STARTING BUSINESS IN INDIA :
There are various steps required to establish business in India.
The different types of business entities available in India are :- Private Limited Company
- Public Limited Company
- Unlimited Company
- Limited Liability Partnership Other Suits
- Partnership
- Sole Proprietorship
- Liaison Office/Representative Office
- Branch Office
- Subsidiary Company
Private Limited Company :
A Private Limited Company is the most popular form of business entity used for Foreign Investors in India. A private company is a company where shareholders’ right to transfer shares is restricted, the number of shareholders is limited to fifty, and an invitation to the public to subscribe to any shares or debentures is prohibited.
Public Limited Company :
A public company is a company which is not a private company. The public company must have at least seven shareholders and three directors. It must hold statutory meetings and obtain government approval for the appointment of the management. There are several other provisions contained in the Companies Act 1956 which are applicable for public companies.
Unlimited Company :
An unlimited company is a company formed by registration under the Companies Act where the liability of the members is unlimited - that is, they are liable to contribute whatever sums are required to pay the debts of the company should it go into compulsory liquidation. Not surprisingly, this is not a common form of company. An unlimited company is very similar to a partnership and there are only rare occasions when it will be preferred to this alternative business model.
Partnership :
A partnership is a type of business entity in which partners (owners) share with each other, the profits or losses of the business undertaking in which all have invested. "Partnership" is a relation between the persons who have agreed to share the profits of a business carried on by all or any of them acting for all persons who have entered into partnership with one another are called individually, "partners" and collectively "a firm", and the name under which their business is carried on is called the firm-name.
Limited Liability Partnership (LLP) :
Limited Liability Partnership is an alternative corporate business entity that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually-arrived agreement, as is the case in a partnership firm. This format would be quite useful for small & medium enterprises in general and for the enterprises in services sector in particular, including professionals and knowledge based enterprises. The Limited Liability Partnership will be a separate legal entity, liable to the full extent of its assets, with the liability of the partners limited to their agreed contribution. None of the partners would be liable on account of the independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s business decisions or misconduct.
Sole Proprietorship Concerns :
A sole proprietorship is a type of business entity which legally has no separate existence from its owner. Hence, the limitations of liability enjoyed by a corporation and limited liability partnerships do not apply to sole proprietors. All debts of the business are debts of the owner. The person who sets up the company has sole responsibility for the company's debts. It is a "sole" proprietorship in the sense that the owner has no partners. A sole proprietorship essentially is an individual doing business in his/her own name and in which there is only one owner. The owner pays personal income taxes on the profits made, making accounting much simpler.This also allows the proprietor to open a business account with banking institutions.
Liaison Office/Representative Office :
A Liaison Office could be established with the approval of the government of India. The role of Liaison Office is limited to collection of information ,promotion of exports/imports and facilitate technical/financial collaborations.
Branch Office :
Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:
- Information Technology and development of software in India.
- Professional or consultancy services.
- Export/Import of goods promoting technical or financial collaborations between Indian companies and parent or overseas group company.
- Representing the parent company in India and acting as buying/selling agents in India.
- Rendering technical support to the products supplied by the parent/ group companies.
A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI may remit outside Indian profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).