How to Start a Business in India from the UK

Interested in starting a business in India? It’s easy to see why the country may be on your radar, as it has one of the fastest-growing economies in the world. India also has an enormous consumer market, and is also known as a powerhouse of digital innovation.

But how easy is it to start a business in India? Find out everything you need to know here in this helpful guide, including legal entity types, company registration and much more.

We’ll also show you a smart way to manage your company’s finances in India and worldwide, using Wise Business - the ideal solution for international businesses.

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Doing business in India

India is an attractive place to start a business for a number of reasons. For starters, it has a stable and fast-growing economy. According to Wolters Kluwer, India’s GDP annual growth of between 6-7% is one of the highest in the world. It’s also the fifth-largest economy on the planet by GDP.¹

The country provides access to an enormous consumer market, and is known as a leader in digital innovation. What’s more, the Indian Government has made improvements to foreign direct investment (FDI) policies, to make the country more open to foreign investors and entrepreneurs.

However, the country has a large and complex economy, as well as a vast and fragmented market where business landscapes vary considerably from region to region. It can also be a slow, complicated and overly bureaucratic place to do business.¹ So, a foreign entrepreneur looking to open a business there will need to carry out targeted and in-depth market research.

Researching business opportunities in India? The following are some of the fastest-growing and most GDP-contributing sectors in the country:²

• Automobile industry
• Pharmaceuticals
• Renewable energy
• Financial technology
• IT and digital, including artificial intelligence
• Aerospace.

Business setup in India

The process of setting up a business can vary from region to region, with each state having its own rules and policies. However, in most cases, a new business will need to be registered with the Ministry of Corporate Affairs (MCA).

The good news though is that the government has introduced digital initiatives to make it easier to register. This includes the SPICe+ process.

But before you can register, you’ll need to choose a business entity structure for your new company. Here’s a list of commonly used business types you can choose from in India:

• Sole proprietorship firm
• Partnership firm
• Limited Liability Partnership (LLP)
• One Person Company (OPC)
• Private limited company
• Public limited company.

Sole proprietorship firm³

This is where a single person manages the whole of the business, and is personally responsible for all debts and obligations. The company does not have a separate legal existence.

Partnership firm³

In this type of company, two or more people set up the business together and share profit and obligations between them. The owners are known as partners individually, but collectively they are a company.

Limited Liability Partnership (LLP)⁴

An LLP is a popular choice for foreign entrepreneurs starting a business in India, particularly in manufacturing and related sectors. This company type consists of at least two partners, one of whom must live in India. An LLP is a separate legal entity, and liability of each partner is limited to their contribution. There’s no minimum capital contribution required.

One Person Company (OPC)³

An OPC is similar to a sole proprietorship, in that a single person owns and manages the business. However, there is a key difference. This company type can only be incorporated by an Indian citizen, so foreign entrepreneurs are not permitted to open an OPC.

Private limited company³

Commonly used by small and medium-sized businesses, this entity type is privately held and a separate legal entity once incorporated. Its capital is divided by shares, with between 1-50 shareholders. Shares cannot be publicly traded, unlike with a public limited company.

Public limited company³

A public limited company in India is designed for larger businesses, as it can raise large amounts of capital by issuing shares (which can be freely traded on a stock exchange). A PLC is a separate legal entity, and requires a minimum of three directors and seven shareholders.

How to start a company in India - Step-by-step

The specific rules and processes of setting up a business in India may vary from state to state. But here are the initial steps you’ll need to follow to set up a company:⁵

1. Choose a legal structure for your business
2. Check that your chosen business name is available - you can also reserve it through a service on the MCA website
3. Get a digital signature certificate (DSC) for at least one of the proposed directors of the company
4. Complete Form INC 32 and submit through the SPICe+ system to incorporate the company
5. Your PAN and TAN numbers for tax registration will be automatically generated upon submission of the form.
6. File your electronic Articles of Association in SPICe+
7. Pay the registration fee (if required)
8. The Central Registration Centre (CRC) will verify all of your details, forms and documents.
9. You’ll receive your Certificate of Incorporation (CoI) along with your PAN, TAN and CIN numbers where relevant.
10. Pay your share capital and provide a receipt (if required.)

Starting a business in India - FAQs

If you’re new to India or it’s your very first business, you’re bound to have questions. We’ll tackle some of the most frequently asked questions and answers below.

Is India a business friendly country?

India hasn’t always been the easiest country for foreign investors and entrepreneurs to break into, but that’s changing. The government has introduced new policies and systems to make it easier to do business, including its digital SPICe+ initiative for registering a new company.

India also benefits from a huge consumer marketplace and a stable, fast-growing economy.

Is it easy to start a business in India?

India doesn’t have the easiest process for starting a new business, compared to some countries. It’s easier now that you can register a new company online, but there is still likely to be extra paperwork and processes involved. It can also be slow, potentially taking as long as 68 days to register a new business.¹ Plus, the rules and processes can vary between states.

How much money is needed to start a business in India?

The fees to register a company may vary between regions, and for different company types. But to give you an idea, the registration fees for a private limited company range from 6,000 to 30,000 INR depending on the number of company directors.⁶

Check below the current conversion rate between GBP and INR.

Wise Business account is a handy tool for UK business expanding abroad. Once you set up your business in India you can easily convert British Pounds to Indian Rupees to hold money or set payments like a local. All conversion is done based on the mid-market exchange rate with low and transparent fees.

Get started with Wise Business 🚀

Can a British citizen start a business in India?

It is possible for a British citizen to start a business in IIndia. However, you may need to have at least one partner or director living in India. And you may be restricted to certain company types - for example, it’s not permitted for foreigners to open a One Person Company (OPC).

Can I do business from home in India?

Yes, many sole traders and smaller businesses are run from home in India, without the requirement for office space.

How much tax do small businesses pay in India?

Corporate tax in India ranges from 20% to 40% depending on the company type. This tax rate applies to both Indian and foreign-owned businesses.⁷

Manage your international company's finances with Wise Business

An Indian bank account will certainly be useful for your new business. But it’s also worth considering alternatives which could save you time and money when managing your finances internationally.

Open a Wise Business account and you can manage your company’s finances in 40+ currencies all in one place, including INR, USD, GBP and EUR. You’ll be able to pay suppliers and staff in their own currency, as well as receiving payments in multiple currencies.

You can even automate payments using the powerful Wise API to save even more time.See how it works here in our case study

Wise payments are fast and secure (even for large amounts). Best of all, you’ll only pay low, transparent fees and always get the mid-market exchange rate.

This is the rate that banks use to buy and sell currency, and is widely considered the fairest rate you can get. When banks carry out currency conversions on behalf of customers, they usually add a mark-up or margin to the exchange rate. This makes it more expensive for your business, as less of your money reaches your recipient.

It’s quick and easy to open a Wise Business account, with a fully digital application, verification and on-boarding process. Check out the requirements here.

Get started with Wise Business 🚀

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After reading this, you should have a better idea of what’s involved with business setup in India. We’ve looked at legal entities, the company registration process, fees and much more. Good luck with your new venture!

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Sources used for this article:

1. Wolters Kluwer - Doing business in India
2. British Council - What are India’s key economic priorities and growth sectors?
3. NNRoad - Types of business entities in India
4. Cleartax - Limited Liability Partnership (LLP) Registration in India
5. Invest in India - Setting up a business in India
6. TAXAJ - Company Registration fees in India
7. India Briefing - Corporate Income Tax in India

Sources checked on 04-Mar-2024