If you want to set up a business in India, the first real decision is the legal vehicle. It decides who can own it, how foreign money may enter, which Indian filings follow, and how profits eventually reach the United States or Canada. This guide compares the common choices and walks through incorporation on the Ministry of Corporate Affairs (MCA) portal. Indian amounts use lakh (100,000) and crore (10 million).
Which entity should you use to set up a business in India?
| Vehicle | Foreign owners allowed? | Best for | Main trade-offs |
|---|---|---|---|
| Private limited company | Yes, subject to sector rules | Subsidiaries, startups, anything that will raise capital | Annual audit and ROC filings; at least two directors |
| LLP | Yes, in 100% automatic-route sectors without conditions | Professional and service ventures; flexible profit sharing | Narrower FDI access; partners' tax treatment differs |
| One Person Company (OPC) | Only an Indian citizen, resident or not | A single NRI or resident founder | Not open to U.S. or Canadian citizens who are not Indian citizens |
| Branch office | Foreign company only | Extending an existing foreign business | Profits taxed as a foreign company's; RBI criteria |
| Liaison office | Foreign company only | Representing the parent without earning income | Cannot carry on commercial activity |
| Project office | Foreign company with an Indian contract | One defined project | Ends with the project |
| Sole proprietorship or partnership | NRIs and OCIs on a non-repatriation basis | Small local activity | Unlimited liability; limited banking and FEMA flexibility |
A private company must have at least two directors, and the Companies Act requires at least one director who stays in India for 182 days or more during the financial year. A One Person Company needs one director, and the MCA states that only a natural person who is an Indian citizen, whether resident in India or not, can be its member or nominee.
Who can invest, and under which route?
India regulates foreign investment under the Foreign Exchange Management Act, 1999 (FEMA). The RBI's Master Direction (updated up to June 15, 2026) describes two entry routes:
- Automatic route: no prior government approval. For sectors not separately listed and not prohibited, up to 100% foreign investment is permitted, with exceptions such as financial services.
- Government route: prior approval through the Foreign Investment Facilitation Portal.
Prohibited activities include lottery, gambling, chit funds, Nidhi companies, real estate business (as defined, which excludes townships and construction), cigarettes and atomic energy. Investors from countries sharing a land border with India, or with beneficial owners there, can invest only through the government route. Sector caps and conditions change, so your Indian Chartered Accountant (CA) or counsel should confirm the position on the day you invest.
How to incorporate a private limited company
- Pick directors and shareholders. Each proposed director needs a digital signature certificate (DSC) and identity documents. Foreign directors apply for a Director Identification Number inside the same filing.
- Register on the MCA portal. The MCA's V3 system expects a business-user login with the DSC associated.
- Reserve the name (SPICe+ Part A). A reserved name stays valid for a limited time. The MCA's FAQ says 20 days, and a June 2026 MCA notice extended name-reservation validity, so check the current period before you file.
- File SPICe+ Part B. This is the incorporation form, with e-MoA (INC-33) and e-AoA (INC-34). It can also request DIN, PAN, TAN, EPFO and ESIC registration, a bank account, and GST registration if you apply for it. Professional tax registration is bundled for Maharashtra, Karnataka and West Bengal.
- Receive the certificate of incorporation. It carries the Corporate Identity Number (CIN). If the correspondence address differs from the registered office, the MCA's FAQ points to Form INC-22 within 30 days of incorporation.
- Complete the first 30 days. Hold the first board meeting within 30 days of incorporation, appoint the first auditor, open the current account, and issue share certificates.
- Bring in the foreign money correctly. Remit through banking channels into the company's account, issue shares within 60 days, and file the FC-GPR reporting (see our FDI and FEMA reporting guide).
Documents and information you need
- Passport and proof of address for each foreign director and shareholder, typically notarised or apostilled, so ask your Indian CA which form the MCA currently accepts
- Indian PAN for resident directors, plus a proposed registered-office address with supporting proof
- Proposed name options, objects clause and share capital split
- Valuation certificate from a Chartered Accountant, merchant banker or cost accountant for the issue price, where FEMA pricing rules apply
- Bank details of the foreign investor and the Indian company
Foreign companies: branch, liaison and project offices
A foreign company applies on Form FNC to a designated authorised dealer (AD) Category-I bank, which forwards it for a Unique Identification Number from the RBI. The RBI Master Direction (last updated May 2021) sets these criteria:
- Branch office: a profit-making record in the home country for the five preceding financial years and net worth of at least USD 100,000.
- Liaison office: profits for three preceding years and net worth of at least USD 50,000; validity is generally three years.
- Project office: general permission where the foreign company holds a contract from an Indian company and the project meets funding conditions.
Approval lapses if the office is not opened within six months. A foreign company with a place of business in India also registers under Chapter XXII of the Companies Act and files annual accounts on Forms FC-3 or FC-4.
A worked example
A Batavia software founder plans a Pune subsidiary. The Indian company is incorporated through SPICe+ in November 2026. The founder wires USD 150,000 on 2 November 2026, so shares must be issued by 1 January 2027. If the board allots them on 20 December 2026, the FC-GPR deadline is 19 January 2027. The U.S. owner also tracks Form 5471 for the new foreign corporation.
Mistakes to avoid
- Starting to invoice before PAN, bank account and GST registration are live
- Wiring money to a director's personal account instead of the company's
- Letting the 60-day share-issue window pass, which forces a refund of the funds
- Choosing an OPC for a foreign national who is not an Indian citizen
- Running commercial work through a liaison office
How we can help
From Aurora and the Fox Valley we handle the U.S. side: planning how the Indian entity is held, U.S. reporting, and the formation of any U.S. parent. We coordinate with your Indian Chartered Accountant for MCA, FEMA and Indian tax filings so all three countries' filings agree. See business formation and registrations, cross-border tax and startup tax planning. Browse the full India: Tax and Compliance section.
Frequently asked questions
Can a U.S. citizen own 100% of an Indian company?
Often yes, through a private limited company, if the sector is open on the automatic route and the other conditions are met. Some sectors have caps or need approval, so confirm before investing.
Is a liaison office taxed?
A liaison office cannot earn income in India, so it mainly carries costs. It still has to meet RBI and annual activity reporting duties, and your Indian CA confirms any tax filings.
Do I need to live in India to be a director?
No, but every company needs at least one director who stays in India for 182 days or more in the financial year.
Which is cheaper to run, a company or an LLP?
An LLP usually has lighter governance, but its FDI access is narrower. Compare the annual filings in our private limited company compliance and LLP compliance guides.
Can an NRI start a sole proprietorship?
NRIs and OCIs may invest in a proprietary concern on a non-repatriation basis. Repatriation, banking and tax rules are narrower, so get advice first.
Official sources
- MCA: FAQs on SPICe+ and linked filings
- MCA: FAQs on One Person Company
- RBI: Master Direction on Foreign Investment in India (updated up to June 15, 2026)
- RBI: Master Direction on branch, liaison and project offices
- Companies Act, 2013 (MCA copy)
This page summarizes public guidance in plain language. If anything here differs from the official source, the official source controls.
General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.