India is the most preferred country for several commercial activities. Several foreign companies visit and invest in India or plan to make their strong entry in India. One of the important reasons for foreign companies to prefer India is because of the large population. Moreover, there are also attracted by the low labor expenses and buying capacity of Indians.
To attract foreign investors, the Indian government have increased FDI (Foreign Direct Investment). But still, some fields are not permitted for Foreign Direct Investment.

Common thoughts about FDI
People have various opinions regarding foreign business ventures establishing in India. Some believe that it is a risk to Indian establishments and companies, and there are chances for the country to lose its sovereignty. But, some broad-minded people view foreign establishments differently. They believe that it helps in developing the economy of the nation and also generate employment opportunities for common people.

How foreign companies enter India?
Several foreign companies aim to establish their business in India. It was not very easy for them to do business. They make use of new lofty policies announced by the government. Thus, foreign companies have gained some peace when it comes to establishing businesses in India. There are certain ways where a foreign company can establish a business in India.

Enter into the country as an Indian organization: The overseas company can function by registering under the public or private limited company as per Company’s Act 2013 by any of the below mentioned ways.

As a Joint Venture (JV): The foreign establishment can form a joint venture or JV with an Indian company. They can run the business with a 51:49 partnership ratio. The maximum ratio will be owned by an Indian partner or the Indian company.

WOD or Wholly owned subsidiary: It is possible in the regions where FDI is allowed 100 percent and has been permitted by the government. By following this method, the foreign establishment can get 100 percent ownership rights of the company.

If the companies need to be registered, they have to file an application with Registrar of Companies or ROC. After the foreign organization completes the necessary formalities and registers with ROC, the foreign company become eligible to all the laws which are applied for an Indian organization.

For instance, ESI, tax, PF, labor law, etc. have to be set and followed according to the Indian standards.

As a foreign organization: The foreign company is eligible to set up their branch or base company in India by any of the below mentioned ways.

Liaison offices: It is also referred to as a representative office. It acts as an associating connection between its entities and head office in India. It is not possible for them to take part in commercial activity. The role is to identify the Indian market and distribute the details to the main parent company. The office can import or export to or from India and also assist in the technical association between the companies of India and the parenting company.

Branch offices: It is the best option for foreign companies that are dealing in the trading and manufacturing business. It benefits in the following ways.

  • Import and export of goods
  • Consultancy services
  • Perform research work
  • Offering technical assistance to the products provided by the group or parent companies
  • Promoting technical association between other companies situated in India and parent company
  • Offering IT services in India

Limited liability partnership or LLP in India
LLP in India is popular for less compliance when compared to an individual or private limited company. It is now possible for the foreign companies to enter into India in the form of LLP or limited liability partnership. The LLP agreement makes the company responsible only to a certain amount of debts. However, it needs pre-approval document from the government. Foreign direct investment in LLP has permitted several new areas of opportunities for several foreign establishments entering into India.

Some of the important norms you should know about Foreign Direct Investment in LLP are as follows:

  • LLP is not eligible to admit FDI in areas where FDI is permitted under government approval way.
  • No FDI can operate under LLP in real estate, agriculture, print media and plantation.
  • LLP is not eligible to permit FDI in sectors that are less than cent percent FDI as per automatic route.

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