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Doing Business In India

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Doing Business In India Any resident / non resident who intents to start business in India has to select its business modules. The following are various type of business module :
  • Sole Proprietorship
  • Partnership
  • Limited Liability Partnership
  • Private Limited Company
  • Public Limited Company
  • Association of Persons
In India most popular and advisable business module is "Private Limited Company". The following chart contains various formalities for incorporating a Private Limited Company in India.
Action Plan Step No Turn around time (days)
Obtain DIN for proposed Directors of the new Company 1 2
Obtain DSC for proposed Directors of the Company 2 3
Filing application for availability of the proposed name of company for approval to the Registrar of Companies (ROC); 3 7
Drafting of Memorandum & Articles of Association (MOA) of the proposed company 4 3
Stamping of the Memorandum of Association and Articles of Association from State Treasury. 5 1
Execution of various documents including MOA, declaration & POA etc. 6 1
Present the required documents along with the registration fee to the Registrar of Companies and to get them vetted 7 3
Obtaining Certificate of Incorporation 8 2
Obtain a company seal 9 2
Application for Permanent Account Number 10 7
Open Bank Account 11 1
Application for Tax Account Number for withholding tax 12 7
Obtain Importer Exporter Code Number (In the case of Importer / Exporter) 13 7
Register for value added tax (VAT) before the Sales Tax Officer of the ward in which the company is located, if applicable 14 10
Register for Profession tax. If applicable 15 2
Register with Employees' Provident Fund Organization & ESIC as and when applicable 16 10
Filing for Government Approval before RBI/FIPB for Foreigners and NRI's, if applicable 17 15
Note: Various action plan as stated above can take place simultaneously. The Turn around time (days) mentioned above is only indicative and depends upon time taken by the client to furnish desired details The actual time and procedure may vary with city, state and the nature of business activities
A private limited company has the following features:
  • Number of shareholders is limited to fifty excluding its present & past employees;
  • Shareholders' right to transfer shares is restricted; and
  • Prohibition on invitation to the public to subscribe for any shares in or debentures of the company.
  • Prohibits any invitation or acceptance of deposit from persons other than its members, directors or their relatives.
A Public Limited company has the following features:
  • It must have at least seven members.
  • A public company is not authorized commence business immediately on receipt of Incorporation certificate. In order to be eligible to commence business as a as a corporate body, it must obtain another certificate called "Certificate of Commencement of Business ".
  • It must publish a prospectus or file a statement in lieu of a prospectus before it can start transacting business.
  • A public company is required to have at least three directors.
  • It must hold statutory meetings within a period of not less than 1 month nor more than 6 months from the date at which the company is entitled to commence business.
There are several other provisions contained in the Companies Act 1956 which are applicable only to a public limited company those are relevant for day to day operation of the company.
Foreign companies are allowed to set up branch office in India for the purpose of following activities:
  • export/import of goods
  • rendering professional or consultancy services
  • R&D, promoting technical or financial collaborations,
  • representing the parent company, acting as buying/selling agents
  • rendering services in IT and development of software
  • rendering technical support to the products supplied by the parent/group companies foreign airline/shipping companies.
Such branch offices could be established with the approval of the government of India and may remit outside India profit of the branch, subject to applicable Indian Rules & Regulation
A Liaison Office could be established with the prior approval of appropriate Government Authorities as prescribed under the prevailing Indian Rules & Regulations. The Liaison Office can undertake the activities which are confined to collection of information, promotion of exports/imports and facilitate technical/financial collaborations. However, it cannot undertake any commercial activity in any manner.
Foreign Companies planning to execute specific projects in India can set up a temporary project/site offices in India for carrying out activities only relating to the project for which it has setup project office. The Government of India has now granted general permission to foreign entities to establish project offices subject to terms & conditions.
It is a new phenomenon in Indian context. The Parliament of India has enacted (Limited Liability Partnership (LLP) Act of 2008). Therefore, now the Indian laws permits to Incorporate LLP. It shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. The liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner 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 wrongful business decisions or misconduct.

LLP is an alternative corporate business module 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 module is recommendable for small and medium enterprises in general and for the enterprises in services sector in particular.
Joint Venture Companies are the most preferred module of corporate entities for Doing Business in India to achieve specific objectives of a partnership like temporary arrangement between two or more firms. JVs are advantageous as a risk reducing mechanism in new-market penetration, and in pooling of resource for large projects. The Company incorporated in India, even up to 100% foreign equity, are at par at domestic companies. A Joint Venture may be any of the business modules available. There are no separate laws for joint ventures in India. They, however, present unique problems in equity ownership, operational control, and distribution of profits (or losses).
A subsidiary, in business matters, is an entity that is controlled by a separate entity. The controlled entity is called a company, corporation, or limited liability company and in some cases can be a government or state-owned enterprise, and the controlling entity is called its parent (or the parent company). The reason for this distinction is that a lone company cannot be a subsidiary of any organization; only an entity representing a legal fiction as a separate entity can be a subsidiary. While individuals have the capacity to act on their own initiative, a business entity can only act through its directors, officers and employees.

Note that contrary to popular belief, a parent company does not have to be the larger or "more powerful" entity; it is possible for the parent company to be smaller than a subsidiary, or the parent may be larger than some or all of its subsidiaries (if it has more than one). The parent and the subsidiary do not necessarily have to operate in the same locations, or operate the same businesses, but it is also possible that they could conceivably be competitors in the marketplace. Also, because a parent company and a subsidiary are separate entities, it is entirely possible for one of them to be involved in legal proceedings, bankruptcy, tax delinquency, indictment and/or under investigation, while the other is not.

The most common way that control of a subsidiary is achieved is through the ownership of shares in the subsidiary by the parent. These shares give the parent the necessary votes to determine the composition of the board of the subsidiary and so exercise control. This gives rise to the common presumption that 50% plus one share is enough to create a subsidiary. There are, however, other ways that control can come about and the exact rules both as to what control is needed and how it is achieved can be complex.

Subsidiaries are separate, distinct legal entities for the purposes of taxation and regulation. For this reason, they differ from divisions, which are businesses fully integrated within the main company, and not legally or otherwise distinct from it. Subsidiaries are a common feature of business life and most if not all major businesses organize their operations in this way over the world.
Address : Contact Person : Phone No. :
170/11, Bhikam Colony, Tigaon Road, Ballabgarh, Faridabad-121004,
Ms. Shubhra Agrawal (Director) +91-129-2242098
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