Quick guide to Starting a Business in India as an American Company
India: The Country and The OpportunitiesIndia, one of the world's oldest civilizations, has only recently emerged from years of stagnant economic growth due to state-planning, into a nation of ripe opportunities and potential.
India is the world's largest democracy with a heterogenous population of hundreds of different ethnic groups, much like the United States. With a large pool of highly educated but still low-cost workers, India could be the best place your business will ever visit.
India continues to reform and liberalize its economy, most-recently removing many restrictions on foreign-direct investment. With this opportunity comes increased risks, namely a very dynamic regulatory environment where laws and procedures change often. However with a stable parliamentary democracy and effective court system, if preparations are made, the risk is palpable.
The Basics, Pt. 1Establishing a business in India involves more bureaucracy than in the United States. Here, the formation of a business is all-but-totally a State affair, only at the more advanced stages when securitization or mergers come into play does the Federal government get involved.
In India, opening a business involves both the National AND State governmental agencies.
The first step is to obtain a Director's Identification Number (DIN) and a digital signiture certificate from the Ministry of Corpoate Affairs. Now the good news is that the Indian government, like many others, is increasingly online, and obtaining these is now web-based. Also online is the filing of your company's name with the Registrar of Companies also a National agency.
The Basics, Pt. 2After that is done you must get your corporate documents stamped locally, either at the State Treasury Office in the State you plan to do business. A potentially more pricey alternative (it depends on bank policy) albeit a more efficient one is to get them stamped at an authorized, local bank.
Then it is back to the Ministry of Corporate Affairs with your completed paperwork and obtain your Certificate of Incorporation. After this there is light at the end of the tunnel and your journey towards setting up a business in India is almost over, but there are still some additional housekeeping tasks you must still complete.
Next comes requirements for the tax man. The Income Tax Department sets up agents through either the NSDL or UTI to set up a Permanent Account Number (PAN). Simultaneously, and this is particularly important if your initial location in India is Mumbai (formerly Bombay); setting up a tax account number at the State Income Tax Department.
Wrapping UpWhile you are ensuring your tax reporting will be fully-compliant, you can also save time by simultaneously taking care of the remaining housekeeping matters. First is, if you will be a retail operation, register with your local Office of the Inspector, Shops and Establishment Act, which might be either municipal or State in its organization. Simultaneously, register for your Value-Added Tax (VAT) at the State Commercial Tax Office; your Profession Tax at the State Profession Tax Office; and register with two national offices, the Employees' Provident Fund Organization and the Employee's State Insurance Corporation (Employee medical insurance). I told you there was a fair amount of bureaucracy involved didn't I?
Costs and ConclusionsThe financial costs to set up a business in India are relatively light, between INR 23,000 and INR 30,000. The Rupee, India's currency, like the Chinese Yuan is very undervalued against the US Dollar, with about INR 55 equalling 1 USD, so your total costs for setting up a business in India from the administrative side, is about $550 (I'm rounding up).
India is one of the fastest growing economies in the world, with an exploding affluent, educated and upwardly-mobile middle class driving enormous consumer demand. India is also the world's largest democracy, and has enjoyed political stability since its independence. Lastly, India has two official languages, Hindi, and English; and while the man on the street may not be able to converse with you in your native tongue, almost all mid and senior-level members of industry, government, finance and academia can and will.
India is one of the top business destinations for the future. Contact me if you'd like our help taking you there.