NRIs and Partnership Firms

Firm handshake

Individuals might be surprised to learn that partnership firms and non-resident Indians (NRIs) are two of the most underutilized sources of business investment in India. If utilized effectively, NRIs in particular have a wealth of expertise and knowledge that can be a benefit to Indian businesses.

Who are the Non-Resident Indians?

Those with citizenship outside of India are referred to as NRIs. They may spend some of the years living in India, while they spend the majority of their time abroad. NRIs come in a variety of forms, including those who were born abroad, those who have immigrated, and those who are citizens of India and have temporarily relocated there for jobs or school.

Partnership Firms in India 

Businesses with two or more partners that are registered in India are called partnership firms. The partners may be international or Indian people or businesses. Partnership firms come with several advantages for business investment in India, including the capacity to raise capital, accessibility to government grants and tax reductions, and a streamlined start-up procedure.

What is a Partnership Firm?

When it comes to partnerships, there are two types: 

  • General Partnership- With a general partnership, all partners are equally liable for the debts of the business. This type of partnership is the most common, but it can be risky because the partners are all personally liable for any legal issues or financial woes the business might experience.
  • Limited Partnership- A limited partnership, on the other hand, limits each partner’s liability to what they’ve invested in the company. This is a good option if you want to reduce your risk but still have some involvement in the business.

There are pros and cons to both types of partnerships, so it’s important to weigh them carefully before making a decision.

Benefits of Partnership Firms for NRIs

When it comes to doing business in India, NRIs have a few options. They can establish a branch or liaison office, which is the simplest and quickest way to set up shop. They can also establish a joint venture with an Indian partner, or they can set up a partnership firm. 

  1. Partnership firm offers complete control to the NRIs. They are 50% owners of the company, and they make all the decisions regarding management and operations. This gives NRIs the freedom to run the business exactly as they see fit, without having to compromise with an Indian partner.
  2. Setting up a partnership firm is much easier and less bureaucratic than setting up a full-fledged company. There is no need for foreign investment approval or liaison office approval, meaning the process is much simpler and faster.
  3. NRIs can repatriate 100% of their profits back to their home country, which is not possible with other business structures. This allows them to keep more of their profits and reinvest them in their business back home.
  4. Partnership firms provide a lower tax burden than other business structures. The tax rates are flat at 30%, which is much lower than the rates for companies (which can be as high as 42%). This means that NRIs can keep more of their profits and reinvest them in their business.
  5. Partnership firms provide an easy way for NRIs to enter the Indian market and do business with local partners. The process is simple, and there is no need for complex legal agreements or negotiations.

How to Register a Partnership Firm for NRI in India?

It’s quite easy to register a Partnership Firm in India. 

  • Obtain a Digital Signature Certificate (DSC) and Director Identification Number (DIN). This can be done through the Ministry of Corporate Affairs (MCA) website. 
  • Open a special bank account for the partnership firm, making sure it’s fully compliant with regulations. Once the bank approves your application, you can then apply for registration with the Registrar of Companies (ROC).
  • Provide some additional information at this point. 
  • You will have to guarantee that all partners are NRIs. 
  • All NRI partners should submit their proof of residence using documents such as an electricity bill or PAN card. 
  • Provide proof of your digital certificate and DIN numbers. 
  • Submit all related papers required for setting up a company in India – such as a Memorandum of Association (MOA) and Articles of Association (AOA).

Once everything is submitted, the ROC has 60 days from the submission date to approve or reject the registration application. If approved, your partnership firm is now registered and ready for business. 

Rules and Regulations for NRI Investment in Partnership Firms

Did you know that Non-Resident Indians can also invest in Partnership Firms? To do so, however, they must comply with the rules and regulations stipulated by the Foreign Exchange Management Act (FEMA). To start with, they must have an Indian passport, along with a valid visa. They must also have a PAN (Permanent Account Number) card and a Demat account.

In terms of the amount that can be invested by an NRI in a Partnership Firm, it is limited to 25% of the total capital invested in the company. This rule does not apply to Foreign Institutional Investors (FII), which are not subject to any restrictions on their investments.

It is important to note that all NRIs who are keen on making investments in India must adhere to the laws relating to foreign exchange transactions. These laws are in place to ensure compliance and protect investors from any illegal activity or fraudulent practices. Always ensure that all your documents are in order before investing. 

Starting a Business in India

One common type of business that NRIs and Partnership Firms can enter into is starting a business in India. It is important to note that before engaging in any kind of investment activity, the Indian government needs to grant permission to the individual or group. There are numerous advantages to starting a business in India, including

  • Access to larger markets,
  • Simple tax structure, and
  • Improved access to funding and other resources, and a skilled workforce.

If you are interested in taking advantage of India’s ample opportunities for business investment, then you’ll want to know more about the process for starting a business here.

  1. Register with relevant authorities and obtain necessary permits. This includes registering your company name by filling out an online form on the Registrar of Companies website and obtaining an Incorporation Certificate from the Ministry of Corporate Affairs. 
  2. Obtain PAN (Permanent Account Number) and TAN (Tax Deduction Account Number) from the Income Tax Department, open bank accounts for your company, register for VAT (Value-added Tax) if necessary, and obtain an employer identification number (EIN). 

Once all these details are taken care of, you can start setting up your business operations and taking advantage of enticing investment opportunities in India.

Business Investment in India

Non-Resident Indians (NRIs) and Partnership Firms have a unique opportunity to unlock their potential for business investment in India. Investing in India can provide several benefits—including access to a growing market, access to world-class infrastructure, and an attractive rate of return on investment.

For NRIs, investing in India is attractive because the cost of living is much lower than in other countries, making it easier to do business. There is also the potential for higher returns than traditional investments that can be found elsewhere. In addition, investing in India provides access to a strong network of investors, advisors, and service providers—all of whom are familiar with the Indian market and can help guide NRIs through the process. Partnership Firms have the advantage of being able to pool resources from multiple partners, allowing them to move faster into new markets and capitalize on emerging opportunities. 

NRI Partnership Firms

Are you interested in tapping into the potential of non-resident Indians (NRIs) and partnership firms for business investments? If so, you’re in luck—there are several ways to make it happen.

  • NRI partnership firms are one of the most effective options available. By pooling resources, NRIs can establish a firm that allows them to easily invest in India without having to go through complex registration procedures. Not only can they use their resources to bring capital into India, but they can also utilize their expertise and connections to help their company succeed.
  • NRIs and partnership firms can take advantage of certain tax-related benefits that can give them a competitive edge over other business investors. Since these firms can claim certain deductions against their income, this can result in higher profit margins for them. This makes it a great option for anyone who wants to maximize their earnings and minimize their risk.

Unregistered Partnership Firms

As you may know, unregistered partnership firms are popular among Non-Resident Indians (NRIs) because they don’t require any registration or declaration. This is perfect for those looking for an easy, fuss-free way to invest in existing businesses or start their own business back in India.

Unlike other types of firms, unregistered partnership firms don’t need to give details regarding the shares of each partner or how much each partner has invested. It’s also important to note that the liabilities of unregistered partnership firms are shared among all partners. 

The biggest advantage of an unregistered partnership firm is that it can be easily dissolved and taken apart if needed. This makes it easier for NRIs who aren’t able to visit India often and don’t want to commit to a long-term agreement. However, be warned that tax laws and regulations can still apply.

Registering a Firm

When it comes to registering a partnership firm with NRIs as part of the members, there are a few steps to follow. 

  • Decide on the type of business you want to do and the area where it will be located.
  • Meet the legal requirements by registering your firm with the Registrar of Companies (ROC). This is done by submitting form 4 and some other applicable documents that include a Memorandum of Association and Articles of Association depending on the nature of the business.
  • Secure a permanent account number (PAN) and register for Goods and Services Tax (GST). Additionally, if any foreign national is involved in the business, then they have to acquire Foreign Investment Promotion Board approval.

After all these requirements have been fulfilled, you can successfully register your firm and start operating as a non-resident Indian or through partnership firms.

Incorporating a Partnership Firm

You may now be considering incorporating a partnership firm, which is a popular business structure in India. As an NRI, you can own up to 100% of the partnership firm and can also employ other NRIs. Furthermore, you may even register the firm with the Reserve Bank of India (RBI), allowing you to receive investments from abroad.

To form a partnership firm, you will need at least two partners and will need to file documents with the registrar of firms to obtain legal recognition. You’ll then need to draft a partnership deed that outlines the terms and conditions of the business as well as the roles and responsibilities of each partner. You’ll also need to apply for various requisite registrations such as GST Registration, TIN/VAT Registration, Professional Tax Registration, and other related agencies. It should be noted that all partners are jointly and severally liable for any debts or losses incurred by the business. Once all these steps have been completed, you can then begin running your businesses as an NRI. 

What does this mean for Businesses?

If you are looking to invest in India, partnering with an Indian firm is the best way to maximize the potential of your investment. Indian firms offer a wide range of services and have the local knowledge and connections needed to help your business succeed. As a bonus, Indian firms are becoming increasingly interested in partnering with foreign firms, so there is no shortage of potential partners.