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Company Formation in India

So you've decided to start a business in India and researched your market. Now it's time to decide how you will register or set up a business in India. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?
Here are your typical options when setting up a business operations in India:
For formally starting a company in India, one is required to fulfill many formalities. As per an estimate, one would require more than a month to complete them. For foreign firms, in most of the cases it is mandatory to obtain government approval for incorporating a business in India or forming a joint venture. Certain restrictions apply in some sectors. It is recommended to seek proper legal advice before starting.

The following types of business are usually used by foreign investors to set up a business in India:

Corporations, of two types:

Private Limited Company: A company limited by shares in which there can be maximum 50 shareholders, no invitation can be made to the public for subscription of shares or debentures, cannot make or accept deposits from Public and there are restriction on the transfer of shares. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager of such a Company can at times be unlimited. The minimum number of shareholders is 2 and a minimum paid-up capital of 0.1 million rupies.

Public Limited Company: A company limited by shares in which there is no restriction on the maximum number of shareholders, transfer of shares and acceptance of public deposits. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager of such a Company can at times be unlimited. The minimum number of shareholders is 7 and a minimum capital of 0.5 million rupies.

Other business forms:

Liaison Office

Subject to specific approval by Royal Bank of India, these offices act as a communication channel between the foreign corporations and the Indian customers. They are normally established with exploring purposes, before setting up a more permanent presence. Liaison Offices must be registerd with the Registrar of Companies.

Project Office

Once secured a contract from an Indian company to execute a project in the country, a foreign corporation may establish a Project Office without obtaining prior permission from Royal Bank of India.

Branch Office

It requires a special approval from Royal Bank of India, must register with the Registrar of Companies and cannot undertake any activity that is not specifically permitted. It can export/import good, render professional or consultancy services, carry out research work in which the parent company is engaged.

Subsidiary Company
It is incorporated under the laws of India and they provide maximum flexibility for conducting business in the country. No approval is requires for the repatriation of dividends.

Licensing

Licensing is the permission for someone else to use your intellectual property rights: either a patent, trademark, trade secret, or copyright. Different types of license include:

Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.

Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.

Patent License - The allowance of another party to use your patented product, design or process.

Trademark License - Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.

Franchising In India

Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.

The benefits of expanding a business in India in the franchising formula include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.

Disadvantages of franchising a business in India: although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.
The franchise business industry in India is set to grow in the coming years. The potential of this formula in setting up a business in India is good, and analyst forecast a grow to a large extent in next five years. There are approximately 50,000 franchises in the Indian market, which create an employment for at least 500,000 people. The franchise business has been very good mainly in food and beverage and education sectors

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