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Entering India: Subsidiary vs Branch, Liaison, Project Office
Compare the five ways a foreign company can set up in India — subsidiary, branch office, liaison office, project office and LLP — with a decision guide.
8 min readUpdated 8 Oct 2026By the Fastlegal compliance team
A foreign company that wants a presence in India can choose from five structures: a wholly owned subsidiary, a branch office, a liaison office, a project office or a limited liability partnership (LLP). Each is governed by a different mix of the Companies Act, the LLP Act, the Foreign Exchange Management Act (FEMA) and the Income-tax Act. The choice affects what you are allowed to do, how you are taxed, how long approval takes and how easy it is to leave. This guide compares them in one table and then walks you through a simple decision process.
The five options at a glance
| Subsidiary (Pvt Ltd) | Branch office | Liaison office | Project office | LLP | |
|---|---|---|---|---|---|
| Legal status | Separate Indian company owned by the foreign parent | Extension of the foreign company; not a separate legal person | Extension of the foreign company; representative only | Extension of the foreign company, limited to one project | Separate Indian body corporate with partners |
| Permitted activities | Any lawful business allowed under the FDI policy for that sector | Export/import, consultancy, research, IT services, support for parent's products; no manufacturing or retail trading | Liaison, market research, promotion of parent; no commercial activity or income | Execution of a specific contract awarded by an Indian company | Any business where 100% FDI is allowed under the automatic route without FDI-linked performance conditions |
| Tax rate basis | Taxed as a domestic company; concessional domestic rates may be available under current rules | Taxed as a foreign company at the higher foreign-company rate on India-sourced profits | Not taxable as it earns no income, but must still file returns and annual statements | Taxed as a foreign company on project income; often creates a permanent establishment | Taxed at the rate applicable to firms; no dividend distribution layer |
| Approval authority | Registrar of Companies (MCA); RBI reporting after investment | RBI via authorised dealer (AD) bank; some sectors need government approval | RBI via AD bank; parent needs a profitable track record | RBI via AD bank, or general permission if conditions are met | Registrar of Companies (MCA); RBI reporting after investment |
| Capital requirement | No statutory minimum; capital set by business needs | No capital; funded by parent remittances, net worth test for parent | No capital; funded by inward remittances, net worth test for parent | No capital; funded by project contract and parent | No statutory minimum; partner contribution set by agreement |
| Repatriation | Dividends after corporate tax; buy-back or capital reduction under FEMA pricing rules | Profits can be remitted after tax, net of applicable taxes, through AD bank | Nothing to repatriate; surplus returned on closure | Surplus can be remitted after project completion and tax clearance | Profit share to partners after tax; capital withdrawal per FEMA rules |
| Closure complexity | Moderate to high: strike-off or voluntary liquidation plus tax clearances | Moderate: RBI closure through AD bank with auditor certificate and tax no-objection | Low to moderate: AD bank closure with auditor certificate | Low to moderate: closes on project completion with AD bank reporting | Moderate: strike-off or winding up plus tax clearances |
| Best for | Long-term operations, hiring, local sales, raising funds, manufacturing | Service exports and support functions where a separate company is not wanted | Early-stage market testing with no revenue | Single infrastructure, EPC or turnkey contracts | Professional services and partnerships with low compliance appetite |
What the table does not tell you
The subsidiary is the default choice for most foreign companies because it is the only structure that can do everything: trade, manufacture, hire freely, sign contracts in its own name, borrow locally and later bring in investors. The price is a full annual compliance cycle under the Companies Act (board meetings, audited accounts, AOC-4 and MGT-7 filings, director KYC) on top of GST, income tax and FEMA reporting.
Branch, liaison and project offices are all ways of operating as the foreign company itself rather than through an Indian company. That means the foreign parent is directly exposed to Indian liabilities and, for a branch or project office, is taxed as a foreign company. The approval route through an authorised dealer bank and the RBI is slower than incorporation, and each office must file an Annual Activity Certificate from a chartered accountant and annual accounts with the Registrar of Companies.
An LLP sits between the two. It is a separate legal entity with limited liability and a lighter compliance load than a company, but foreign investment in an LLP is only allowed in sectors with 100% automatic-route FDI and no performance conditions. It is also harder to bring in venture capital, because LLPs cannot issue shares.
Practical warning: a liaison office that starts quoting prices, negotiating contracts or collecting payments can be treated as a permanent establishment of the parent in India. That exposes the parent's global contract profits to Indian tax. Keep the liaison office strictly to promotion and information gathering, and document it.
Decision guide
- 1
Check the sector first: Look up your activity in India's consolidated FDI policy. If 100% FDI is allowed under the automatic route, every option is open. If government approval is required, a subsidiary or LLP will need that approval, and a branch office may also need it.
- 2
Decide whether you need revenue in India: If you only want to study the market, meet customers and promote the parent, a liaison office is enough. If you will invoice Indian customers, you need a subsidiary, branch office, project office or LLP.
- 3
Decide whether the work is a single contract: If an Indian company has awarded you a specific project, a project office is designed for exactly that and closes when the project ends. For ongoing business, look at a subsidiary or branch.
- 4
Weigh limited liability against simplicity: A branch office is quicker to close and has no share capital, but the parent carries every liability and pays the higher foreign-company tax rate. A subsidiary ring-fences risk and is taxed as a domestic company.
- 5
Think about future funding and hiring: If you may raise money from Indian or foreign investors, issue employee stock options, or build a large team, choose a subsidiary. LLPs and branches cannot issue shares.
- 6
Plan the exit: Every structure can be closed, but a company with assets, employees and contracts takes the longest. If you expect a short engagement, keep the structure light.
- 7
Line up the paperwork: For a subsidiary you will need notarised and apostilled parent documents, director identification and a registered office. For RBI-approved offices you will need audited parent accounts and a bank reference. Reporting to the RBI starts as soon as money comes in.
After you choose
- Subsidiary or LLP: incorporate on the MCA portal, open a bank account, receive the capital, and report the share allotment to the RBI in Form FC-GPR (or Form LLP-I) within the prescribed time limit.
- Branch, liaison or project office: file Form FNC through your AD bank, obtain a Unique Identification Number from the RBI, register with the Registrar of Companies, and obtain PAN, TAN and (if needed) GST registration.
- All structures: set up GST, income tax and TDS compliance before the first invoice or salary payment, and calendar the annual FEMA returns such as the FLA return.
Fastlegal handles each of these routes end to end, from the first document checklist to RBI and ROC filings, so you can choose the structure that fits the business rather than the one that seems easiest on paper.
Frequently asked questions
Can a foreign company do business in India without setting up any entity?↓
Yes, to a limited extent. You can sell goods to Indian importers or supply services from abroad without a local entity. However, the moment you want staff, an office, local invoicing in rupees or a long-term presence, you will need one of the structures described here. Digital service providers selling to Indian consumers may also need an OIDAR GST registration even without a physical presence.
Which option is fastest to set up?↓
A wholly owned subsidiary (private limited company) is usually the fastest because incorporation is handled online through the Ministry of Corporate Affairs and most sectors do not need prior government approval. Branch, liaison and project offices need RBI approval through an authorised dealer bank, which takes longer and is harder to predict.
Can a liaison office earn revenue in India?↓
No. A liaison office is strictly a representative office. It can promote the parent, gather market information and act as a communication channel, but it cannot invoice, trade or earn any income in India. All its expenses must be met from inward remittances from the parent.
Does a subsidiary need an Indian shareholder or director?↓
A subsidiary can be 100% foreign owned in sectors where automatic-route FDI is permitted. There is no requirement for an Indian shareholder. However, under current rules every Indian company must have at least one director who has stayed in India for a minimum number of days in the financial year, so you will usually need one resident director.
This guide is general information under rules current at the date shown, not professional advice for your situation. Rules, due dates and fees change by notification.
Keep reading
Form FC-GPR Filing on RBI FIRMS Portal: Step-by-Step Guide
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