Are you a US company expanding to India? Your first big choice isn’t a lawyer, a bank, or a flight. It’s your India entry structure. You have four main paths. You can set up a wholly owned subsidiary in India. You can open a branch office in India. You can form an LLP for a foreign company. Or you can hire through an Employer of Record (India).
This one choice shapes a lot. It sets your tax rate. It sets how much compliance work you carry. It affects whether you can raise money. And it decides how fast you can hire.
This guide covers all four India market-entry options for US companies. That’s the usual subsidiary vs branch vs LLP question. It also covers the EOR vs entity question. Most founders don’t know to ask that one. Read on, and you can pick the right structure the first time.
Why your India entry structure decides everything
For US companies entering India, the structure is the base. Everything else sits on top of it. Pick the right one, and hiring, billing, tax, and fundraising all get easier. Pick the cheapest one this month, and it can cost you later.
You may still end up doing foreign subsidiary registration in India next year. Then you have to redo contracts. You have to move payroll. And you have to explain to an investor why your India setup is in the wrong wrapper.
US companies use four routes to set up in India. A wholly owned subsidiary (Private Limited Company). A branch office. An LLP. And an Employer of Record (EOR). Here’s how each one compares on control, tax, speed, and hiring.
Option 1: Wholly owned subsidiary in India (Private Limited Company)
For most US startups and product companies, a wholly owned subsidiary in India is the default. It’s usually the right India entry strategy too. Your US parent owns 100% of a new Indian Private Limited Company. India then treats that company as a domestic company. That’s true for both tax and law.
In most sectors, 100% foreign ownership is allowed under the FDI automatic route. So you don’t need approval first. You incorporate, bring in capital, and report the investment to the Reserve Bank of India (RBI) after.
Why founders choose an Indian subsidiary of a US company.
It’s the most capable option by far. With a Private Limited Company, you can hire a full team. You can invoice Indian customers in rupees. You can sign local contracts. You can own your IP inside India. And you can raise a priced round later without redoing the structure.
A domestic company also pays a lower corporate tax rate. It’s about 22% base. That’s around 25% once you add surcharge and cess. A branch pays much more.
Tax and compliance for an Indian subsidiary of a US company
A Private Limited Company is a real corporate citizen. So it has real duties. Company registration in India for foreigners needs at least two directors and two shareholders. Here’s the part US founders miss. You also need at least one resident director in India. That means someone in India for 182+ days in the financial year.
There’s no minimum paid-up capital, so you can start lean. But you take on more. You need a board. You file with the MCA each year. You do a statutory audit every year. You handle GST and TDS. And you report the foreign investment under FEMA. Incorporation is mostly online. It usually takes a couple of weeks.
Choose a wholly owned subsidiary if you plan to scale in India. The compliance is real. But it’s the price of a structure that won’t hold you back. Not when you want to hire, bill, or raise.
Option 2: Branch office in India for a US company
A branch office in India is an extension of your US company. It’s not a separate legal entity. It can do real work. Think consulting, exports, and some technical services. But two things make it hard for most newcomers.
First, the RBI keeps a branch on a short leash. Setup usually needs RBI approval. The allowed activities are narrower than a subsidiary’s. And there’s a bar to clear. You usually need a profit track record. You also need a net worth of about $100,000 for the parent.
Second, a branch is taxed as a foreign company. The base rate dropped from 40% to 35%. But the all-in rate still lands near 38%. That’s well above the ~25% a subsidiary pays. The gap is on purpose. India would rather you set up locally.
Choose a branch office in India only in a special case. Maybe you’re an established, profitable US company. Maybe you have a clear reason to run limited work from your existing entity. And you’ve checked the higher tax with your accountant. For an early-stage founder, the tax and limits usually make it the wrong first move.
Option 3: LLP in India for foreign companies
An LLP is a Limited Liability Partnership. It gives partners limited liability. It also has lighter compliance than a Private Limited Company. There’s no forced audit below certain limits. There are fewer filings. And the rules are simpler.
Foreign investment in an LLP is allowed under the automatic route in many sectors. So it’s a clean, low-cost fit. It works well for consulting firms, agencies, and services businesses. Mainly ones that aren’t chasing venture money.
The catch is about the future, not now. Equity investors find LLPs awkward. You can’t issue shares. You can’t issue ESOPs. You can’t issue the preference instruments a priced round needs. So if you might raise equity in the next two years, a wholly owned subsidiary is cleaner. Turning an LLP into a company later costs time and money.
Choose an LLP if you run a lean services business. And if you want lower compliance. And if you truly won’t raise equity. If not, treat the subsidiary as the safer default for a foreign company entering India.
Option 4: Employer of Record (EOR) in India — hire without an entity
Here’s the option most US companies expanding to India don’t know about. Say your goal right now is simple. You just want to hire employees in India without setting up an entity. Then you may not need to incorporate at all.
An Employer of Record (EOR) in India already has an Indian entity. It legally employs your people for you. The EOR is the employer on paper. It runs payroll. It deducts and pays taxes. It handles provident fund and local labor law. It issues compliant contracts. You still direct the daily work.
It’s the fastest way in. You can hire in days, not weeks. There’s no incorporation. No resident director. No statutory audit. And no annual filings of your own.
The EOR vs entity trade-offs are worth knowing first:
- You pay a per-employee EOR fee each month. It grows with headcount. At some point it costs more than owning an entity.
- You don’t have your own Indian company. That matters if you want to bill local customers in rupees, own IP in India, or raise money.
- Control is one step removed. You direct the work. But the legal employer is the EOR.
Here’s the pattern that works best. Start on an EOR in India to test the market and hire fast. Then move to a wholly owned subsidiary once your team or local revenue is big enough. The EOR buys speed. The subsidiary buys ownership and better economics.
Choose an EOR in India if you want good people on the ground fast. And if you’re not ready to commit to an entity yet.
Subsidiary vs branch vs LLP vs EOR: quick comparison
| If your priority is… | Best India entry structure |
| Build a team, bill Indian customers, raise funding | Wholly owned subsidiary (Pvt Ltd) |
| Hire 1–5 people fast, test the market, no entity yet | Employer of Record (EOR) |
| Run limited operations from an existing US company | Branch office |
| Lean services business, no equity fundraising | LLP |
How to choose your India entry structure: the two-year test
Don’t start with “what’s cheapest to set up?” Ask a better question. “Where will this business be in two years?”
Say the honest answer is a real India operation. A team. Local revenue. Maybe a funding round. Then start with the wholly owned subsidiary. Do it even if it feels heavy on day one.
Say the answer is “we’re not sure yet.” Maybe you just want to hire a couple of engineers and see. Then an EOR lets you move now. You don’t have to bet on an unknown outcome. For a US company expanding to India, these aren’t rivals. They’re points on a path. The EOR-to-subsidiary route is a proven way to walk it.
Common mistakes US companies make entering India
- Defaulting to a branch to “keep it simple.” It usually isn’t simpler. And it’s taxed near 38% instead of ~25%. Simplicity that costs you 13 points of tax isn’t simple.
- Choosing an LLP, then trying to raise. The lighter compliance looks nice. Then a term sheet asks for shares an LLP can’t issue.
- Under-planning the resident director. The 182-day rule trips up teams. Many assume a US founder who visits now and then will qualify. He won’t. Plan for a real India-resident director from the start.
- Staying on an EOR too long. It’s great for the first few hires. It gets costly and limiting once you’re a real team billing local customers. Watch the crossover point. Incorporate before the fees and limits hurt.
Final word for US founders
For most US companies expanding to India, it comes down to two real options. Use an EOR in India if you just need good people on the ground fast. Use a wholly owned subsidiary if you’re building something lasting. Branch offices and LLPs fit special cases. They’re not the default. The test isn’t which route is cheapest this month. It’s where the business is heading in two years.
Tax rates and rules change with each budget. The figures here reflect the current position. Confirm them for your own case before you act.
Not sure if you need an entity or just an EOR? Tell us what you want to do in India. We’ll point you to the right India entry structure. Then we’ll set it up. FinGuru India handles foreign subsidiary registration, EOR hiring, resident-director support, and ongoing compliance for US companies entering India.
