Avoid These Errors When Incorporating Your Company in India

So, you’ve got your business idea polished and the ambition to take it into the Indian market. Great move. With a customer base as varied as its languages, India is one of the economies with the quickest rates of growth in the world.  The element that many business owners don't immediately understand, though, is that incorporating your company in India involves more than merely filling out paperwork. Compliance and knowledge of the local business culture are key.
 

If you skip a step, you risk fines or, worse, rejection without even having to deal with delays.  Let's examine the most frequent mistakes made by international companies and how to prevent them.

Misunderstanding the Right Business Structure
 

Choosing the wrong type of entity can be a costly mistake. Each has specific regulatory rules and tax treatment. For example:
 

•     Private Limited Company – Allows full operations but comes with more compliance.
•     Liaison Office – Limited to non-commercial activities, useful for initial market presence.
•     Branch Office – Can conduct business but is subject to more RBI scrutiny.
   

A Quick tip: If your primary goal is market research or brand representation, a Liaison Office might be a smarter first move.

Incomplete or Incorrect Documentation

You know what? This is where things often unravel. Missing a single document—or submitting one with outdated notary stamps—can delay approval by weeks.
 

Foreign companies must provide:

•     Certificate of Incorporation
•     Board resolution authorizing Indian incorporation
•     Valid ID and address proof of directors
   

    Apostilled or consumerized documents (depending on your home country)

And here’s the kicker: Indian regulatory bodies are very particular. A mismatch in passport details or a bank letter with vague wording can cause rejections.

Not Appointing a Resident Director

Under the Companies Act, 2013, every Indian Private Limited Company must have at least one Resident Director. It is someone who’s lived in India for a minimum of 182 days in the previous calendar year.

Foreign founders often overlook this requirement or assume a visiting executive can fill the role. That’s not how it works

What you can do: Partner with a trusted compliance service provider who can help appoint a qualified local director.

Ignoring Tax Implications at the Setup Stage

Many foreign startups set up their Indian entity without consulting a tax advisor, only to face issues later with Permanent Establishment (PE) classification, Transfer Pricing, or GST registration.

Taxes can get complicated fast. For instance:

•     Your Indian entity might be taxed on global income if improperly structured
•     Payments to the parent company can trigger withholding taxes
•     GST registration might be mandatory from day one, depending on the services offered
   

A bit of early tax planning can save your company from headaches down the road.

Delayed Filing with Regulatory Bodies

Once the company is incorporated, that’s not the end of the paperwork—it’s just the beginning. Missing deadlines with the Registrar of Companies or the Reserve Bank of India can attract fines or even suspension.

Some key post-incorporation steps include:

•     Filing INC-20A to confirm the commencement of business
•     Registering for PAN and TAN
•     Opening a compliant bank account
•     Submitting the Foreign Liabilities and Assets (FLA) return to RBI

It’s a lot to manage, especially if you're operating remotely.

Underestimating Local Compliance Culture

India’s business environment is not only rule-driven but also process-sensitive. There’s a certain rhythm to how things move. Missing a local holiday or misunderstanding how state-level approvals work can throw your entire timeline off.

Foreign founders often bring global expectations into a system that thrives on procedural clarity. Adjusting your approach isn’t just smart—it’s necessary.

Final Thoughts

Global entrepreneurs may easily incorporate their businesses in India; in fact, it happens on a daily basis.  However, you may have to fix errors that could have been prevented with a little planning if you speed through the procedure or neglect the preliminary steps.

Therefore, relax, choose the best counselors, and develop your foundation properly.

Company Bio: PKP Consult specializes in guiding global entrepreneurs through every step of incorporating your company in India. With in-depth expertise in Indian regulatory, tax, and financial systems, we support clients from Singapore, the USA, Japan, Australia, and the UK to launch and structure their businesses compliantly and confidently in the Indian market.