Foreign companies entering India can choose from several structures, including:
• wholly owned subsidiary
• branch office
• liaison office
Each structure has different regulatory requirements and operational flexibility.
Choosing the correct structure is critical when expanding into India.
Wholly Owned Subsidiary
A wholly owned subsidiary is an Indian private limited company owned by a foreign parent company.
Advantages:
• separate legal entity
• ability to generate revenue
• ability to hire employees
• easier scaling of operations
This is the most common structure used by foreign companies expanding to India.
Branch Office
A branch office is an extension of the foreign parent company.
Characteristics:
• no separate legal entity
• limited permitted activities
• requires RBI approval
Branch offices are typically used for:
• consulting services
• professional services
• export/import coordination
Liaison Office
A liaison office is used only for representative activities.
Restrictions include:
• cannot generate revenue in India
• cannot sign commercial contracts
• limited to communication and coordination
These offices are mainly used for market research or relationship management.
Comparison Table
| Feature | Subsidiary | Branch Office | Liaison Office |
|---|---|---|---|
| Legal entity | Yes | No | No |
| Revenue allowed | Yes | Yes (restricted) | No |
| Local hiring | Yes | Limited | Limited |
| Regulatory complexity | Moderate | High | High |
Which Structure Do Foreign Companies Prefer?
Most international companies expanding into India choose a wholly owned subsidiary.
This structure provides:
• operational flexibility
• ability to hire teams
• ability to invoice Indian customers