- The growing interest of investors in India
We come from the land that coined the term jugaad. A word that has not yet found a worthy translation, it represents how India has always supported innovation and creativity. In the past few years, India has shown notable growth in entrepreneurship and business in general. Be it the fresh-out-of-college kid with a bright concept or the passionate housewife with her own notions for shaking things up… if it’s a viable idea, there’s opportunity. That’s why starting a business in India isn’t a thought you should brush aside lightly.
Lower wages, highly skilled and diverse workforces, and favorable FDI policies are just some of the factors that have bought investors in India tremendous growth and returns. Today, India has earned its place in the Top 100 Club of Ease of Doing Business. Foreign investment inflows rocketed to $45.15 billion back in 2014-15 and have been on a steady growth ever since. Most notably, FDI inflow of $27.37 billion was recorded just in the first four months of F.Y. 2021-22. A staggering 62% increase than the corresponding period of F.Y. 2020-21.
These are very promising statistics which indicate India is on an upward journey. We also bounced back from the hit we took during the pandemic. India’s investments struck a record low of 21.6% of the nominal GDP in June 2020 but accounted for 32.5 % in Sep 2021, compared with a ratio of 28.7 % in the previous quarter.
We expanded not only in terms of these statistics, but also in the diversity of businesses we nurtured. India has emerged as the 3rd largest ecosystem for startups globally with over 59,000 DPIIT-recognized startups across 634 Indian districts as of 24th November 2021.
- Types of Businesses You Can Start in India
If these figures have opened your eyes to the potential of starting a business in India in 2022, now you have to figure out the types of business you can establish. This will be the way your business in India is structured. Each is associated with a set of associated regulations and business compliance laws.
- Private Limited Company
A private company in India is characterized by the following features:
- Restricts the right of the shareholders to transfer their shares.
- Made up of a minimum of 2 and a maximum of 50 members.
- The public cannot share its capital.
- Must have a minimum paid up capital of Rs. 1 lakh or such a higher amount which may be regularly prescribed.
- Public Limited Company
An Indian public limited business shows the following traits:
- Shareholders can transfer their shares.
- Has a minimum of 7 members, with no maximum limit.
- The general public can subscribe to share capital.
- Must have a minimum paid up capital of Rs 5 lakh or such a higher amount as may be prescribed from time to time.
- Sole Proprietorship
Establishing a sole proprietorship in India means you form a business entity which is entirely handled by a single individual. He is the only one who reaps the profits and suffers the losses. There are no specific bylaws governing sole proprietorships.
A partnership in India is a business instituted by a group of people who have agreed to handle business operations, assume liability, and share the profits / losses of the business. Unlike sole proprietorships, partnerships are governed by the Indian Partnership Act 1932.
In a country such as India, where 100% foreign direct investment is permitted, companies can establish wholly owned subsidiaries, which can then be private limited or public limited.
- Foreign Investment in India
For anyone who wants to start a business in India, foreign investment laws are pretty favorable. Except in very specific industry sectors, India allows foreign investments. Since the early 1990s, India has always worked towards liberalizing its economy. We have opened our doors to most of our business sectors.
Business in India has actively attracted foreign investments by improving our Ease of Doing Business quotient. From the 142nd position in 2014, we jumped a whopping 79 positions and landed on the 63rd position in 2019, on World Bank’s Global EoDB list.
Foreign investment in India is primarily governed by the Foreign Exchange Management Act 1999 (FEMA) and the regulations thereof. FEMA consolidates all the laws regarding foreign exchange in India. To regulate foreign investments from businesses, the Reserve Bank of India (RBI) has published the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000.
The odds of starting a business in India are in your favor. If you need any more convincing, this EoDB Quotient Sheet of India compares various metrics of doing business, including costs of business operations in India.
- Options for starting a business in India
- Subsidiary Formation
For kickstarting India operations in full swing, you can always opt for a full-fledged Indian subsidiary. Keep in mind that there are a host of regulations you need to adhere to, including a local director, entity setup, and employee compliance.
Alternatively, you can also setup partially owned subsidiaries. Your parent company in your domestic region partially own your child company in India.
Both these options are great if you want to expand your business in India.
- Company Formation
If you are not looking to expand your current business but rather want to start a new venture from scratch, you can think of starting a proper company in India. This company can be structured as per any of the types we already discussed above. Remember, the way you structure your Indian company from the onset will govern a lot of your day-to-day operations.
- PEO / EOR
This is by far the best option for tapping into Indian markets in 2022. A Professional Employer Organization in India or an Employer of Record will help you hire human resources in India by becoming their legal employer. In both the above options, you would have triggered an entity setup in India.
But this is not the case with PEO/EOR services. This is because an India-based company technically all the human resources you employ. A PEO agency also takes over payroll processing and other employee responsibilities like employee benefits, insurance, taxation etc.
If you want to know more about how the PEO process works, there is no better resource than our blog on the PEO onboarding process. But if you are sold on the PEO model, your search for an Indian PEO service ends right here. With deep roots in the Indian markets, Remunance understands business in India and also the people who keep it running. The right human resources, speedily deployed to your India operations. Profits await!