Prospective companies and
investors looking to enter India must carefully consider their options for
investment and available avenues for establishing a business presence. Liaison
offices (LOs) are a popular option
for foreign investors exploring the Indian market for the first time, and
unsure of how the country's liberalizing FDI policies will affect their
business. In contrast to other business structures, LOs allow foreign companies
to establish a light footprint in India while keeping their financial, legal,
and administrative commitments low.
The Foreign Exchange
Management Act (FEMA) defines Liaison Office as a place of business to act as
a channel of communication between the Principal place of business or Head
Office by whatever name called and entities in India but which does not
undertake any commercial / trading / industrial activity, directly or
indirectly, and maintains itself out of inward remittances received from abroad
through normal banking channels.
Liaison
Offices (LOs) can undertake only liaison activities and are not allowed to
undertake any business activity in India and cannot earn any income in India.
Expenses of a Liaison Office should be met entirely through the inward foreign
exchange from Head Office outside India.
Typically
a Liaison Office can undertake only the following activities in India:
A summary of advantage and disadvantage of proprietorship business model are as follows:-
| Advantage | Disadvantage |
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