Setting Up an Indian Subsidiary. The Complete Guide.
Establishing a subsidiary in India gives your business a permanent legal presence — enabling revenue generation, investment, and long-term growth. This guide covers everything you need to know, from choosing the right structure to managing ongoing compliance.
Why Set Up an Indian Subsidiary?
A subsidiary is the right structure when you are ready to commit to India — generating revenue, building a permanent team, and establishing a credible local presence.
Full Legal Presence in India
A Private Limited Company gives your business a permanent, credible legal identity in India — enabling you to sign contracts, open bank accounts, raise invoices, and bid for enterprise and government contracts in your own name.
Revenue-Generating Operations
Unlike an EOR or liaison office, a subsidiary can generate revenue directly in India — making it the right structure for companies that want to sell to Indian customers, not just hire Indian talent.
Investment & Funding Ready
Indian subsidiaries can receive foreign investment, issue ESOPs to employees, and raise capital from Indian investors — making it the preferred structure for companies planning long-term India growth.
Limited Liability Protection
A Private Limited Company provides limited liability protection — your parent company's assets are shielded from the subsidiary's liabilities, giving you a clean separation between India operations and global exposure.
How LawSync Incorporates Your India Subsidiary
LawSync manages the entire incorporation process end-to-end — from name reservation to post-incorporation setup. Here is what the journey looks like.
Name Reservation (RUN)
Reserve your company name through the MCA's Reserve Unique Name (RUN) portal. LawSync checks availability, advises on naming conventions, and files the application on your behalf.
Director Identification & DSC
All proposed directors must obtain a Director Identification Number (DIN) and Digital Signature Certificate (DSC). LawSync manages the application process and documentation requirements.
MOA, AOA & SPICe+ Filing
LawSync drafts the Memorandum of Association (MOA) and Articles of Association (AOA), and files the SPICe+ form with the MCA — covering incorporation, PAN, TAN, GST, EPFO, and ESIC registration in a single integrated filing.
Certificate of Incorporation
Upon MCA approval, your company receives its Certificate of Incorporation, CIN, PAN, and TAN. LawSync then assists with bank account opening, GST registration, and post-incorporation compliance setup.
Post-Incorporation Compliance
Incorporation is just the beginning. Running an Indian subsidiary comes with a significant ongoing compliance burden — which LawSync manages entirely on your behalf.
Annual ROC Filings
Every Indian company must file annual returns (MGT-7) and financial statements (AOC-4) with the Registrar of Companies. Deadlines are strict — penalties for late filing escalate quickly.
Statutory Audit
All Indian companies must have their accounts audited by a Chartered Accountant annually. LawSync coordinates with empanelled auditors to ensure timely completion.
Income Tax & Transfer Pricing
Corporate income tax returns must be filed annually. Related-party transactions with your parent company must comply with India's transfer pricing regulations — requiring an annual TP study and Form 3CEB.
Payroll & Labour Compliance
Monthly payroll processing, TDS deduction, PF and ESI contributions, professional tax, and labour law compliance — all ongoing obligations that LawSync manages end-to-end.
FEMA & RBI Reporting
Foreign investment into an Indian subsidiary must be reported to the RBI via the FIRMS portal. Annual returns on foreign liabilities and assets (FLA) must also be filed. LawSync handles all FEMA compliance.
Board Meetings & Resolutions
Indian companies must hold a minimum of 4 board meetings per year, maintain statutory registers, and pass board resolutions for key decisions. LawSync provides company secretarial support for all these requirements.
Subsidiary vs. Employer of Record
Both models let you build an India team — but they suit very different stages and objectives. Here is how to choose.
| Aspect | Own Subsidiary | LawSync EOR |
|---|---|---|
| Time to first hire | 15–25 working days | 3–5 days |
| Setup cost | ₹50,000–₹1,50,000+ | None |
| Ongoing compliance burden | High (audit, ROC, tax, FEMA) | Zero — fully managed |
| Revenue generation in India | Yes | Not directly |
| India-resident director required | Yes (mandatory) | No |
| Raise investment / issue ESOPs | Yes | No |
| Legal employer of India staff | Your subsidiary | LawSync |
| Best for | Long-term India operations | Fast market entry / testing |
Many companies start with EOR to test the India market and transition to a subsidiary once they are ready to commit.
Common Mistakes When Setting Up in India
These are the errors that cost foreign companies the most — in penalties, delays, and reputational damage. LawSync helps you avoid every one of them.
No India-Resident Director
Every Indian Private Limited Company must have at least one director who is a resident of India (present in India for 182+ days in the previous calendar year). Many foreign companies overlook this requirement and face incorporation delays or regulatory action.
Incorrect FDI Route
Foreign investment into an Indian subsidiary must follow the correct FDI route — automatic or government approval — depending on the sector. Investing through the wrong route can result in compounding penalties under FEMA.
Missing Transfer Pricing Documentation
Transactions between the Indian subsidiary and its foreign parent must be at arm's length and documented in an annual transfer pricing study. Failure to maintain TP documentation attracts penalties of up to 2% of the transaction value.
Late ROC Filings
Annual return and financial statement filings with the ROC have strict deadlines. Late filing attracts additional fees that escalate with delay — and persistent non-compliance can result in director disqualification.
Inadequate Share Capital Structure
Getting the authorised and paid-up share capital structure wrong at incorporation creates complications for future investment rounds, ESOP issuance, and profit repatriation. LawSync advises on the optimal capital structure from the outset.
Ignoring State-Level Labour Laws
Labour law compliance in India is both central and state-specific. Companies often focus on central laws (PF, ESI, Gratuity) and overlook state-level obligations — Shops and Establishments Act registration, professional tax, and state-specific leave rules.
Frequently Asked Questions
What type of entity should a foreign company set up in India?
For most foreign companies, a Private Limited Company (Pvt Ltd) is the recommended structure. It offers limited liability, is widely recognised by Indian banks and counterparties, can receive foreign investment under the automatic FDI route in most sectors, and can employ staff directly. Liaison offices and branch offices are alternatives but come with significant restrictions — liaison offices cannot generate revenue, and branch offices are taxed at a higher rate (40%).
Do I need an India-resident director to incorporate a company in India?
Yes. The Companies Act, 2013 requires every Indian company to have at least one director who has been resident in India for a total period of not less than 182 days in the previous calendar year. LawSync can assist with identifying a suitable nominee director if required.
How long does it take to incorporate a Private Limited Company in India?
Typically 15–25 working days from submission of complete documentation — covering name reservation, DIN and DSC for directors, MOA/AOA drafting, SPICe+ filing, and receipt of the Certificate of Incorporation. LawSync manages the entire process and has established relationships with the MCA and tax authorities to minimise delays.
What is the minimum capital required to set up an Indian subsidiary?
There is no minimum paid-up capital requirement for a Private Limited Company under the Companies Act, 2013. However, the authorised share capital (the maximum capital the company can issue) must be declared at incorporation — LawSync advises on the optimal structure based on your business plan and future funding requirements.
What are the ongoing compliance requirements for an Indian subsidiary?
Key ongoing obligations include: annual ROC filings (MGT-7 and AOC-4), statutory audit, income tax return, transfer pricing study and Form 3CEB (for related-party transactions), monthly payroll and TDS compliance, PF and ESI filings, GST returns, RBI/FEMA reporting (FIRMS portal and FLA return), and a minimum of 4 board meetings per year. LawSync manages all of these as part of its subsidiary compliance service.
Should I set up a subsidiary or use an Employer of Record (EOR) to hire in India?
It depends on your objectives. If you want to hire India talent quickly without a long-term commitment to India operations, EOR is faster, cheaper, and carries zero compliance burden. If you want to generate revenue in India, raise investment, issue ESOPs, or build a permanent India presence, a subsidiary is the right structure. Many companies start with EOR to test the market and transition to a subsidiary once they are ready to commit.
Related Guides & Solutions
Let LawSync Incorporate Your India Subsidiary
Book a free consultation with LawSync's India incorporation experts. We will assess your structure, advise on the right entity type, and manage the entire incorporation and compliance process — so you can focus on building your India business.