How to Set Up a Subsidiary in India (US Guide)

Most guides on this topic are written the other way around, for Indian founders forming a Delaware C Corp to raise US venture funding. If you are a US company, often a Delaware C Corp, looking to own and operate an Indian entity, the journey runs in the opposite direction, and the checklist is different. This guide walks through that reverse journey: how a US parent company sets up, funds, and maintains an Indian subsidiary under current regulations.

Can a Delaware C Corp Own an Indian Subsidiary

A Delaware C Corp, or any US company, is generally permitted to hold shares in an Indian company, subject to sector specific foreign investment rules that are described further below. The Indian entity itself is typically incorporated as a Private Limited company, which is the closest Indian equivalent to a US corporation in terms of limited liability, separate legal personality, and the ability to issue shares.

Common ownership structure

The usual structure is a wholly owned subsidiary, where the Delaware C Corp holds all or substantially all of the shares of the Indian Private Limited company, subject to the minimum number of shareholders required under Indian company law being met (often satisfied using a nominee shareholder holding a nominal number of shares on behalf of the parent, or a group affiliate holding a small stake). The US parent appoints directors to the Indian board, and the Indian company operates as a distinct legal entity governed by Indian law, even though it is fully controlled by the US parent.

When a wholly owned subsidiary makes sense

A wholly owned Indian subsidiary is generally the right structure when the US company plans to hire employees directly in India, needs to invoice Indian customers in Indian rupees, wants to build a product or engineering team under its own brand, or wants to enter into contracts, leases, and vendor agreements in its own name in India. It is a heavier structure than simply engaging Indian contractors or using a staffing arrangement, but it gives the US parent direct control over IP, employment terms, and local operations.

Key checks before choosing the structure

Before committing to a subsidiary, it is worth checking whether the intended business activity is open to full foreign ownership under current sector rules, whether a lighter alternative such as a branch office or liaison office might suit the initial stage better, and whether the expected scale of Indian operations justifies the ongoing compliance cost of running a full subsidiary. A Chartered Accountant or company secretary familiar with cross border structures can help validate this before any paperwork begins.

India Subsidiary Setup Process

Once the structure is confirmed, the actual incorporation process for an Indian subsidiary of a US company follows a fairly standard sequence, though timelines and documentation can vary depending on the sector and the number of foreign directors involved.

Choosing the Indian company type

For a foreign owned subsidiary, a Private Limited company is almost always the appropriate choice, since it allows share capital, limited liability, and a governance structure familiar to US investors and boards. Other Indian entity types, such as a Limited Liability Partnership, are less commonly used by US parents that plan to eventually raise capital, transfer shares, or list the Indian entity in group reorganizations, since LLPs have different rules around foreign investment and share transfer.

Name approval and incorporation documents

The process generally begins with reserving a company name with the Ministry of Corporate Affairs, followed by preparing incorporation documents such as the memorandum and articles of association, details of proposed directors and shareholders, and proof of the registered office address in India. Since the parent is a US entity, additional documents such as a board resolution authorizing the investment, apostilled or notarized corporate documents, and identity proof for the authorized signatory are typically required, and these usually need to be legalized for use in India.

Director and shareholder requirements

Indian company law generally requires at least one director who is a resident in India, meaning someone who has stayed in India for a minimum period during the preceding financial year, in addition to any US based directors nominated by the parent. The Delaware C Corp itself is usually the corporate shareholder, with the resident individual or an affiliate holding the balance shares if a second shareholder is required. Each director will need a Director Identification Number and digital signature certificate issued through the Indian regulatory system.

Tax and statutory registrations

After incorporation, the Indian subsidiary needs a Permanent Account Number and Tax Deduction and Collection Account Number for direct tax purposes, along with registration under Goods and Services Tax if the business crosses the applicable threshold or engages in specified activities. Depending on the state and the nature of operations, registrations under the local Shops and Establishments Act, professional tax, and employee welfare schemes such as provident fund and employee state insurance may also apply once staff are hired.

Foreign Ownership and Compliance Checks

Because the parent is a foreign company, the subsidiary's foreign investment is governed by India's foreign exchange and investment regulations, in addition to standard company law.

Sector eligibility

Most sectors relevant to US technology, software, and services companies are generally open to full foreign ownership under the automatic route, meaning no prior government approval is required, though certain sectors such as defense, media, insurance, and specific categories of retail or financial services carry conditions, caps, or approval requirements. It is worth confirming the current position for the specific business activity before incorporation, since sector classifications and conditions are periodically revised.

Foreign investment reporting

When the Delaware parent subscribes to shares in the Indian subsidiary, the investment needs to be reported to the Reserve Bank of India through the subsidiary's authorized dealer bank, using the prescribed foreign investment reporting form, generally within a defined window from the date shares are allotted. This reporting confirms that the inbound investment complies with the applicable pricing guidelines and sector conditions, and delays or omissions here can attract compounding proceedings under current FEMA regulations.

Banking and capital contribution steps

The Indian subsidiary needs a current bank account with an authorized dealer bank in India before it can receive share subscription money from the US parent. The inbound funds are typically routed through normal banking channels, and the bank will require supporting documents such as the foreign inward remittance certificate and know your customer documentation for the US parent before the funds can be credited and the shares formally allotted.

Post Incorporation Obligations in India

Incorporation is only the starting point. An Indian subsidiary of a US parent carries a recurring set of compliance obligations that need to be tracked from year one.

Company secretarial compliance

The subsidiary needs to hold board meetings and an annual general meeting within the intervals prescribed under Indian company law, maintain statutory registers, and file annual returns and financial statements with the Registrar of Companies. These filings are generally due within fixed periods after the financial year end and after the annual general meeting, and missed deadlines can attract additional fees and penalties under current rules.

Accounting and tax filings

The subsidiary must maintain its books of account under Indian accounting standards, undergo a statutory audit, and file its corporate income tax return under the current Income Tax Act. Since the subsidiary will typically make payments to its US parent for services, royalties, or reimbursements, these transactions generally fall under India's transfer pricing rules and need to be priced at arm's length, with supporting documentation maintained for review.

Board and shareholder records

Even where the US parent holds all or nearly all the shares, the Indian subsidiary still needs to keep proper records of board resolutions, shareholder resolutions, share certificates, and statutory registers, since Indian regulators and banks will ask for these during audits, funding rounds, or when the subsidiary opens new banking relationships.

Ongoing foreign investment compliance

Beyond the initial share allotment reporting, the subsidiary generally needs to file an annual return with the Reserve Bank of India covering its foreign assets and liabilities, and any subsequent transfer of shares, further capital infusion, or repatriation of funds to the US parent will typically trigger its own reporting or approval requirement under current FEMA rules.

Common Mistakes for Delaware Parent Companies

US founders and legal teams sometimes carry over assumptions from the Delaware incorporation process, or from advice written for Indian founders going to the US, which does not translate well to setting up in India.

Using a template meant for Indian founders going to the United States

Most publicly available guidance on India and Delaware structures is written for Indian founders flipping their company into a Delaware C Corp to raise venture capital. That process, sometimes called a flip, is close to the reverse of what a US company needs when it wants to open an Indian subsidiary, and applying that template directly, for example assuming a simple certificate of incorporation is enough or that no resident director is needed, tends to create gaps.

Missing India specific filings after incorporation

A frequent mistake is treating the certificate of incorporation as the finish line, without following through on the foreign investment reporting to the Reserve Bank of India, the PAN and TAN registrations, or the GST registration where applicable. These are separate filings from incorporation itself, and each carries its own timeline.

Treating incorporation as the end of compliance

The other common gap is assuming that once the subsidiary is set up and funded, no further action is needed until the next funding round. In reality, board meetings, annual filings, tax returns, and transfer pricing documentation are recurring obligations from the first year onward, and a US parent that does not have a local compliance calendar in place risks penalties that accumulate quietly.

When to Get Professional Help

Given the number of moving parts, most US companies bring in Indian company secretarial, tax, and FEMA advisors at a few specific points rather than trying to manage the process entirely from the US.

Before finalizing the ownership route

It is worth getting professional input before deciding on the exact ownership structure, particularly if the business activity sits close to a restricted or conditional sector, or if the group is considering a more complex structure involving an intermediate holding entity.

Before moving funds into India

Since the timing and reporting of the share subscription money is tied to specific regulatory deadlines, it helps to have the Indian bank account, KYC documentation, and reporting forms lined up before the US parent wires funds, rather than after.

Before hiring employees or signing customer contracts

Once the subsidiary starts hiring in India or signing customer and vendor contracts, additional registrations such as provident fund, employee state insurance, and GST may be triggered, and getting the employment contracts and customer agreements reviewed against Indian law before signing avoids rework later.