How do the four options compare?
| Wholly owned subsidiary | Branch office | Liaison office | LLP with a foreign partner | |
|---|---|---|---|---|
| Legal status | Separate Indian private limited company | Part of the foreign company | Part of the foreign company | Separate LLP with at least two partners |
| Earns revenue in India | Yes, within its objects | Yes, for permitted activities only | No, it earns no income in India | Yes, if the sector allows |
| Approval route | Automatic route where the sector allows | AD bank under general permission, prior RBI or government approval in specified cases | AD bank under general permission, prior RBI or government approval in specified cases | Automatic route where the sector allows |
| Eligibility tests | None beyond sector rules | Under the 2016 rules, five-year profit record and net worth of at least USD 100,000 | Under the 2016 rules, three-year profit record and net worth of at least USD 50,000 | None beyond sector rules |
| People required | At least two members and two directors, one resident | Set by the foreign company | Set by the foreign company | At least two partners, one designated partner resident in India |
| Main reporting | FC-GPR within 30 days of allotment, annual FLA return by 15 July | Annual Activity Certificate through the AD bank, Form FC-1 with the Registrar | Annual Activity Certificate through the AD bank, Form FC-1 with the Registrar | Form LLP(I) within 30 days of receiving funds, LLP(II) within 60 days for transfers, annual FLA return by 15 July |
| Tax at a high level | Taxed as an Indian company, transfer pricing on parent dealings | Taxed as part of the foreign company, at the foreign-company rate | No income in India | Taxed as an Indian firm, transfer pricing on parent dealings |
| Best for | Trading, hiring, GCCs, long-term presence | Permitted services by an established company | Market exploration and representation | Professional or service ventures in open sectors |
Why does a subsidiary suit most foreign companies?
A subsidiary is a separate company that your parent owns at up to 100% in most sectors, and it can hold a bank account, lease premises and employ people in its own name. It has more filings than an office, but it removes the activity limits that bind a branch or liaison office. Read the wholly owned subsidiary page for the director, capital and FEMA rules.
When does a branch or liaison office make sense?
A branch office fits an established company with a profit record that wants to deliver a permitted service, such as consultancy or IT services, in its own name. It cannot carry out retail trading or manufacturing.
A liaison office fits a company that wants a presence to promote exports and imports, gather market information and act as a communication channel. It cannot undertake commercial, trading or industrial activity.
When is an LLP worth considering?
An LLP suits a professional or service venture in a sector open to 100% automatic-route FDI, where the promoters want a partnership structure rather than a company, such as a consultancy, design or technology-services practice. It suits this kind of venture better than it suits a business that plans to raise external equity, since investors and lenders are more familiar with the private limited structure.
An LLP with foreign investment is possible only in sectors that allow 100% FDI under the automatic route with no FDI-linked performance conditions. Reporting runs through the FIRMS portal, and downstream investment by the LLP is limited to such sectors. An LLP needs at least two partners and one designated partner resident in India. Most foreign parents that want a long-term operating company use a private limited subsidiary, and we suggest you take advice before choosing an LLP.
How do you choose?
Start with the activity. If your India team must invoice, sign contracts or hire beyond a small group, choose the subsidiary. If it will only represent you, a liaison office is enough. If you want to hire a few people without any entity, see Employer of Record versus subsidiary. For a wider decision guide, see how to choose your route into India.
Note: Rules and forms change often. This page is general information, not legal or tax advice. Check the current position with a practising Chartered Accountant or Company Secretary before you act.
Frequently asked questions
Which is better for a foreign company in India, a subsidiary or a branch?
Can a foreign company be a partner in an Indian LLP?
Can a liaison office be converted into a subsidiary?
Do the branch and liaison office eligibility tests still apply?
Sources
General information only, not legal or tax advice. Rules and forms change, so confirm the current position with a practising Chartered Accountant or Company Secretary before you act. See our disclaimer.