Setting up business entity is easier with the guidance of expert professional but many foreign promoters make mistake due to lack professional guidance. There are five mistakes should be avoided at the time of setting up business entity in India by foreign promoters.

Wrong entry structure selection

Avoid the selection of structure on short term tax relief basis.  Always choose the entry structure as per long term need like when commercial operations are intended then avoid Branch office structure. Before incorporating the WOS (Wholly Owned Subsidiary) evaluate the sectoral cap of FDI. You should must aware about the restricted business activity.

Ignoring FEMA and Pricing guideline

Timely compliance can save a lot of time and cost. Filing of FCGPR and follow the valuation requirement wherever it is applicable can save time and avoid compounding burdens. We should always follow FEMA (Non-Debt Instruments) Rules, 2019 and RBI Master Directions on FDI.

Improper capital structure and shareholding planning

Generally, shareholders enter in to the business without the shareholder’s agreement, without the exit clause, ignoring the ESOP Pool. Subsequently it can be the cause of mmanagement disputes, Oppression & mismanagement, litigation under Sections 241–242 of Companies Act, difficulties in fund raising later.

Non-Compliance with resident director

Pursuant to the provision of Section 149(3) of the Companies Act, 2013 at least one director must stay in India for minimum 182 days in a financial year. Proportionately can be calculated as per the date of incorporation of the company.

Post incorporation Compliances

Your liabilities do not end with the incorporation of company or setting up business entity in India, your liabilities start with the date of incorporation. So professional guidance munch needed for the post compliances.