows a firm to sell shares to investors this is beneficial in raising capital. A minimum of three Directors are required for establishing a Public Limited Company and it has more stringent regulatory requirements compared to a Private Limited Company. Public Limited Companies are those types of companies where minimum number of members is seven and there is no cap on the maximum number of members. A public limited company has most of the characteristics of a private limited company.
REGISTRATION WITH TAX AND COMPLIANCE AUTHORITIES
Goods and Services Tax (GST) Registration
GST is the biggest tax reform in India, tremendously improving ease of doing business and increasing the taxpayer base in India by bringing in millions of small businesses in India. By abolishing and subsuming multiple taxes into a single system, tax complexities would be reduced while tax base is increased substantially. Under the new GST regime, all entities involved in buying or selling goods or providing services or both are required to register for GST. Entities without GST registration would not be allowed to collect GST from a customer or claim input tax credit. Further, registration under GST is mandatory once an entity crosses the minimum threshold turnover of starts a new business that is expected to cross the prescribed turnover.
PAN /TAN Registration
Permanent Account Number (PAN) and Tax Deduction and Collection Number (TAN) is mandatory 10-digit alphanumerical number required to be obtained by all taxable entities. TAN is allotted who are responsible for Tax Deduction at Source (TDS) or Tax Collection at Source (TCS) on behalf of the Government. The person deducting the tax at source is required to deposit the tax deducted to the credit of Central Government - quoting the TAN number.
PF Registration
Provident Fund is a mandatory post-retirement benefit in India (Social Security scheme) provided under the Employees Provident Fund and Miscellaneous Provision Act 1952. The employee and employer each contribute 12% of the employee's basic salary and dearness allowance towards EPF. The current rate of interest on EPF deposits is 8.10% p.a.
ESI Registration
Employee's State Insurance (ESI) is a self-financing social security and health insurance scheme for Indian workers. For all employees earning INR 15000 or less per month as wages, the employer contributes 4.75 percentage and employee contributes 1.75 percentage, total share 6.5 percentage. This fund is managed by the ESI Corporation (ESI) according to rules and regulations stipulated therein the ESI Act 1948, which oversees the provision of medical and cash benefits to the employees and their family through its large network of branch offices, dispensaries and hospitals throughout India. ESI is an autonomous corporation under Ministry of Labour and Employment, Government of India. But most of the dispensaries and hospitals are run by concerned state governments.
MSME Registration
Micro, Small and Medium Enterprises (MSME) is any entity that falls under any of these three categories. MSME are the backbone of any economy and are an engine of economic growth, promoting equitable development for all. Therefore, to support and promote MSMEs, the Government of India through various subsidies, schemes and incentives promote MSMEs through the MSMED Act. To avail the benefits under the MSMED Act from Central or State Government and the Banking Sector, MSME Registration is required.
Import Export Code
Import Export Code (IEC) is a registration required for persons importing or exporting goods and services from India. IEC is issued by the Directorate General of Foreign Trade (DGFT), Ministry of Commerce and Industries, Government of India.
FSSAI Registration
The Food Safety & Standards Act, 2006 introduced to improve the hygiene and quality of food has brought about tremendous changes in the food industry. As per the Act, no person shall commence or carry on any food business except under a FSSAI license or FSSAI registration. Therefore, any food manufacturing or processing or packaging or distributing entity is now required to obtain a FSSAI License or Registration.
Digital Signature
A Digital Signature is the equivalent of a physical signature in electronic format, as it establishes the identity of the sender of an electronic document in the Internet. Digital Signatures are used in India for online compliances such as Income Tax E-Filing, Company or LLP Incorporation, Filing Annual Return, E-Tenders, etc
INVESTMENTS IN INDIA
Our team of domain and functional experts provide sector-and state-specific inputs, and hand-holding support to investors through the entire investment cycle, from pre-investment decision-making to after-care. We assist with location identification; expediting regulatory approvals; facilitating meetings with relevant government and corporate officials; and also provide aftercare services that include initiating remedial action on problems faced by investors. The Make in India initiative was launched by Prime Minister in September 2014 as part of a wider set of nation-building initiatives. The Initiative was devised to transform India into a global design and manufacturing hub. Under this initiative Foreign Direct Investment policies were reformed and liberalized. The foreign investment in India can be summarized in following pointers:-
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- Foreigners can directly invest in India either on their own or as a joint venture, with a few exceptions with regard to investment limits and sectors.
- No government approval is required for FDI in virtually all sectors except a small negative list formulated by government.
- Sector specific guidelines are formulated by government giving sectoral investment caps if any. If an investment does not qualify for automatic approval, FIPB considers the proposal.
- Use of single foreign brands names/trademarks is permitted for wholesale trade in India however the retail and e-commerce is restricted with sectoral caps and minimum investment criteria.
- Indian capital markets are open to FII’s and Indian companies are allowed to raise funds from international capital markets
- Foreign technology collaborations are allowed with agreements on
- Technical knowhow fees
- Payment for designs and drawings
- Payment for engineering services
- Other royalty payments
- Non-Resident Indians can invest in shares and or convertible debentures of Indian companies on a non-repatriable basis and these investments are not considered as FDI
- The repatriation of investment capital and profits earned: There are three basic points to note with respect to repatriation:
- All foreign investments are freely repatriable, subject to sectoral policies. Dividends declared on foreign investments can be remitted freely through an authorized dealer.
- Non-residents can sell shares on the stock exchange without prior approval of the Reserve Bank of India (RBI) and repatriate the sale proceeds through a bank, if they hold the shares on repatriation basis and if they have necessary NOC/tax clearance certificate issued by the Income Tax authorities.
- For sale of shares through private arrangements, regional offices of the RBI grant permission for recognized units of foreign equity in Indian company in terms of guidelines indicated in Regulation 10.B of Notification No. FEMA.20/2000 RB dated May 2000. The sale price of shares on recognized units is to be determined in accordance with the guidelines prescribed under Regulation 10.B (2) of the above Notification.
- Locational Restrictions: Industrial undertakings are free to select the location of their projects. Industrial License is required if the proposed location is within 25 km of the Standard Urban Area limits of 23 cities having population of 1 million as per 1991 census.
- Environmental Clearances: Entrepreneurs are required to obtain statutory clearances relating to pollution control and environment as necessary for setting up an industrial project for 31 categories of industries in terms of Notification S.O. 60 (E) dated 27.1.94 as amended from time to time, issued by the Ministry of Environment & Forests under The Environment (Protection) Act, 1986.
JOINT VENTURES
Foreign companies can also set up joint venture with Indian or foreign companies in India. There are no separate laws for joint ventures in India and laws governing domestics companies apply equally to joint ventures. Key elements of a joint venture's design include:
1) the number of parties;
2) the geographic, product, technology and value-chain scope within which the JV will operate; 3) the contributions of the parties;
4) the structural form (each country has specific options,
5) the valuation of initial contributions and ownership split among the parties;
6) the profit and cost sharing arrangements, post-deal
7) governance and control;
8) Talent/HR model
9) contractual arrangements with the parent companies for inputs, outputs or services;
10) exit and evolution provisions.
We at Kalpavat through our professional associates assist the business entities to draft and execute and implement the Joint Venture Agreements.