Large companies are usually on the hunt for the next big thing to even improve its current revenue channel. It is only expected since opening up a business is about making profits and taking chances.
To make money, you have to spend money first, of course. These companies usually invest their funds in different kinds of expansion plans to tap into new target markets, those not yet covered by their current product and service offering.
The companies which have the financial capability—and bold enough—to go overseas do so to set up a foreign subsidiary. But before delving into this topic, let us define first what is a subsidiary.
A subsidiary is a company owned by a company referred to as the parent firm or the holding group. The so-called parent company has the controlling stake, representing over half of the ownership, in the subsidiary. If the parent has 100-percent ownership in the said company, it is now called as a wholly owned subsidiary.
It is not surprising if foreign companies are setting up their subsidiaries in India. Its government has been implementing initiatives to ease the doing of business in the country; and investors are finding it an attractive investment destination.
Let us find out more about how to incorporate subsidiary of foreign company in India.
Setting Up the Foreign Subsidiary Company in India
Incorporation of company in India, whether foreign or local, is covered by the Companies Act of 2013. You can register your company as private limited or public limited. However, generally, foreign companies are opting to set up a wholly owned subsidiary in India.
In India, a foreign company can establish its subsidiary by:
- Incorporating the company as a joint venture or as foreign company registration by way of Indian subsidiary
- Establishing liaison office or representative office of the foreign company that has the capacity and permission to perform corporate affairs
Requirements to Open a Subsidiary in India
Like in any business registration, you have to prepare necessary documentation to be submitted to the government and appropriate regulator. This is to assure the legitimacy of the company. In a way, it can also protect the potential customers and clients of the business. Here are the requirements for opening a subsidiary in India:
- Digital signature certificate of the directors and shareholders
- Application for the company name via Form RUN or Reserve Unique Name
- Application for the incorporation of the company and submission of Memorandum and Articles of Association
- Payment of necessary fees online.
- Approval of the application
- Receipt of certificate of incorporation
Reasons Why You Should Incorporate a Foreign Subsidiary
As mentioned, setting up a business in a different country is establishing access to new markets for your products and services. This can lead to your brand having wider reach and recognition. Therefore, you will need India incorporation services from a provider who knows everything about the country.
It can also be ideal to build up your own manufacturing site in another country to lower the cost of production and distribution to that specific location.
In addition, you can also tap into a new workforce that has the unique skill sets you are looking for.
If you need help setting up your foreign subsidiary in India, look no further. Contact 3E Accounting India and we will provide you the assistance you need. We are a business service provider in India ready to serve you today.