Liaison Office, Branch or Subsidiary? An India Entry Overview for US Companies

Why the distinction matters

The form of presence determines what the India operation can do, how it is regulated and how money and contracts flow. It should be selected from the intended activity, not from whichever option sounds simplest.

Liaison office

A liaison office is intended for permitted liaison and representative activities. RBI guidance restricts it from ordinary commercial, trading or industrial activity and from earning income in India. That makes it unsuitable for many operating models that need local revenue-generating activity.

Branch office

A branch office is an extension of the foreign entity rather than a separate Indian subsidiary. Permitted activities and eligibility sit within India’s foreign-exchange framework. The correct route depends on the sector and facts, so a US company should obtain current professional advice before assuming a branch is available or preferable.

Indian subsidiary

An Indian company creates a separate local corporate vehicle. Incorporation is handled through the Ministry of Corporate Affairs framework, including SPICe+ processes. Foreign ownership, sector conditions, tax, governance, capitalisation and reporting need to be evaluated together.

Questions to take to advisers

Will the India team contract with customers? Will it invoice locally? Who owns intellectual property? What functions and risks sit in India? How will the operation be funded? Will employees be hired locally? What sector restrictions apply? These answers are more useful than asking for the “cheapest entity.”

Do not treat this page as legal advice

Regulatory rules change and company facts matter. Use this overview to prepare the right questions, then validate the structure with Indian legal, tax, corporate-secretarial and authorised-dealer banking advisers.

The structure should follow the intended activity

A representative presence, a branch and an incorporated Indian company are not interchangeable labels. The appropriate route depends on what the foreign business intends to do in India, how revenue and contracts will work, the sector, investment rules, tax considerations and the desired level of permanence. A US team should describe the proposed activities in plain language first and then obtain current professional advice on which structure can legally and practically support them.

A liaison office has meaningful limits

RBI guidance describes a liaison office as a channel of communication and states that it cannot undertake business activity or earn income in India. That makes it unsuitable for many operating models that involve local commercial activity. A branch office can undertake permitted activities subject to the applicable framework, while an Indian subsidiary operates as an Indian incorporated entity. The differences affect more than paperwork; they influence contracts, banking, tax, staffing and ongoing compliance.

Model the ongoing burden, not only setup

Decision-makers should compare recurring filings, accounting, audit, payroll, banking, governance, repatriation and closure implications as well as formation time. A structure that appears simple at the beginning may not fit the planned scale two years later. Put the operating model and expected growth beside the legal options, and document why the chosen route fits both the immediate launch and foreseeable expansion.

Start with the activity, not the entity label

Before comparing structures, write down what the India operation is actually expected to do during its first year: employ staff, sign customer contracts, invoice locally, provide support, conduct research, coordinate with a parent company, or hold assets. That activity list gives legal and tax advisers something concrete to assess and prevents the discussion from becoming a comparison of entity names in the abstract.

The preferred structure can also change as the operating plan becomes clearer. A company that begins with a narrow representative purpose may later need broader commercial capability, while another may decide that a full operating entity is justified from the start. Treat structure selection as part of the business design and confirm the current requirements before implementation.