A foreign business that wants to sell into India, build a team here or invest in an Indian venture has to decide what kind of presence to set up first. The answer depends on one question above the others: will the Indian presence earn income and enter into contracts, or only support the parent? This guide, accurate as of October 2026, explains the four routes. Foreign investment and exchange-control rules change, so confirm each point against the rule in force on the day you invest.
We are a law firm in Delhi that acts in the disputes that follow business arrangements, and our advocates appear before the courts and tribunals where those disputes are decided. Incorporation filings, tax structuring and accounting are usually done together with a company secretary and a chartered accountant, and we say where their advice is needed.
The four routes at a glance
| Subsidiary company | LLP | Branch office | Liaison office | |
|---|---|---|---|---|
| Separate legal entity | Yes | Yes | No, an extension of the parent | No |
| May earn income in India | Yes | Yes | Yes, only in permitted activities | No |
| Limited liability for the parent | Yes | Yes | No | No |
| Governing law | Companies Act, 2013 | LLP Act, 2008 | Foreign exchange regulations and Companies Act | Foreign exchange regulations and Companies Act |
| Typical use | Trading, services, manufacturing, investment | Professional and service businesses, joint ventures | Parent’s own export, consulting, support work | Market research, liaison, promotion |
1. Wholly owned subsidiary (private limited company)
This is the default choice for a business that will operate in India for the long term. The foreign parent holds the shares, and the company is a separate person: it signs contracts, employs staff, holds property and is sued in its own name.
- Directors and shareholders. A private company needs at least two directors, one of whom must be resident in India, and at least two shareholders; the parent can hold the shares with a nominee holding one.
- Foreign investment. Whether you may hold 100% depends on the sector. Many sectors are open under the automatic route; some have a cap or need prior government approval.
- Reporting. Money brought in for shares must be reported to the authorised dealer bank and the Reserve Bank of India on the prescribed forms within the stated time limits, and the shares must be issued within the period the rules allow. Missing these deadlines is the commonest avoidable error we see foreign investors make.
- Ongoing compliance. Annual accounts and returns with the Ministry of Corporate Affairs, statutory audit, and an annual foreign liabilities and assets return to the Reserve Bank of India.
2. Limited liability partnership (LLP)
An LLP offers limited liability with lighter compliance than a company. Foreign investment in an LLP is allowed under the automatic route only in sectors where 100% automatic investment is permitted and no performance conditions are attached. It needs at least two partners, including two designated partners, one of whom must be resident in India. An LLP suits service businesses and joint ventures, but it cannot raise capital through shares, which makes it a poor fit for a venture-funded business.
3. Branch office
A branch is the foreign company itself operating in India. It is not a separate entity, so the parent is liable for what the branch does. It is permitted only for the activities the foreign exchange regulations list, and it needs the approval of an authorised dealer bank, and in certain cases the Reserve Bank of India, before it opens. It must then register with the Registrar of Companies as a foreign company. Its Indian profits are taxed in India, so take tax advice before choosing it.
4. Liaison office
A liaison office is a representative presence: it can promote the parent’s business, collect information and pass communications between the parent and Indian parties. It may not carry on commercial activity or earn income, and its costs are met by remittances from abroad. Approval is granted for a limited period and is renewable. Because it cannot earn revenue, many businesses use it as a short market-testing phase before forming a subsidiary.
How to choose
- List what the Indian entity will actually do. Selling, hiring, owning property or signing customer contracts points to a subsidiary or LLP. Research and relationship-building only points to a liaison office.
- Check the sector. Look up the sector in the current consolidated foreign direct investment policy to learn whether the route is automatic or needs approval, and whether a cap applies.
- Decide how much liability the parent will carry. Subsidiaries and LLPs ring-fence it. Branches and liaison offices do not.
- Plan the exit. Closing a branch or liaison office, and repatriating funds from a subsidiary, each follow their own procedure, so ask about it before you commit.
Plan for disputes before you sign anything
Setting up a presence usually means a first Indian contract: a distribution agreement, a joint venture, a premises lease, an employment contract. Three clauses decide how expensive a later disagreement will be: governing law, the seat of arbitration, and the court that has jurisdiction. Foreign businesses that skip them tend to find themselves in a forum they did not choose. We can review a dispute clause before signing; speak to our advocates on 99115 44811. For what we do and where we appear, see our page on the law firm in Delhi and our commercial dispute work.
This article is general information, not advice on your structure. It is current as of October 2026, and foreign investment, foreign exchange and company law rules are amended often.