US to India · Entity structure comparison
Subsidiary vs Branch vs Liaison Office vs LLP in India
Prepared by S U and Company's CA-led advisory team · Published 26 October 2026 · About S U and Company
Four routes let a foreign company establish a presence in India, and they are not interchangeable: a wholly owned subsidiary, a branch office, a liaison office and a Limited Liability Partnership differ in what they are permitted to do, who is liable if something goes wrong, how they are taxed, and what it takes to qualify for each. Picking the wrong one tends to surface later, usually as a forced conversion once the business has outgrown what the original structure was ever allowed to do.
Quick answer
What is the difference between a subsidiary, branch office, liaison office and LLP in India?
Most foreign companies choose a wholly owned subsidiary, a private limited company, because it is a separate legal entity that can carry on full business, limits the parent's liability, and is taxed as an Indian company. A branch office is an extension of the foreign company with restricted permitted activities and direct parent liability. A liaison office cannot earn revenue at all. An LLP is permitted only in sectors with no FDI-linked performance conditions and suits narrower cases.
1. The four structures compared
| Wholly owned subsidiary | Branch office | Liaison office | LLP | |
|---|---|---|---|---|
| Legal status | Separate Indian company | Part of the foreign company | Part of the foreign company | Separate legal entity |
| Can earn revenue | Yes | Yes, within permitted activities | No | Yes |
| Parent's liability | Generally limited to its investment | Parent is directly liable | Parent is directly liable | Limited to each partner's contribution |
| Approval route | Automatic Route in most sectors; reported to the RBI | RBI approval through an authorized dealer bank | RBI approval through an authorized dealer bank | Allowed only in eligible sectors |
| Best suited for | Operations, sales, development centers, GCCs | A specific parent activity such as consultancy or R&D | Market research and liaison only | Certain partnership-style setups |
2. Wholly owned subsidiary (private limited company)
This is the standard route for an operating business. The company has its own registrations, bank account, employees and contracts. It needs at least two directors, one of them resident in India, and two shareholders — in a wholly owned subsidiary, usually the foreign parent and a nominee holding one share. It must keep statutory books, have its accounts audited every year, and file annual returns with the Registrar. Foreign ownership of up to 100% is allowed in most sectors under the Automatic Route. See our step-by-step incorporation guide and our Resident Director guide.
3. Branch office
A branch office carries on specified activities of the parent in India — export and import, professional or consultancy services, research work the parent is itself engaged in, IT and software services, or technical support for products the parent supplies. It needs RBI approval, usually applied for through an authorized dealer bank, and its activities are strictly limited to what has been approved. Because a branch is not a separate legal entity, the foreign company is directly liable for it, and its India profits are taxed at the rate for foreign companies rather than the domestic company rate. Branches tend to suit a parent that wants to perform one defined activity in India without setting up a separate company. See our branch office registration guide.
4. Liaison office
A liaison office represents the parent in India and passes information between the parent and Indian parties. It cannot undertake commercial activity or earn income, and its expenses are met entirely by remittances from the parent. It also needs RBI approval. If the plan includes invoicing customers, hiring a sales team to close deals, or delivering services of any kind, a liaison office will not be enough — see our liaison office registration guide.
5. Limited Liability Partnership (LLP)
An LLP is a separate legal entity with each partner's liability limited to their contribution. Foreign investment in an LLP is permitted only in sectors where 100% foreign ownership is allowed under the Automatic Route with no FDI-linked performance conditions attached. For a foreign parent, an LLP is less common in practice, mainly because the home-country tax treatment of the partnership interest and the lack of share-based instruments can complicate both funding and eventual exit. Confirm the home-country tax classification with your own tax adviser before choosing this route. See our subsidiary vs LLP guide for the detail.
6. Tax rates at a glance (tax year 2026-27)
| Structure | Effective tax rate |
|---|---|
| Wholly owned subsidiary (concessional regime) | 25.168% under Section 200 of the Income-tax Act, 2025 (previously Section 115BAA of the 1961 Act): 22% plus 10% surcharge and 4% cess |
| Wholly owned subsidiary (without the concessional election) | 25% (turnover up to ₹400 crore) or 30%, plus 7% or 12% surcharge and 4% cess, with Minimum Alternate Tax of 15% of book profit |
| Branch office | 35% on India profits, plus a 2% or 5% surcharge depending on income, plus 4% cess — up to roughly 38.22% |
| Liaison office | No business income tax, since commercial activity is not permitted; still needs a PAN and an Annual Activity Certificate |
| LLP | 30% plus a 12% surcharge above ₹1 crore and 4% cess — roughly 34.944%, with 18.5% Alternate Minimum Tax where higher |
Sending profits home also differs by structure: a subsidiary's dividends bear withholding tax of 15% under the India-US treaty where the parent holds at least 10% of the voting power (20% plus surcharge and cess at the domestic rate otherwise); a branch can generally remit after-tax profits to its head office without a further layer of Indian tax; a liaison office has no profits to remit; and an LLP partner's share of after-tax profit is not taxed again in the partner's hands in India.
7. Eligibility requirements for each route
- Wholly owned subsidiary — no minimum net worth or profit-track-record test for the parent; Form FC-GPR reported within 30 days of share allotment.
- Branch office — the parent needs a net worth of at least USD 100,000 and a profit-making record in the preceding five financial years in its home country.
- Liaison office — the parent needs a net worth of at least USD 50,000 and a profit-making record in the preceding three financial years in its home country.
- LLP — only in sectors where 100% foreign investment is allowed under the Automatic Route with no FDI-linked performance conditions.
8. How to choose
- Choose a subsidiary if the plan involves hiring a team, signing contracts, invoicing customers, holding assets, or growing the India presence over time — this covers most foreign companies entering India.
- Choose a branch office if the foreign company itself wants to carry out one defined, permitted activity and is comfortable with direct liability and foreign-company tax rates.
- Choose a liaison office only for representation, market research or relationship-building where no revenue will ever be earned through it.
- Start with an Employer of Record instead of any of the four if the immediate goal is simply to hire quickly and test the market before committing to a structure — see our EOR vs subsidiary guide.
9. Mistakes worth avoiding
- Opening a liaison office and then invoicing customers or signing contracts through it, which sits outside its permitted scope entirely.
- Choosing a branch to save setup effort without weighing the parent's direct liability and the higher foreign-company tax rate that comes with it.
- Deciding on a structure before checking whether the relevant sector actually allows 100% foreign ownership.
- Leaving the home-country tax classification of the chosen Indian entity unexamined until after the first filing is already due.
Frequently asked questions
Can a liaison office earn revenue in India?
No. A liaison office can only represent the parent and coordinate with Indian parties; it cannot undertake commercial activity or earn income, and its running costs are met entirely by remittances from abroad.
Which structure do most foreign companies choose for India?
A wholly owned subsidiary incorporated as a private limited company, because it is a separate legal entity with limited liability that can carry on full business activity, hire staff directly and invoice customers.
Can a foreign company own 100% of an Indian subsidiary?
Yes, in most sectors. India permits 100% foreign ownership under the Automatic Route, which needs no prior government approval. A small number of sectors carry ownership caps, conditions or an approval requirement, so the specific activity should be checked against the FDI Policy before the structure is finalized.
How many directors and shareholders does an Indian subsidiary need?
At least two directors under Section 149(1) of the Companies Act, 2013 and two shareholders under Section 3(1)(b), with at least one director resident in India, meaning present for 182 days or more in the year under Section 149(3). In a wholly owned subsidiary, the parent holds nearly all the shares and a nominee holds the small remainder.
What is the tax rate for a branch office in India?
A branch office is taxed as a foreign company at 35% on its India profits, plus a 2% surcharge where income falls between ₹1 crore and ₹10 crore or 5% above ₹10 crore, plus 4% cess — up to roughly 38.22% in total. After-tax profits can generally be remitted to the head office without a further layer of Indian tax.
What is the tax rate for an LLP in India?
An LLP is taxed at 30%, plus a 12% surcharge where income exceeds ₹1 crore and 4% cess, giving roughly 34.944% in total. An Alternate Minimum Tax of 18.5% of adjusted total income applies instead where it is higher than the normal computed tax.
Does a liaison office pay income tax in India?
No business income tax, because it cannot earn income or carry on commercial activity. It still needs a PAN and must file an Annual Activity Certificate from a Chartered Accountant each year, and any commercial activity beyond its permitted scope could create a permanent establishment and real tax exposure.
How S U and Company can help
We advise on the right entry structure for a given business plan, incorporate the Indian entity, and handle the RBI and MCA filings that follow. See our related guides on how to register a company in India and EOR vs subsidiary, or explore the US-to-India entry guides.
Sources and further reading
- Ministry of Corporate Affairs — company incorporation and corporate-law resources.
- Reserve Bank of India — FEMA and the FIRMS portal.
- DPIIT — the Consolidated FDI Policy.