Preliminary Licenses and Registration required by Foreign Investors in India

Introduction

In order to conduct any business activities in India by a foreign investor, it is imperative to register an entity either by way of Private Company or a Limited Liability Partnership (“LLP”) so as to create a separate legal entity with perpetual existence with the advantage of minimal personal liability to promoter and initial investors of Company and the LLP. As it has a separate legal entity, the business would be more easily transferable, and the organization would continue to exist, and the investor can choose to exit from the business by selling his interest in the legal entity. The Ministry of Corporate Affairs department governs companies’ registration procedures and limited liability partnerships. You may looks for more information on MCA at https://www.mca.gov.in/content/mca/global/en/home.html. Businesses with annual revenue exceeding Rs.20 lakhs should register as a limited liability partnership or a corporation. Therefore, the paramount step would be to register a separate legal entity which shall be in the form of a Business License. For investor registering a Company and LLP, an incorporation certificate shall be issued to the investor upon completion of the procedure for registration. Some of the basic criteria for registration is that the investor is required to be at least 18 years above, there should be no criminal record of the investor applying for license and permit and the business for which the license is required should be lawful to be operated in India.

Post- Incorporation Registration and Licenses

Once the separate legal entity is registered, the Income Tax authority in India mandates to obtain a Goods and Services Tax Registration (also called as GST Registration). Further it is mandatory to register all businesses and people with combined yearly sales of more than Rs 20 lakhs for most states and Rs 10 lakhs for the Special Category State. In addition, each supplier of goods involved in interstate supply must do GST registration online, regardless of turnover. It is important for all Entrepreneurs to understand the criteria’s and obtain GST registration within the first 30 days after starting the business.

Another requirement from the Income Tax authority in India is to obtain a PAN card which is required to do business with an Indian company or in India and it is required to be obtained simultaneously with the registration of the Company. Regardless of whether the company is registered, has a permanent establishment, or has an office in India, it is also necessary for anybody who is involved in the generation of income out of India. PAN cards for businesses or companies can be obtained by submitting of PAN application form in Form49A.

Another important license to be obtained upon deciding the registered office of the Company or the LLP is the License under the Shops and Establishment Act. The Shop and Establishment registrations differ from State to State which is provided by the respective state governments depending on the location of the Company. The License regulates the hours of employment and wages.

An optional but important license is the Udyam Registration, also known as MSME Registration. This government registration comes with a certificate of recognition and a special identification number which serves to certify small, medium-sized, and microbusinesses. Companies registered under the MSME Act are eligible for various government subsidies and programs to support India’s small companies.

For Companies/ LLPs that are looking for importing or exporting products or services from India is required to get an Import Export Code from the DGFT Department. An Import Export Code can only be issued to a company that has both a PAN and a bank account.

For Companies having their trademark, it is highly suggested out of our experience  to register the trademark of the Company under the Trademark Act of 1999. It permits the owner to have sole ownership rights and forbids other parties from using the mark in a way that benefits the registered mark’s owner. Once a trademark application has been approved, the applicant and the brand may use the “TM” symbol. Trademark registration in India is necessary to safeguard the brand name.

Conclusion

With various business licenses required for certain types of business, the Company/LLP is required to understands the nature of the business to be carried out and all the necessary steps required in order to set up the Company/LLP. After an analysis of the nature of business, it is advisable that the Company shall look for professional assistance to obtain the necessary licenses and permits in order to run the Company/ LLP. Depending on the nature of work Companies may also have to obtain permits from the fire department, or the pollution control board, or maybe the local healthcare system.

We at D’Andrea & Partners Legal Counsel are a legal firm with its presence in India, Pune and provide all round legal and fiscal services relating to open a company in India, legal compliance, litigation and dispute resolution, drafting of agreements and contracts, intellectual property rights protections, HR and IPR Related work and other miscellaneous services. Should you have any query or wish to know more, please reach us at info@dandreapartners.com. We are also pleased to introduce our practical guide on Foreign Direct Investment in India which you can purchase on https://www.amazon.com/Foreign-Direct-Investment-India-Invest-ebook/dp/B0BP7M7GKD/ref=sr_1_3?qid=1695004259&refinements=p_27%3ACarlo+Diego+D%27Andrea&s=digital-text&sr=1 3&text=Carlo+Diego+D%27Andrea

Disclaimer

The above content is provided for informational purposes only. The provision of this article does not create an attorney-client relationship between D’Andrea & Partners and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this article are not a substitute for legal counsel.

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