Setting Up an Indian Subsidiary for a US Staffing or Recruitment Company

Prepared by AU Corporate's CA-led advisory team · Published 12 October 2026 · General guidance; the right approach depends on the services and employment model.

A US staffing, recruitment or talent business may want an India team to support sourcing, recruiting operations, candidate research, sales or delivery. Some firms also plan to employ people in India or supply staffing services to clients. These models have different legal, tax and employment considerations, so define the proposed work before selecting a structure.

1. Define the staffing business model

Start by describing the services the India team will provide and who the customer is. A recruitment team that sources candidates for the US parent is different from an Indian business that places candidates with clients, supplies contract workers or employs people on a client's behalf.

Do not use “recruitment”, “staffing” and “EOR” as interchangeable terms. The contract, actual working arrangements and responsibility for employment obligations should line up.

2. Compare an Indian entity with an EOR or service provider

A private limited subsidiary may suit a firm that plans to build a lasting India operation, hire its own team, enter local client contracts or manage delivery through a separate Indian business. An EOR may be useful for a limited initial hiring need where the provider becomes the legal employer. A managed service or recruitment-process outsourcing arrangement may fit work where a provider owns the delivery process.

Compare the full scope and cost, including setup, monthly service fees, payroll, benefits, supervision, IP, data access, contract terms, exit or transfer arrangements and tax exposure. A particular model is not automatically suitable just because it appears quicker or cheaper.

For more detail, see our EOR vs subsidiary guide for US companies and India payroll compliance guide.

3. Review ownership and foreign-investment eligibility

Before committing funds, describe the proposed activity accurately and check the applicable foreign-investment policy, sector conditions and approval route. A business that recruits for clients may have a different activity profile from one that provides internal support services to its US parent. Do not assume the same regulatory treatment applies to every staffing model.

Use the DPIIT and Reserve Bank of India websites as starting points, and get a fact-specific review where the activity or funding route is uncertain.

4. Document client and intercompany arrangements

Write down who supplies each service, who contracts with the client, how fees are calculated, who supervises the work, and who bears responsibility for mistakes, replacements, confidentiality and data security. Where the Indian entity serves the US parent, the intercompany agreement should match the actual services and supporting records.

Retain appropriate evidence such as service descriptions, recruiter activity, timesheets where relevant, client approvals, invoices, cost calculations and documented service levels. Cross-border related-party transactions may require transfer-pricing analysis and reporting.

5. Plan employment responsibilities and payroll

Identify the legal employer for every worker group. Plan employment agreements, payroll, benefits, withholding and applicable social-security or state-level requirements based on the employment facts and current law. If staff work at customer premises or are supplied to another business, check the additional obligations that may apply to the actual arrangement.

Also define how workers are onboarded and offboarded, who approves leave and expenses, who keeps personnel records, and which party handles complaints, workplace policies and employee information.

6. Protect candidate and employee information

Recruitment operations may process CVs, contact details, work history, interview notes, identity documents and sensitive client information. Map what is collected, why it is needed, where it is stored, who can access it and when it should be deleted.

Review privacy notices, client and intercompany contracts, access controls, retention practices, vendor arrangements and cross-border data transfers. The right safeguards depend on the data, systems, locations and laws that apply.

7. Map tax and recurring compliance

Depending on the activities, the Indian business may need company-law filings, accounting, statutory audit, income tax, GST, payroll and withholding compliance, foreign-investment reporting and transfer-pricing documentation. Establish the calendar before the first employee or client contract starts.

For the setup process, start with our company registration guide for US businesses and review the post-incorporation compliance checklist.

Official starting points

• Ministry of Corporate Affairs for company incorporation and filings.
• DPIIT for foreign-investment policy.
• Employees' Provident Fund Organisation for applicable EPF information.
• Employees' State Insurance Corporation for applicable ESI information.

Confirm which requirements apply to the actual business model, workforce and locations before relying on any general checklist.

Frequently asked questions