Setting up a business in India — start with the right structure.

A subsidiary is an Indian company owned by the foreign parent and taxed as a domestic company. A branch office is an extension of the foreign company and is generally taxed at the higher rate that applies to foreign companies. The subsidiary is also simpler to operate for most trading businesses.

A subsidiary and an LLP can trade freely. A branch office may earn income, but only from the activities the RBI has permitted it. A project office earns only from the project it was approved for. A liaison office cannot earn Indian income at all — it may represent the parent, promote business and act as a communication channel, and is funded entirely by inward remittance.

For most subsidiaries under the automatic route, no prior approval is needed — only reporting afterwards. Liaison, branch and project offices go through an AD Category-I bank and may require RBI approval depending on the activity and the applicant.

Foreign investment in an LLP is permitted in sectors where 100% FDI is allowed under the automatic route and no performance conditions apply. It suits some professional and service models but is not always the right fit.

A subsidiary is typically three to five weeks. A liaison or branch office is usually longer — often eight to fourteen weeks — because it depends on the AD Bank and, where required, the RBI.

Yes. Every Indian company is audited every year by a statutory auditor regardless of turnover — a company with no revenue, no employees and no bank activity is still audited, and the accounts are still filed with the Registrar. There is no small-company or dormant exemption from audit as such. Groups that incorporate early and trade later are regularly surprised by this, and it is one of the reasons not to incorporate before you need to.

Strike-off is much faster where you qualify. A company that never commenced business within a year of incorporation, or has not carried on business for the two preceding financial years, can apply to the Registrar to be struck off, provided it has no liabilities, its filings are up to date and its bank account is closed. Anything else goes through voluntary liquidation under the insolvency code with an appointed liquidator, which realistically takes the better part of a year. Either route requires the filings to be current first, so the cost of closing is largely the cost of catching up.

Yes, once the liabilities are settled and the tax is paid. On a strike-off the bank account has to be closed before the application, so the cash must be dealt with first — which in practice means settling everything and distributing the balance. On a liquidation the liquidator realises the assets, pays creditors in order and distributes the surplus to shareholders, and the foreign shareholder's share is remittable with the usual Form 15CA and accountant's certificate. The mistake to avoid is leaving the money in the account and hoping to deal with it later: once the company is struck off, releasing funds from a dormant account is a slow and disproportionately painful exercise.

Closing does not extinguish them. A strike-off application requires a declaration that the company has no liabilities, and the directors indemnify against any that emerge — so a company with pending assessments or unpaid dues is not a candidate for it, and the Registrar can have a struck-off company restored where dues surface. In a liquidation, statutory dues rank in the statutory order and the liquidator must provide for them. Separately, directors can be personally liable for tax deducted at source and provident fund that was withheld from others and never remitted, and that liability is not affected by the company ceasing to exist. Clean the position up first; it is cheaper than being pursued for it later.

It is the worst of the options. The company does not quietly disappear — penalties accrue daily, the Registrar eventually strikes it off on its own initiative, and after three consecutive years of unfiled accounts or annual returns every director is disqualified for five years. That disqualification attaches to the person, not the company, so it follows them onto the board of any other company, in India or as a director elsewhere with an Indian directorship. Closing properly is cheaper than the clean-up.

Usually not in full. India taxes income arising in India, and has tax treaties with around ninety countries that decide which country taxes what and cap the rate on dividends, interest, royalties and fees for technical services. Where both countries tax the same income, the home country normally gives credit for the Indian tax. To claim the treaty rate in India the foreign recipient needs a tax residency certificate from its own authorities and Form 10F. The mechanics differ treaty by treaty, so the position is worth settling before profits move rather than after.

Tax at source on salary every month, with a quarterly return in Form 24Q and a Form 16 to each employee after the year end. Provident fund applies once there are twenty or more employees, employees' state insurance from ten or more where wages are within the prescribed limit, and professional tax in the states that levy it. Gratuity becomes payable to staff who complete five years where there are ten or more employees. We run payroll and the filings that go with it for Indian subsidiaries.

A subsidiary files ROC returns, an income tax return, TDS returns, GST returns where registered, and the annual FLA return to the RBI, and is audited every year regardless of size. A liaison or branch office files an Annual Activity Certificate from a chartered accountant, plus its own returns.