For economic development, NRIs (Non-resident Indians) have always been instrumental. Providing financial resources into India through Foreign Direct Investment (FDI), the Government of India has also recognized their contribution to the development of the Indian economy. Simplifying their businesses in India through FDI/FEMA/ RBI policies, the government extended its ease of doing business plans for NRIs.
To ease investment in India, the government permitted NRIs as accepted entities for investment as per the Regulations notified under Foreign Exchange Management Act, 1999.
NRIs as per current FDI/FEMA legislation in India includes persons who are resident outside India but are citizens of India or are persons of Indian origin.
NRIs can invest in India either by purchasing shares of an Indian company or investing in the capital of any existing entity or by registering a new business in the country. While it is more challenging for an NRI to held ownership in India, so the below write up discusses the two accepted business organizations types Private limited company and LLP, which an NRIs can prefer to form, if willing to do business in India.
Why choose Private Limited Company or LLP and no other business form for NRI business registration?
Business registration for NRI or any other entrepreneur in India is not a child’s play. One has to go through a lot of paperwork, planning the structure, making arrangements of funds and through a host of different requirements. Also, several approvals have to be obtained from various ministry, departments, compliance and licensing authorities. The compliance requirement for doing business in India is endless which in most cases restricts but certain relaxations are now being given in the name of ease of doing business for initiating business in India.
To start a business by NRI in India both Private Limited Company and LLP (Limited Liability Partnership) structure, offers a separate advantage in terms of:
Compliance: Whereas compared to a public limited company, sole proprietorship, one person company or any other business forms in India, a private limited company or LLP has the most minimum compliance requirements. NRI investing in India, choosing a private limited company for business registration in India, other than following the basic guidelines have to additionally comply with only FEMA/FDI/RBI and Income Tax guidelines. Most of the compliance requirements for NRIS under these legislations have been sorted out by the government through the ease of doing business policies.
Liberal Investment: FDI by NRIs in any Indian private or public limited company has been permitted through the automatic route. FDI is not allowed in other business forms like partnership, proprietorship or a One person company. FDI is also permitted even for LLP, but it only requires the approval of RBI in certain cases. So, it is recommended for NRIs and foreign nationals to choose a private limited company or LLP to start a business in India over any other form of business.
Acceptance: Holding a similar structure like other foreign national companies, a private limited company format or LLP both have universal acceptance. Due to existence of numerous foreign national companies and foreign LLPs in India, these structures have been widely accepted due to their liberal regulations for NRI investment.
Liability: Both private limited company and LLP, pose a benefit to NRIs investing in India in terms of liability. Where forming a PVT ltd company or LLP, the liability of NRIs are limited to the extent of capital contributed by them. Also enabling separate existence of business.
Unending existence: Private Limited companies and LLP are mostly preferred for business incorporation by NRIs due to their un-ending extent.
Holding separate legal existence both private limited company and LLP can be operated in India by NRIs keeping their other business affairs in the country separate.
As NRIs have multiple options to start a business in India, they can form PVT ltd Company, can initiate their LLP, open a branch office, license office or project office in India
Formation of a Private Limited Company by NRI in India
Forming a Private Limited Company in India, there must be a minimum of two directors and they have to obtain a DIN (Director Identification Number) and a DSC (Digital Signature Certificate) by making an application on the MCA portal.
DIN and DSC have to be obtained by NRIs or other foreign nationals by providing an attested & notarized copy of passport, proof of residency from the embassy and PAN card as applied in India.
NRIs initiating business in India must have to include at least once director of Indian residency in a private limited company with all documents, identity proof, address proof attested and notified, which has to be submitted on the MCA portal filing the required incorporation form
On approval of registration, the registrar issues a Certificate of Incorporation concluding legal registration of the company.
Things to know before Registration of Private Limited Company by NRIs
- The registered office of the company must have to be situated in India.
- FDI in private limited company by NRI shall have to be approved only through, the Automatic route where compliance of RBI /FDI/FEMA regulations has to be done.
- FDI policy regarding the investment of NRI in Indian private limited company is regulated by the Department of Industrial Policy and Promotion. As per current norms for FDI in private company, NRI have to receive approval or intimate DIPP.
Formation of Limited Liability Partnership by NRI in India
For incorporation of LLP by NRI in India, the LLP incorporation form FiLLiP is to be filed by NRI, after preparation of all necessary documents prescribed by Registrar of Companies.
FDI in LLP by foreign entities can be made in the form of capital contribution or by way of acquiring shares, government has limited restrictions on FDI investment by NRI in LLP but where FDI linked conditions are applicable, approval from the government for FDI is to be obtained.
Documents required in the process will include an LLP partnership agreement, Passport and identity documents of NRI attested from Embassy and notarized, declaration from other members, DSC and other documents as prescribed by ROC (Registrar of Companies).
Things to know before forming LLP in India
- 100% FDI is allowed under automatic route for LLP, where no FDI link performance conditions are applicable, while in other cases approval from RBI has to be obtained.
- It is a separate legal entity with perpetual succession and should hold a minimum of two partners which can either be individual for corporate entities.
- Out of partners in LLP, at least two of them should be the designated partner of which minimum of one should be a resident of India.
Know more about LLP incorporation in India.
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