India Entity Setup Costs Compared: Subsidiary, Branch, LLP & EOR

Introduction: Cost Is the Question Every Foreign Company Asks First

This article is part of our Complete Guide to India Entry Strategy & Entity Structure. Here we dive deep into the numbers — the actual costs of setting up and maintaining each entity type, including the hidden expenses that brochures and service providers rarely mention upfront.

When a foreign company evaluates India market entry, the first question is almost always about cost. How much does it cost to set up a subsidiary? Is a branch office cheaper? Can we use an LLP to save money? Would an Employer of Record be more cost-effective than incorporating?

These are legitimate questions, but the answers are more nuanced than most advisory firms communicate. The initial registration cost — which is what most providers quote — represents a small fraction of the total cost of ownership over the first three years. Annual compliance costs, tax rates, director remuneration obligations, audit fees, and exit costs can dwarf the initial setup expense by a factor of 10-20x.

This guide provides a comprehensive, numbers-driven comparison across all four structures, using 2026 figures verified against current MCA fee schedules, RBI regulations, and practitioner data. We compare not just the setup cost, but the three-year total cost of ownership that reflects the real financial commitment.

Initial Setup Cost Comparison

The following comparison covers the direct costs of establishing each entity type, including government fees, professional charges, and mandatory initial expenses.

Private Limited Company (Wholly-Owned Subsidiary)

A wholly-owned subsidiary incorporated as a Private Limited Company is the most common structure for foreign companies entering India with operational intentions.

Key notes: Stamp duty varies dramatically by state — Maharashtra and Delhi are among the most expensive (INR 10,000-15,000), while states like Gujarat and Rajasthan are significantly lower (INR 3,000-5,000). The registered office cost depends entirely on the city and can range from INR 50,000 in a Tier 2 city to INR 5,00,000+ in Mumbai or Bangalore premium locations.

Branch Office

A Branch Office is an extension of the foreign parent company, not a separate legal entity. Setup requires RBI approval, which adds both cost and time.

Key notes: The RBI approval process requires, among other things, that the parent company meet the eligibility criteria prescribed under the FEMA (Establishment in India of a Branch or Office or Other Place of Business) Regulations — including a profit track record and net worth threshold. Approval timelines range from 4-8 months, during which the company incurs professional fees but cannot begin operations.

Limited Liability Partnership (LLP)

An LLP offers a lighter compliance framework than a Private Limited Company, but foreign investment is restricted to sectors where 100% FDI is permitted under the automatic route with no FDI-linked performance conditions.

Key notes: LLP registration costs are the lowest among all entity types. However, foreign investment in LLPs requires at least one designated partner who is a resident of India (having stayed in India for 120 days during the financial year). LLPs with FDI are prohibited from operating in agricultural/plantation activities, print media, and real estate.

Employer of Record (EOR)

An EOR is not a legal entity setup — it is a service arrangement where a third-party provider becomes the legal employer of your workers in India while you retain operational control. There is no incorporation, no registration with MCA, and no RBI approval required.

Key notes: EOR costs scale linearly with headcount, while entity costs have a large fixed component and a smaller variable component. The crossover point — where running your own entity becomes cheaper than an EOR — is typically at 25-30 employees for a subsidiary and 15-20 employees for an LLP. EOR setup takes 1-3 days versus 4-16 weeks for entity incorporation.

Annual Compliance Cost Comparison

The annual compliance burden varies dramatically across entity types. This is where the true cost differential emerges, often surprising companies that chose their structure based on setup costs alone.

Private Limited Company — Annual Compliance Costs

The resident director requirement deserves special attention. Every Private Limited Company must have at least one director who has stayed in India for 182 days or more during the financial year (Section 149(3), Companies Act 2013). If no foreign director meets this requirement, the company must appoint a local director — and compensating that person costs INR 3-6 lakh per year at minimum. Annual compliance services can help manage these obligations.

Branch Office — Annual Compliance Costs

LLP — Annual Compliance Costs

EOR — Annual Ongoing Costs

Tax Rate Comparison

The effective tax rate varies significantly across entity types and directly affects the total cost of operating in India.

The tax rate comparison reveals a critical insight: while branch offices appear simpler to set up, their 35% tax rate makes them significantly more expensive for profitable operations compared to a subsidiary taxed at 22-25%. This is why the branch office vs. subsidiary comparison almost always favours the subsidiary for revenue-generating activities. For companies comparing the Pvt Ltd vs. LLP structure, the LLP's 30% rate is offset by simpler compliance but restricted FDI access.

Three-Year Total Cost of Ownership

The following projection models the total cost of each structure over the first three years, assuming 5 employees, a Tier 1 city (Bangalore/Mumbai), and mid-range professional fees.

However, this comparison is misleading without considering the tax impact. At 10 employees and INR 1 crore annual revenue, the branch office's 38.22% effective tax rate versus the subsidiary's 25.17% rate creates a tax differential of approximately INR 18.5 lakh per year — far exceeding the compliance cost savings. This is why the subsidiary is almost always the most cost-effective structure for revenue-generating operations beyond the first year.

Hidden Costs Most Advisory Firms Don't Mention

The numbers above cover direct, visible costs. But several hidden costs can significantly increase the total investment, and foreign companies are frequently caught off guard by them.

Resident Director Cost

Both Private Limited Companies and LLPs require at least one person resident in India. Pvt Ltd residency is 182 days during the financial year (Section 149(3), Companies Act 2013); LLP residency is 120 days during the financial year (Section 7(1), LLP Act 2008). If no foreign director or partner meets the applicable residency requirement, the company must appoint and compensate a local individual. This costs INR 3-6 lakh per year for a basic professional directorship. Finding a trustworthy, qualified resident director who understands their fiduciary obligations is itself a significant undertaking.

Transfer Pricing Documentation

Any Indian entity transacting with its foreign parent or affiliates must maintain transfer pricing documentation. This includes preparing a local file and, if aggregate international transactions exceed INR 10 crore, a master file. Professional fees for transfer pricing compliance range from INR 50,000 for basic documentation to INR 3-5 lakh for complex, multi-transaction arrangements. This applies to subsidiaries, branches, and LLPs alike, but not to EOR arrangements.

Bank Account Operating Costs

Corporate bank accounts in India carry minimum balance requirements (INR 10,000-50,000 for domestic banks, INR 5-10 lakh for foreign banks), quarterly or annual maintenance fees, and charges for every cross-border transaction. A subsidiary processing 10-15 international payments per year can incur INR 50,000-1,00,000 in banking charges alone.

GST Registration and Compliance

GST registration is free, but ongoing compliance is not. Monthly or quarterly GST return filing, annual GST reconciliation, and GST audit (for turnover above INR 5 crore) add INR 24,000-60,000 per year in professional fees. Companies providing services to overseas clients may be eligible for zero-rated supply treatment, but claiming refunds on input GST requires additional documentation and professional effort.

Exit Costs

The cost of closing an entity in India is often underestimated. Striking off a dormant Private Limited Company costs INR 5,000-10,000 in government fees plus INR 20,000-50,000 in professional fees, and takes 3-6 months. Winding up an active company through the National Company Law Tribunal can take 1-3 years and cost INR 2-5 lakh. Branch office closure requires RBI approval and takes 6-12 months. LLP closure is relatively simpler, taking 3-6 months at a cost of INR 10,000-30,000. EOR arrangements can be terminated with 30-90 days notice at zero exit cost beyond the notice period fees.

Decision Framework: Which Structure When

Based on the cost analysis above, here is a practical decision framework for foreign companies evaluating India entry options:

Choose an EOR When:

• You need to hire 1-10 employees quickly (days, not months)
• You are testing the Indian market before committing to full incorporation
• Your India operations are limited to hiring talent with no local revenue generation
• You want zero compliance burden and the flexibility to exit within 30-90 days
• Your timeline is less than 18-24 months (beyond which a subsidiary becomes more cost-effective)

Choose an LLP When:

• Your business operates in a sector with 100% FDI under the automatic route with no performance conditions
• You want lower compliance costs than a Private Limited Company
• You have a trusted Indian partner who can serve as resident designated partner
• Your India operations are primarily service-based with moderate revenue
• You do not need the structural flexibility of a company (no ESOPs, no angel tax provisions)

Choose a Private Limited Company (Subsidiary) When:

• You plan to generate revenue in India and want the lowest effective tax rate (22-25.17%)
• You expect to grow beyond 15-20 employees within 2-3 years
• You need to raise capital, issue ESOPs, or bring in additional investors
• You want full operational flexibility including importing, exporting, and invoicing clients
• You are building a long-term India presence and want maximum FDI access across all permitted sectors
• Companies evaluating this route should explore foreign subsidiary setup services and FDI advisory for end-to-end support

Choose a Branch Office When:

• You are executing a specific contract or project in India with a defined timeline
• You want the parent company to directly conduct business without creating a separate entity
• You are comfortable with the 35% tax rate because the branch is a cost centre rather than a profit centre
• Your activities fall within the permitted categories for branch offices under FEMA

Key Takeaways

• Initial setup costs are the smallest component of total cost — annual compliance, tax rates, and hidden costs (resident director, transfer pricing, banking) dominate the three-year total cost of ownership.
• A Private Limited Company (subsidiary) has the highest compliance cost but the lowest effective tax rate at 22-25.17%, making it the most cost-effective for revenue-generating operations with 15+ employees.
• Branch offices have lower compliance costs but a 35% effective tax rate that makes them unsuitable for profitable operations — use them only for cost-centre activities or specific project execution.
• EOR is the most cost-effective option for 1-10 employees with no Indian revenue, but costs scale linearly and become uneconomical beyond 25-30 employees.
• LLPs offer the lowest setup and compliance costs but are restricted to automatic-route FDI sectors with no performance conditions — verify sector eligibility before choosing this structure.