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Legal compliance for doing business in india / setup business in India Part 1

India is one of the fastest growing Asian economies of today. It is the hub of global BPO and software industry. Today, more and more companies from around the world are interested in a base in India. This aim of this article is to provide information in brief regarding setup of company and legal requirement for starting a business in India.

The first and foremost thing is setting up/ forming a company in India. Here, an international company has three modes for forming a company in India i.e. opening foreign branch office, open liaison office or register a fully owned foreign subsidiary company.

Foreign Branch / Liaison Offices are setup where manufacturing is not required i.e. either to sale / purchase of goods for foreign company or to undertaken liaison work i.e. source sale / purchase but the transaction is made directly by the foreign company. Foreign Branch Office is allowed to undertake sale / purchase as well as providing services on its own account whereas Liaison Office is allowed to only undertake liaison activities and actual sale / purchase / provision of services is done by the parent company.

Whereas fully owned subsidiary is setup to undertake commercial activity like manufacturing, providing services etc. on its own account and is required to file necessary returns with various taxation and legal authorities as a separate entity from its prent.

Before, setting up a company in any of the modes mentioned above necessary permission of either the Reserve Bank of India (RBI) or Foreign Investment Promotion Board (FIPB) is required. There are certain industries where 100% foreign equity participation are allowed. There is no requirement for permission for them. For others permission is required from either FIPB or RBI before registration

After obtaining permission a company / branch office / liaison office is required to be registered with the Registrar of Companies under the Companies Act. Various forms and other legal requirements as required under the Companies Act is to be fulfilled before the Registrar of Companies including preparation of Memorandum and Articles of Association. The registrar on being satisfied issues certificate of incorporation and the company comes into existence.

After incorporation the company is required to be registered with various Tax and Legal Authorities to start commencement of business. Details on Tax and Legal Compliances shall be provided in the next part............................

Article Source: http://www.articles2know.com

Written By Ashish Ahuja. The author is an Indian Chartered Accountant and founder partner of Ahuja & Ahuja which provides services for Company Formation and Business Setup.

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