India is a land of opportunities and skilled workforce as one would agree. Starting a business in India and Investing was never so easy, cheap and quick. Doing business in India is getting easier day by day due to E-governance and simpler procedures, Companies who intend to start business operations in India can start doing so by registering an Indian subsidiary of foreign companies or a Private Limited Company with Foreign Shareholder.

Private Limited Company in India as Indian Subsidiary

The Indian subsidiary company is the company whose interests are held and controlled or held by another company. The preference share capital and the paid-up equity share capital of the Subsidiary company can be used to determine the holding company, subsidiary company relationship between two companies. The Indian Subsidiaries can be wholly owned by foreign nationals.

Private Limited Company in India with Foreign Shareholders

Private Limited Company in India with Foreign shareholders is a normal Private Limited Company with foreign shareholding. This type of company can already be existing Private Limited Company where foreign shareholders can invest their money or a newly incorporated company with a combination of Indian and foreign shareholders. The owners of the Private Limited Company depend upon the percentage of shareholding decided by the members of the company.

Suggested Read: Shareholders’ Agreement? & Clauses of a Shareholder Agreement

Table of Comparison between Indian Subsidiary and Private Limited Company with Foreign Shareholders 

Advantages of Private Limited Company registration (As Indian subsidiary or with Foreign shareholder) in India

No Minimum Capital

No minimum capital is required to form a Private Limited Company. A Private Limited Company can be registered with a mere sum of Rs. 10,000 as total Authorized Share capital.

Separate Legal Entity

A Private Limited Company is a separate legal identity in the court of the law, meaning assets and liabilities of the business are not the same as the assets and liabilities of the directors. Both are counted as different. A private limited company separates Management and Ownership and thus, managers are responsible for the company’s success and are also answerable for the company’s loss.

Limited Liability

If the company undergoes financial distress because of whatsoever reasons, the personal assets of members will not be used to pay the debts of the Company as the liability of the person is limited.

For e.g. If a Private Limited company takes any loan and is unable to pay off, the members are responsible to pay only that much how much they own towards their own shareholding i.e. the unpaid share value. Which means, if you have no balance payable towards the amount of shares you hold, you are not payable towards any debt payable by the company even if the debt/credit amount remains unpaid.

Fund Raising

A Private Limited Company in India is the only form of business except Public Limited Companies that can raise funds from the Venture Capitalists or Angel investors.

Free & Easy transfer of shares

Shares of a company limited by shares are transferable by a shareholder t any other person. The transfer is easy as compared to the transfer of an interest in a business run as a proprietary concern or a partnership. Filing and signing a share transfer form and handing over the buyer of the shares along with share certificate can easily transfer shares.

Uninterrupted existence

A Private Limited company has ‘perpetual succession’, that is continued or uninterrupted existence until it is legally dissolved. A company, being a separate legal person, is unaffected by the death or other departure of any member but continues to be in existence irrespective of the changes in membership. Perpetual succession is one of the most important characteristics of a company.

FDI Allowed

In private Limited Company, 100% Foreign Direct Investment is allowed that means any foreign entity or foreign person can directly invest in a Private Limited Company.

Builds Credibility

The particulars of the company are available on a public database. Which improves the credibility of the company as it makes it easy to authenticate the details

Suggested read: Why would it be a good move to start business / Indian Subsidiary / Manufacturing base in India?