Setting up a Business in India

Advantages of setting up private limited company in India are:

• Private limited company is a separate legal entity in comparison to a sole proprietorship and partnership firms. (They have separate name, seal, assets and liabilities and is capable of owning property, incurring debt, borrowing money, having a bank account, entering into agreement and contracts and suing and being sued)
• In a private limited company the liability of members are limited to the number of shares respectively held by them. (It means if the company undergoes financial distress because of whatsoever reasons, the personal assets of members will not be used to pay the debts of the Company as the liability of the person is limited.)
• Private company has ‘perpetual succession’, that is continued or uninterrupted existence until it is legally dissolved.
• A private limited company arranges its capital by private arrangement from its members. There is no involvement of the general public which is why share allotment in case of private companies is easier and less complicated.
• In the case of private companies, control and management are in the hands of the actual owners of the company. The members have a say but the major control stays in the hands of the owners.
• A private company is allowed to advance a loan to the director of the company and can easily remunerate its directors or staff in the management. It can also appoint anyone to an office of profit
• Private companies have been provided with various exemption in terms of compliances as per Ministry of Corporate Affairs. There are a lesser number of compliances and regulations as compared to public limited companies. Also, multiple disclosures are not required to be made in private limited company.

Entrepreneurs when planning to enter the Indian dimension should make sure that they are complying with all the legal obligations that the law of the land demands. One of the first step for these obligations is to get the business registered legally.

• Private limited company is a separate legal entity in comparison to a sole proprietorship and partnership firms.
  (They have separate name, seal, assets and liabilities and is capable of owning property, incurring debt, borrowing money, having a bank account, entering into agreement and contracts and suing and being sued)
• For this first an individuals should wisely choose their business structure (i.e; sole proprietorship, partnership firm, limited liability partnership, company etc)
• Once you decided which business structure fulfils your purpose, then you are required to choose a business name that reflects your venture’s ideology and make sure it is not already claimed by some other entity.
• Once the name is decided, then the next step is to get it registered under intellectual property rights.
• In this step the selected business structure needs to be registered like incorporation of company, LLP etc.
• After incorporation or registration of an entity, there is a need to get various registration like Goods and Service Tax registration, Import and Export Code etc depends upon the business activity of an entity.
• Once all above steps are completed then the company is ready to conduct its business activity in India.

Yes, subject to compliance of provisions of Companies Act, 2013, Foreign Exchange Management Act (FEMA) 1999, Reserve Bank of India (RBI) Regulations and Foreign Direct Investment (FDI) Policy, a foreigner can set up a company (except one person company) in India but there must be atleast one resident director in the board of that particular company.

(Resident director is defined as a person who stays in India for a total period of not less than one hundred and eighty-two days during the financial year)

Yes, subject to compliance of provisions of Foreign Exchange Management Act (FEMA) 1999 Reserve Bank of India (RBI) Regulations and Foreign Direct Investment (FDI) Policy, OCI holder can start a business in India.

In addition to the above OCIs are also allowed to invest in partnership/ proprietorship concerns in India on non-repatriation basis.

• Automatic Route: Foreign Investment is allowed under the automatic route without prior approval of the Government or the Reserve Bank of India, in all activities/ sectors as specified in the Regulation 16 of FEMA 20 (R).
• Government Route: Foreign investment in activities not covered under the automatic route requires prior approval of the Government.

Some of the options for receiving foreign funding with respect to company are:

Issuance of Capital Instruments: In case of Company, the company can issue capital instrument (such as equity shares, debentures, preference shares and share warrants) to foreign investors in accordance with Companies Act, 2013, Foreign Exchange Management Act (FEMA) 1999 and Reserve Bank of India (RBI) Regulations and can get foreign funding.

If the company is a registered start up company which is recognised by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry (DIPP) in India, It can issue convertible Notes to its foreign investors. Provided that minimum amount of investment in convertible note shall Rs. 25 Lakhs or more in a single tranche.

External Commercial Borrowings (ECB): Company can use an option of ECB. These are commercial borrowings raised by eligible resident entities from recognised lenders and should be in conformity to ECB parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.