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Types of Business Unit that Foreign National/Companies can open in India

By gkkedia Dt. May 25th, 2021

The above chart shows the common type of business unit which are currently prevailing in India. A Foreign National or a Foreign Company (incorporated outside India) are allowed to open all type of business units in India. In this blog we will discuss all type of business unit one by one and at the end,we will give the most beneficial form of business.

Meaning of Body Corporate – Section 2(11) of Companies Act, 2013 defines Body Corporate which includes Limited Liability Partnership(LLP), Branch Office, Subsidiary Company, Section 8 Company, One-person Company, Private Company, Public Company etc.

Limited Liability Partnership (LLP) in India – LLP is a partnership formed under the LLP Act, 2008 in which some or all partner have limited liabilities. LLP allows Foreign Direct Investment (FDI) through which a foreign national or a foreign Company can open LLP in India. However, one important point should be noted that one partner must be an Indian Resident.

Can Foreigner open Branch office in India?
As per RBI circular “Master Direction no 10/2015-16” stated that a foreign national or foreign entity can open their branch office, liaison office and project office in India subject to prior approval of Reserve bank of India (RBI). If a foreign entity intent to open branch office in India, so it should have sound financial records.
 
Can a foreigner open a Private Company in India?
Yes, Foreigner are allowed to open Private Limited Company in India without taking prior approval of Government except the sectors attached at the end of the blog –

  • Minimum 2 subscriber of Memorandum of Association, and
  • Minimum 2 directors (one must be Indian Resident)

 
Can a for Feigner open a Public Company in India?
Yes, foreigner can open public Company in India without taking prior approval of central government in almost all the sectors with no minimum capital requirement. Some of the main condition to incorporate a public Company are mentioned below

  • Minimum 7 subscriber of Memorandum of Association, and
  • Minimum 3 directors (one must be Indian Resident).

 
Can Foreigner open a subsidiary Company in India?
Yes, a foreign resident can open subsidiary and Wholly Owned Subsidiary Company in India defined u/s 2(87) of CompaniesAct, 2013 without taking any prior approval of the government except the sectors attach at the end of the blog Other condition will applicable accordance to the nature of subsidiary Company (Private subsidiary or public subsidiary)
 
Can foreigner Open One Person Company in India?
A Person can open One-Person Company in India if he/she

  • A Natural Person, or
  • A Citizen of India (Weather resident or otherwise)

 
Are eligible to incorporate one-person Company or become the nominee in one-person Company.

A natural person shall not be member of more than a One Person Company at any point of time and the said person shall not be a nominee of more than a One Person Company.

Conclusion
It means that Foreigner (expect Non Resident Indian) can’t open One Person Company (OPC) in India.

Can Foreigner Open Section 8 Companies in India? -Yes, a foreign national can open section 8 Company in India and become the member of section 8 Company subject to prior approval of central government.

Section 8 Company is a special type of Company that is formed under section 8 of Companies Act, 2013. The main purpose to form this Company is to carry out commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object.

Other than body corporate- It Includes

  • Proprietorship
  • Partnership Firms

 
Can a foreigner open Proprietorship firm in India?
RBI circular No. 39 dated on Dec, 3 2003 state that a Non-resident Indian or a person of Indian origin can open sole proprietorship in India

The amount shall not eligible for repatriation outside India some other condition are-

  • Amount must be invested by inward remittances
  • Any proprietorship concern should not engaged in agriculture and real estate business in India.

 
Can a foreigner open Partnership firm in India?
RBI circular No.39 is as it is applicable in case of partnership concern.

Foreign Direct investment flow in India sector wise

Approval Based Sector-

  • Mining and Minerals
  • Territorial Broadcasting (FM Radio)
  • Up linking News and current affair TV channels.
  • Uploading/Streaming of News through digital media
  • Publication of newspaper
  • Publication of magazines
  • Private security Agencies
  • Telecom Services
  • Multi Brand retails trading
  • Trading in food products
  • Bank in public sector.

 
Prohibited Sector-

  • Lottery business
  • Gambling and betting
  • Chit fund Company
  • Nidhi Company
  • Trading in transferable development right
  • Manufacturing in Cigars, tobacco and tobacco substitute.
  • Activities which are not open to public at large.
  • Real estate business, or construction of farm houses

 
Our Comments:

The foreign Companies or Foreign national can register the foreign subsidiary Company or Branch and an independent Company in India. Private Limited Company is the most favourable structure to get started. The process is completely online and can be completed in 30 Days.

Other form of business is also allowed but they are highly regulated in India and majorly required prior approval of government.

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