Doing Business in India and other Emerging markets, have been a key focus for many companies hoping to expand their client base as well as their pool of suppliers. Whether it is the cheaper cost of sourcing from abroad or trying to tap into their trillion dollar local markets, they offer the obvious next stage of growth for many companies worldwide. Contrary to popular opinion, it is not just the large corporate behemoths which are successfully expanding there, but a host of small and medium-sized companies are also capitalizing on the opportunities offered in these markets. Here we discuss how a company can establish a presence in the fastest growing major economy of 2015 – the Republic of India.
If doing business in India is your goal, the first step is to identify the type of entity you wish to set up based on the scope of the business opportunity.
The most basic option is a Liaison office which basically can only communicate with existing clients and suppliers in India. It cannot earn any income, nor solicit new clients but merely acts as a medium of communication and possibly a first step towards establishing a larger presence. The documentation and compliance requirements are minimal, and it is only recommended for those businesses which do not wish to get too involved locally.
The second option to doing business in India is to create a wholly owned Branch. A branch office can participate locally in almost all aspects of business, with the notable exception of manufacturing. It is ideal for traders and even for short term projects (short term branch offices are called project offices).
The third option is to create a fully fledged private limited company or a limited liability partnership which would be registered in India. These companies have to abide by all local laws and subject to the jurisdiction of Indian Law. Such structures are more complicated and should be explored if the company is truly committed to expanding and doing business in India and has the resources to manage the business as well as comply fully with local laws.
To set up a branch or liaison office in India, the following process it to be followed. The Government of India has been relaxing the process over the years and now many companies can set up a branch with relative ease.
- The first step is to approach the Reserve Bank of India with documents like Board Resolution, Certificate of Registration, Annual Financial Reports, Power of Attorney, etc.
- Once approval from RBI is received (generally for three year periods and then extendable), the next step is to obtain permission from the Indian Registrar of Companies by filling out a single form.
- Setting up a branch office does require a local address and also the appointment of an authorized signatory in India who would be responsible for all compliance related activities.
To assist in the process, many Banks offer their services to companies wishing to set up shop in India. Banks can then collect the required documentation, whet it and forward it the RBI for processing. A local bank account may also be opened by them which can allow the company to meet its local expenses.
Doing Business in India with Local Suppliers
Unlike doing business in many other foreign countries, most American companies find it simple to onboard local Indian suppliers as they typically have simple contracts and traceable credentials. If you have a Self-Service Vendor Portal here in the USA you can easily make the necessary adjustments and build out your supply chain.