How foreign companies can expand business in india


The atmosphere for international business expansion in India has never been more conducive before. As discussed in our blog on business expansion during Covid-19, the pandemic’s side effects helped some businesses expand in India. But should you jump the gun and start scrambling for expansion opportunities? Maybe not. In this blog, we explore 5 primary methods of expanding business in India. Choose wisely, the method that suits you best.

  1. Forming Subsidiaries in India

A subsidiary company is owned by another company. The parent company / holding company, holds a controlling interest in the subsidiary company (at least 51% stock ownership).

Forming subsidiaries in India is the way ahead only if you want to kickstart business operations in India with a smaller team size. This is because subsidiaries are the costliest of all business expansion methods.

Moreover, you enjoy the least control over the subsidiary. The holding company will have the last word in all major decisions. Further, because another company essentially owns the subsidiary, you risk getting into complications of IP protection.

Unless you’re a business maverick very sure of what you’re doing, forming a foreign subsidiary company in India is unfavourable.

  1. Outsourcing to India

Outsourcing is suitable if business expansion in India is a top priority under a deadline. Outsourcing to India gives you ready resources with which you can quickly setup business operations. Outsourcing services in India will help you connect with just the right remote teams. Additionally, you save loads in labour cost and achieve better work efficiency.

On the flip side, outsourcing reduces your decision-making flexibility as Indian policies take precedence. Also, current market situations will determine your pricing.

Overall, outsourcing is a good option if business control is less of a priority than execution speed.

  1. Freelancing / Contracting / Consulting

With freelancing, you contract individuals, not companies. When you hire freelancers in India, you save a fortune on infrastructure, including office spaces and other resources.

But there are risks involved. Freelancers and consultants could be working for several companies simultaneously, giving you a divided attention. This may give a lower quality throughput.

To combat this, if you hire dedicated freelancers in India, you risk triggering a permanent establishment (PE) of your company, which has complications of local taxation and employer records.

Freelancing is best for independent / modular tasks that don’t interfere with ongoing projects.

  1. Forming Partnerships in India

Partnerships are a perfect way to scale up business operations in India. With an Indian partner, you’re free of all the hassles of company formation in India, remote hiring, incorporation of a foreign subsidiary company, or business compliance. Your partner naturally has a fully functional business with proper infrastructure, employer records, and other compliances.

However, forming a partnership in India has some strategic considerations. Partnerships are two-way streets. Your partner will without a doubt want benefits from your branch as well. Make partnerships only if you want to take your business to the next level internationally and are prepared to do a lot of ground work.

  1. Professional Employer Organization (PEO)

PEO services in India are the best way to hire employees in India. A PEO basically handholds you through managing your remote employees. They handle employees’ wage coverage, employee benefit programs, and HR tasks.

Once you identify the resources you need, you can immediately start business operations in India with PEOs. PEOs are the cheapest means of business expansion in India, and give you maximum control over policy decisions. Also, there’s no risk of triggering a permanent establishment (PE).  
These were the 5 ways of expanding business in India. A PEO is the safest bet for SMBs looking to go global. If you are seeking help with global expansion, look no further! Remunance offers PEO services for small to medium businesses looking to expand in India.