How Can a Non-Resident Start a Business in India?

In 2022, RCI registered an overwhelming growth in inward gross remittances, which surpassed an all-time high of $107.5 billion. It’s a positive sign for non-residents who are likely to start a business here.

Starting a business in India as a non-resident involves certain procedures and considerations.

Step By Step Guide to Start a Business by NRIs

Here are the general steps to guide you through the process:

1. Determine the Business Structure

Decide on the type of business entity you wish to establish, such as a Private Limited Company, Limited Liability Partnership (LLP), or a Branch Office.

• Private Limited Company: Owning a Private Limited Company offers limited liability protection and allows for the infusion of foreign capital. It is a popular choice for businesses with growth potential.
• Limited Liability Partnership (LLP): Opting in an LLP means enjoying the combined benefits of a partnership and a company. It offers limited liability to partners and is suitable for small and medium-sized businesses.
• Branch Office: NRIs are allowed to set up a branch office here as an extension of their existing foreign company. This is the case of already established business. It allows them to conduct specific activities as permitted by the Reserve Bank of India (RBI).
• Liaison Office: A liaison office acts as a communication channel between the NRI’s parent company and potential customers in India. It cannot undertake any commercial activities and is primarily focused on market research and promotion.
• Project Office: NRIs undertaking specific projects in India can establish an office during the tenure of the project. But for this, an approval from the RBI is needed, and is often dissolved after project completion.
• Sole Proprietorship: Indian emigrants can also operate as sole proprietors, where they are personally liable for the business. However, this form of business does not offer limited liability protection.
• Partnership Firm: Non-residents can enter into partnerships with Indian residents or other NRIs to start a partnership firm. It is governed by the Indian Partnership Act, 1932.

Here, the point to consider is that the selection of business structure depends on factors. These can be associated with the nature of the business, desired level of control, liability protection, and regulatory requirements. Non-residents should consider consulting with legal and business professionals to understand the specific requirements and implications associated with each business type.

Another obstacle can be compliance with FEMA. They should comply with the Foreign Exchange Management Act (FEMA) guidelines and seek necessary approvals from the RBI or other regulatory authorities when establishing and operating businesses in India.

2. Obtain a Digital Signature Certificate (DSC)

A DSC is required for online filing and registration purposes. After the pandemic, Indian government has shifted its MCA facilities online. You can obtain it from certifying authorities in India.

3. Procure a Director Identification Number (DIN)

If you (NRI) are planning to set up a Private Limited Company, you must apply for a DIN from the Ministry of Corporate Affairs (MCA).

4. Choose a Business Name

This is a next step wherein you need to select a unique name for your business entity and ensure its availability for registration.

5. Register with the Registrar of Companies (RoC)

In order to get the certificate of incorporation, you need to file the necessary documents, including the Memorandum of Association (MoA) and Articles of Association (AoA). With this, the registration of your business entity with the RoC is initiated.

6. Acquire a Permanent Account Number (PAN)

A PAN is a must-have if you do any transactions here. So, you should apply for a PAN with the Income Tax Department to fulfil tax obligations.

7. Open a Bank Account

Now that you are likely to commence your own business, it’s necessary to open an Indian bank account (NRE Or NRO) in the name of your business entity.

8. Apply for Necessary Business Licenses

Depending on the nature of your business, you may need specific licences and permits from relevant authorities. Consult with an experienced consultant to discover what licences to have.

9. Comply with Tax Regulations

Understand and comply with the tax obligations applicable to your business, including Goods and Services Tax (GST), if applicable.

10. Consider Foreign Exchange and FEMA Regulations

Familiarize yourself with the Foreign Exchange Management Act (FEMA) guidelines for capital investment, repatriation, and other foreign exchange-related matters.

11. Hire Professionals

Engage legal, accounting, and tax professionals to ensure compliance with Indian laws and regulations.

It is important to note that specific requirements and procedures may vary based on the business structure, sector, and location within India. It is advisable to consult with professionals or company registration consultants with expertise in Indian business laws to navigate the process smoothly.