Tools

Two tools for an entity decision.

Compare the five usual ways to hold a business in India, then check whether a company is a small company under the limits in force from 1 December 2025.

Illustrative, not adviceDesk review · to be confirmed

6 min read

Contents3 sections

01Five vehicles, side by side.
02Is it a small company?
03Not sure which service fits?

Tool 01Entity comparison

Five vehicles, side by side.

Tick what the Indian presence must be able to do. Vehicles that cannot do it are marked, with the reason. Rules as checked on 25 September 2026.

It must be able to…

Earn revenue from customers in IndiaBe a separate legal entity from the parentBe owned from outside IndiaRun with no fixed approval term

All five vehicles shown. Tick a need to narrow them.

Subsidiary of a foreign company

Main law: Companies Act, 2013; FEMA (Non-debt Instruments) Rules, 2019 for the investment
Separate legal entity?: Yes. The parent's liability is limited to its investment
May it earn revenue in India?: Yes, within its objects and the sector's foreign-investment conditions
Foreign ownership: Up to 100 per cent in most sectors on the automatic route; some sectors have caps or need approval. Share issue reported in FC-GPR within 30 days
Who approves set-up: Registrar of Companies (incorporation through SPICe+)
People it must have: At least two directors and two members; at least one director resident in India for 182 days in the year
Term: No fixed term
Main yearly filings: Financial statements (AOC-4) and annual return (MGT-7) with the Registrar; FLA return to the Reserve Bank
Can it be a small company?: No. Subsidiaries are excluded whatever their size

Private limited company (Indian-owned)

Main law: Companies Act, 2013
Separate legal entity?: Yes. Members' liability is limited to their shares
May it earn revenue in India?: Yes, within its objects
Foreign ownership: Possible; foreign shareholding then follows the same rules as a subsidiary
Who approves set-up: Registrar of Companies (incorporation through SPICe+)
People it must have: At least two directors and two members (up to 200 members); at least one director resident in India for 182 days in the year
Term: No fixed term
Main yearly filings: Financial statements (AOC-4) and annual return (MGT-7, or MGT-7A if small) with the Registrar
Can it be a small company?: Yes, if it is not a holding or subsidiary company and is within ₹10 crore capital and ₹100 crore turnover

Limited liability partnership

Main law: Limited Liability Partnership Act, 2008
Separate legal entity?: Yes. Partners' liability is limited to their agreed contribution
May it earn revenue in India?: Yes
Foreign ownership: Only on the automatic route in sectors open to 100 per cent foreign investment without investment-linked performance conditions
Who approves set-up: Registrar of Companies (LLP incorporation)
People it must have: At least two partners and two designated partners; at least one designated partner resident in India for 120 days in the year
Term: No fixed term
Main yearly filings: Annual return (Form 11) by 30 May; statement of account and solvency (Form 8) by 30 October
Can it be a small company?: Not applicable. The small-company test is a company-law concept

Branch office

Main law: FEMA establishment regulations, 2016; Companies Act, 2013 (foreign companies, s.380 onwards)
Separate legal entity?: No. It is part of the foreign company, which is liable for it
May it earn revenue in India?: Yes, but only in the activities its approval permits (for example export and import, consultancy, research, IT services). No retail trading
Foreign ownership: Wholly the parent's by definition
Who approves set-up: An authorised dealer bank; the Reserve Bank or the government in some cases. Parent needs a five-year profit record and net worth of USD 100,000
People it must have: Persons resident in India authorised to accept notices, named in form FC-1 within 30 days of opening
Term: No fixed term
Main yearly filings: Annual activity certificate by 30 September; foreign-company filings with the Registrar
Can it be a small company?: Not applicable

Liaison office

Main law: FEMA establishment regulations, 2016; Companies Act, 2013 (foreign companies, s.380 onwards)
Separate legal entity?: No. It is part of the foreign company
May it earn revenue in India?: No. No commercial, trading or industrial activity; costs met from remittances from abroad
Foreign ownership: Wholly the parent's by definition
Who approves set-up: An authorised dealer bank; the Reserve Bank or the government in some cases. Parent needs a three-year profit record and net worth of USD 50,000
People it must have: Persons resident in India authorised to accept notices, named in form FC-1 within 30 days of opening
Term: Normally three years, extendable (two years for construction and development, and NBFCs)
Main yearly filings: Annual activity certificate by 30 September; foreign-company filings with the Registrar
Can it be a small company?: Not applicable

Sources, checked 25 September 2026

Companies Act, 2013: sections 2(42), 2(85), 3, 149(1) and (3), 380 (foreign companies)
Limited Liability Partnership Act, 2008: sections 6 and 7 (designated partners; 120-day residence)
Foreign Exchange Management (Establishment in India of a Branch Office or a Liaison Office or a Project Office or any other Place of Business) Regulations, 2016 (FEMA 22(R)/RB-2016) (opens in a new tab)
Reserve Bank of India, FAQs on liaison, branch and project offices of foreign entities (opens in a new tab)
Reserve Bank draft regulations on establishment of offices by foreign entities (October 2025): proposed, not in force when checked on 25 September 2026. The 2016 regulations are shown
Foreign Exchange Management (Non-debt Instruments) Rules, 2019 and the consolidated FDI policy (automatic route; FDI in LLPs)

A branch office's permitted activities are listed in its approval. Sector caps and conditions for foreign investment change; check the current consolidated FDI policy for your sector. Read the full note on choosing an entity

Tool 02Small-company check

Is it a small company?

Companies Act, 2013, section 2(85). From 1 December 2025 the limits are ₹10 crore paid-up capital and ₹100 crore turnover, up from ₹4 crore and ₹40 crore. Both must be met, and some companies are excluded whatever their size.

Result

Enter capital and turnover.

What a small company gets

01Board meetingsAt least one in each half of the calendar year, at least 90 days apart, instead of four a year.s.173(5)
02No cash flow statementThe financial statements need not include a cash flow statement.s.2(40)
03Shorter annual returnThe abridged form MGT-7A instead of MGT-7.s.92; rule 11
04Shorter board reportAn abridged board's report is allowed.s.134(3A)
05Fast-track mergersMergers between small companies can use the simpler fast-track route.s.233
06Lower penaltiesPenalties for many defaults are capped at half the usual amount.s.446B

Sources, checked 25 September 2026

Companies Act, 2013, section 2(85) (definition of small company; exclusions for holding, subsidiary, section 8 and special-Act companies)
Companies (Specification of Definitions Details) Amendment Rules, 2025, notification G.S.R. 880(E), in force 1 December 2025: rule 2(1)(t) limits raised to ₹10 crore paid-up capital and ₹100 crore turnover (from ₹4 crore and ₹40 crore)
Relaxations: Companies Act, 2013, sections 2(40), 92 with rule 11 (MGT-7A), 134(3A), 173(5), 233 and 446B

Status is tested on the figures of the preceding financial year and can change from one year to the next. This is an illustration, not advice on any company's position.

Not sure which service fits?

Answer three questions