A Complete guide for setting up a company in India for NRI and Foreign Citizens

Starting a business in India as a foreigner or NRI is getting easier day by day due to the new government policies of Foreign Direct Investment (FDI), Simple procedures of incorporation, and other requirements.

In this article, we are going to give a complete step by step procedure of setting up a company in India for foreigners and NRI’s.

Individuals (Foreigners and NRI’s) who want to start a business in India. Can do it by following the below steps of setting up a company India.

  1. Incorporation
  2. Filing for FC-GPR
  3. Getting the Required Licenses and Registrations

1. Incorporation

 

Company Incorporation is the first step in setting up a company in India. Where an individual needs to select the entity type for his/her firm.

Private Limited Company is the best-suited entity type for foreigners and NRI’s. Who wants to start a business in India.

Why is Private Limited Company the best-suited entity type for foreigners and NRI’s?

There are many reasons that a foreign national or an NRI should choose Private Limited Company as the entity type. Some of those I have explained below.

FDI – In the majority of sectors in India. Foreign direct investment in Private Limited Companies is eligible for 100% in the automatic route. That means the company does not need any pre-approval from the government or RBI. But the company has to report to RBI about the FDI. To know more about FDI in different sectors in India read – Foreign Direct Investment (FDI) Into An Indian Private Limited Company

Raising Funds – Raising Venture Capital and Equity funds in Private Limited Company is easier. As compared to other types of entities like LLPs and Limited Companies.

Growth and Expansion – Business Expansion and growth are easier in Private Limited Companies. Private companies can issue equity shares to the shareholders. Also adding and removing a shareholder is an easy process.

Compliance and Recognition – Even though Private Limited Companies have higher compliance and audit procedures these insures the companies stay in compliance regulations. As a result of that, the recognition of Private Limited Companies is way higher than other entity types.

ESOP – Offering options for attracting great talent by offering ESOPs (Employee Stock Option Plans) is available for Private Limited Companies.

 

2. Filing for FC-GPR:

 

Every Company having foreign investment required to report RBI (Reserve Bank of India) about the investment. This process needs to be done by filling the form FC-GPR. All the shareholders (NRI’s and Foreigners) who are investing some amount in the Indian entity, that's considered as FDI.

FC-GPR is required for the Issue of capital instruments by an Indian company to a person resident outside India. Along with FC-GPR, a CA certificate needs to be filed

 

3. Getting the Required Licenses and Registrations.

 

Once the incorporation is complete the other steps can be processed parallelly. And getting the required Licenses and Registrations is completely depends on the nature and scale of the business.

However, we have mentioned below a few registrations that might require for your business.

  1. Commencement of Business Compliance:

    As per the Companies (Amendment) Ordinance 2018. All the companies registered on or after 2 November 2018 need to file for a certificate of commencement of business mandatorily. Within 180 days of the incorporation.

  2. GST Registration

    Goods and Service Tax (GST) Registration is mandatory if

    • The business is E-commerce.
    • The business turnover crosses 20 Lakh rupees in a financial year.
    • The business is doing interstate transactions

    However, we advise you to take it anyway as it has the following benefits.

    • GST eliminates the cascading effects of Tax.
    • A business registered with GST can avail input credit of GST paid on purchase invoices
    • Ease of compliance
    • Efficient deployment of resources
  3. LUT Registration for Exemption of GST

    A letter of undertaking is a document that the user provides declaring the fulfillment of all requirements under GST. It is mandatory to furnish LUT to export goods or services or both without paying IGST. If the exporter fails to provide the LUT, then he has to pay IGST or provide an export bond.

  4. Shops and Establishment license

    Shops & Commercial Establishments is an act. That provides for the regulation of conditions of work and employment in shops and commercial establishments.

    Shops and Establishment License is must if the company has an office. In which persons employed are mainly engaged in office work, a hotel or restaurant, boarding, café, etc.

  5. P.T. Registration

    Under the Professional Tax Regulations, an employer must obtain TWO registrations. Depends on the status of whether there are people employed by the business or not.

    1. Professional Tax Employer Registration - Certificate of Enrollment (EC):

    Every business entity must get the Employer Registration - Certificate of Enrollment (EC). Within 30 days from the date of commencement of business. This registration is mandatory for business whether they employ any people in employment or not.

    2. Professional Tax Employee Registration - Certificate of Registration (RC):

    Every employer liable to Professional Tax on behalf of their employees must get Employee Registration Certificate. Within 30 days of his becoming liable to pay tax.

    Professional Tax Employee Registration is a must for all employers. Who employ people with salary or wages of Rs.15000 /- or more. Certificate of Enrollment (EC) is must for obtaining the Certificate of Registration (RC).

  6. ESI and PF Registration:

    ESI is Employee State Insurance (ESI) and PF is the Provident Fund (PF). These are two social security schemes available to employees working in India.

    Companies, where 10 or more people are employed irrespective of their monthly earnings ESI registration is must.

    Just like the ESI scheme. The Employees Provident Fund (EPF) is a Contributory fund. With contributions from both the employee and their employers.

    EPF is a compulsory and contributory fund for Indian organizations that have employed 20 or more persons.

    The employer must get the registration within 1 month of attaining the strength.

There are other Licenses and Registrations which might need. such as Import Export Code (IEC), Trade License, FSSAI License (food), Etc. but that completely depends on the nature and scale of the business.

Legal Requirements for starting a business in India

There are few legal formalities that need to be followed for incorporating a company in India.

  • A company must have at least 2 shareholders (and can have a maximum of 200)

    if you dot have 2 shareholders you can ask anyone from your family or friends to be the 2nd shareholder and they can hold a minimum of 1 share of the company.

  • At least 2 directors required of which 1 director must be a resident Indian.

    However, I will advise you to have 3 directors with two being from the same country. This helps in saving the travel cost during the annual board meetings later.

  • Please note that Shareholders and Directors can be the same people.
  • You will need an address that will act as your company address. You may or may not have your team working from this office/ address. (Rental agreement and NOC from the owner of the property is required)

Process of starting a business in India

The process involves 4 steps for private limited company incorporation.

1) Digital Signature.

2) Name registration of the company.

3) Drafting and signing of incorporation documents (MoA, AoA, etc.).

4) Applying for Incorporation in ROC.

process of starting a business in India

Documents required for starting a business in India

 

For each Director and Shareholder:

  • Identity proof
    • Passport copy ( mandatory for foreigners and Indians with passport)
    • PAN copy (Mandatory for Indians)
    • In case an Indian does not have a passport:
      • Voters ID card
      • Driving License
    • Address proof
      • Anyone of:
        • Bank statement
        • Phone bill
        • Mobile bill
        • Electricity bill

Please note that these documents should not be more than 2 months old

Notarizing and Apostilling of documents: (for foreign directors/shareholders)

  • Passport issued by any country other than India must be notarized and apostilled in that country
  • The address proof from any country other than India (effectively for foreigners and NRIs) must be notarized and apostilled in that country
  • Any document signed outside India must be notarized and apostilled in that country

For the registered address:

  • Rental agreement
  • NOC from the owner of the property
  • Utility bill

We at Wazzeer specialized in helping foreigners and NRIs Setting up and operating a business in India. If you need any support reach out to us at Wazzeer or enquire@wazzeer.com

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