How to Legally Set Up a US-Owned Subsidiary in India: Key Requirements and Compliance Guide (2026)

Expanding from the US to India: The Legal and Compliance Landscape

India continues to be one of the most attractive destinations for US companies expanding into Asia — thanks to its skilled workforce, growing consumer market, and investor-friendly FDI policy.

However, the real challenge for foreign promoters is not the paperwork. It’s understanding the legal, regulatory, and compliance requirements under the Companies Act, 2013, FEMA, and the MCA V3 system.

This guide explains what a US parent company must know before setting up an Indian subsidiary — including director and office requirements, banking and FEMA obligations, and the practical realities of operating a foreign-owned company in India.

What is the Best Legal Structure for a US Parent in India?

Most US companies establish a Wholly Owned Subsidiary (WOS) as a Private Limited Company under the Companies Act, 2013. It allows 100% foreign ownership, limited liability, and independent legal status — ideal for full control while complying with Indian regulations. A wholly owned subsidiary (WOS) is a company incorporated in India with the US parent holding 100% of its share capital. Unlike branch or liaison offices, a WOS can undertake commercial operations, sign contracts, hire employees, and repatriate profits. Other options — such as Branch Office, Project Office, or Liaison Office — are more restricted and require RBI approval. Hence, the Private Limited route remains the most flexible and compliant structure for long-term business in India.

Pre-Incorporation Legal Planning for US Founders

Before initiating the incorporation process, foreign promoters should undertake careful legal and strategic planning. The first step is to confirm sector eligibility under India’s FDI Policy 2025 — determining whether the proposed business activity falls under the automatic route or requires government approval. Sectors such as fintech, defence, insurance, and broadcasting often need prior clearance, and obtaining clarity at this stage helps avoid downstream regulatory delays.

Next, the capital structure must be thoughtfully designed. Promoters should decide how much capital will be infused at incorporation and how future funding will be channelled — whether through additional equity, shareholder loans, or share premium. Proper structuring ensures compliance with FEMA pricing guidelines and smoother repatriation of funds later.

Finally, careful attention should be given to control and governance arrangements. The parent company should define the composition of the Indian subsidiary’s board, outline decision-making powers, and document these provisions through a Shareholders’ Agreement and a Board Resolution of the US parent. Establishing governance clarity early sets the foundation for compliance, control, and investor confidence once operations begin.

Key Legal Requirements for Incorporating a Foreign-Owned Subsidiary

Every foreign-owned company in India must have two directors (one resident), two shareholders, and a registered office address in India. All foreign documents must be notarised and apostilled, and the incorporation is filed online via the SPICe+ system under MCA V3.

Legal and Practical Explanation:

1. Resident Director Requirement: Under Section 149(3) of the Companies Act, 2013, at least one director must be a resident in India, meaning they must have stayed in India for 182 days or more in the preceding financial year. This ensures local governance presence and accountability.

2. Registered Office Address in India: A physical address is mandatory. It can be a rented office, shared workspace, or owned property, supported by a utility bill and No Objection Certificate (NOC) from the property owner.

3. Shareholding Structure: The US parent company can hold 100% of shares, either directly or through a holding company. Minimum paid-up capital can be as low as ₹1 lakh, though most companies start with ₹10 lakh for practical purposes.

4. Document Legalisation: All foreign documents — including the US parent’s Certificate of Incorporation, Board Resolution, and Director ID proofs — must be notarised and apostilled under The Hague Convention before being filed in India.

Do US Promoters Need to Visit India?

No physical visit is required for incorporation — it’s fully online under MCA V3. However, banks typically insist that directors visit India in person to sign account opening and KYC documents after incorporation. While the entire incorporation process (SPICe+ filing, digital signatures, and approval) can be completed remotely, most Indian banks require physical verification for account opening.

Directors must sign the account opening and KYC forms in the presence of bank officials, even if authorised signatories are local. Some private banks permit video-based KYC, but RBI compliance norms still favour physical verification.

Hence, founders should plan at least one short visit post-incorporation for banking and compliance formalities.

FEMA & FDI Compliance Requirements for US Subsidiaries

Once share capital is received from the US parent, the Indian subsidiary must file Form FC-GPR on the RBI’s FIRMS Portal within 30 days of share allotment, attaching FIRC, valuation, and KYC documents. Under the Foreign Exchange Management Act (FEMA), 1999, all foreign investments must be reported to the Reserve Bank of India (RBI).

The process involves:

• Inward Remittance: The US parent remits capital to the Indian company’s bank account.
• FIRC (Foreign Inward Remittance Certificate): Issued by the receiving bank.
• FC-GPR Filing: Filed on the FIRMS portal within 30 days of share allotment.
• Attachments: Valuation certificate, FIRC, and KYC from the US remitter bank.

Failure to file FC-GPR on time attracts late submission fees (LSF) under FEMA regulations.

📎 Related Read: Post-Incorporation Compliance Checklist for Indian Companies

Post-Incorporation Compliances under Companies Act, 2013

After incorporation, the company must file INC-20A (Commencement of Business), appoint an auditor (ADT-1), hold a first board meeting within 30 days, and maintain statutory registers, books, and annual filings (AOC-4, MGT-7A).

Detailed Obligations:

1. Form INC-20A: Filed within 180 days, confirming receipt of share capital.
2. Appointment of Auditor (ADT-1): Within 15 days of the board meeting.
3. Board Meetings: First within 30 days; at least 4 per year thereafter.
4. Registers and Books: Must be maintained at the registered office.
5. Annual Filings:
   

   • AOC-4 – Financial statements
   • MGT-7A – Annual return

Missing these filings leads to additional fees or penalties.

Tax, Banking, and Operational Considerations

1. Permanent Establishment (PE) Risk: Avoid creating a PE for the US parent — ensure contracts and operations are executed by the Indian subsidiary independently.

2. Transfer Pricing: Inter-company transactions (services, IP, loans) must follow arm’s length pricing and require transfer pricing documentation.

3. Bank Account Opening:
   

   • Can be done only after incorporation.
   • Most banks require in-person signatures by directors.
   • FIRC is issued after foreign capital is received.

4. Repatriation of Profits: Profits can be repatriated after taxes are paid in India. Dividends are freely remittable under FEMA.

5. GST & Income Tax:
   

   • GST registration required if turnover exceeds ₹40 lakh (₹20 lakh for services).
   • Income tax rate for domestic companies: 22% (with MAT and surcharge exceptions).

📎 Related Read: https://csatwork.in/difference-between-esop-sweat-equity-and-phantom-stock-india/

Timeline and Cost Overview

Incorporation usually takes 2–3 weeks, depending on document apostille and MCA approval. The total cost ranges from ₹75,000–₹1,25,000, including government fees, professional charges, and document legalisation costs.

Typical Stages:

1. DSCs and Document Legalisation – 3–5 days
2. Name Approval – 2–3 days
3. SPICe+ Filing & COI – 3–5 days
4. Bank Account & FIRC – 5–7 days
5. FC-GPR Filing – within 30 days of allotment

Common Mistakes to Avoid

• Not appointing a resident director before incorporation.
• Delaying FEMA filings (FC-GPR).
• Incorrect name reservation under MCA V3.
• Ignoring INC-20A filing, leading to company strike-off.
• Neglecting transfer pricing compliance for inter-company services.

Building a Compliant India Entry Structure

Setting up a US-owned subsidiary in India is now easier than ever under MCA V3, but compliance doesn’t end with incorporation. Ensuring proper FEMA filings, board constitution, and banking documentation at the outset builds a strong foundation for regulatory trust and investor readiness.

For foreign promoters, the smartest move is to focus on legal structure, governance, and compliance timing, while letting your Company Secretary handle filings and coordination.

We assists foreign promoters with end-to-end India entry — from structuring and incorporation to FEMA and post-incorporation compliance.

About the Author

Prashant Kumar is a Company Secretary, Published Author, and Partner at Eclectic Legal, where he advises US and global companies on India-entry strategy, subsidiary formation, FEMA compliance, cross-border structuring, and regulatory governance. His work spans end-to-end incorporation planning, FDI documentation (including FC-GPR/FC-TRS), board governance, and ongoing corporate compliance under the Companies Act, 2013.

He regularly supports overseas counsel, VC funds, and group CFOs in navigating India’s legal regime with clarity — from designing simple ownership structures to managing multi-jurisdiction reporting, IP protection and operational risk during market entry.

For consultations, he can be reached at +91-9821008011 or prashant@eclecticlegal.com.

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