In our first article, we set out the five decisions that matter in an India entry. The first — whether you need a full India entity at all — is the one most companies answer by reflex, and the one that quietly sets the cost of the other four.
The reflex is familiar: "We're expanding to India, so we need an entity." But an entity is a commitment, not a starting line. Incorporate too early and you carry the full weight of Indian compliance for a team a lighter structure could have supported for eighteen months. Avoid one when the situation genuinely demands it, and you invite tax exposure and contracting friction that are expensive to unwind.
The real question is rarely which entity. It is this: are you employing people, transacting locally, or both — and over what horizon? Three routes cover nearly every early-stage case.
Employer of Record (EOR)
A third-party Indian entity becomes the legal employer of your hires, running payroll and statutory compliance while you direct the work. It is fast — live in one to two weeks — and ideal for market testing and your first handful of people. The trade-off is a markup of up to USD 600 per employee per month: trivial at three or four heads, but the maths turns at roughly five to eight, where the cumulative cost overtakes running your own entity. An EOR lets you employ, not transact — no local revenue contracts, no regulated activities — and, importantly, it does not by itself remove the parent's permanent-establishment risk. It is a bridge, deliberately temporary; the common error is staying on it long after the strategy has outgrown it.
SNRR Account
A Special Non-Resident Rupee (SNRR) account lets a foreign company invoice, receive, and disburse in rupees without incorporating, under FEMA. It fits when you have Indian contracts or project revenue but no people on the ground — time-bound consulting or INR billing against a defined scope. But it is a settlement vehicle, not an employment one: you cannot build a team on it, and its permitted uses are bounded. Treat it as a precise instrument, not a general foothold.
Your Own Entity
An entity becomes right with meaningful, growing headcount; a regulated industry; the need to contract with Indian customers or government; ownership of IP created in India; or a long-term commitment where control and credibility matter. Past the EOR cross-over it is usually the cheaper and stronger choice — bought at the price of the heaviest compliance burden and the slowest path to live. Which entity — Private Limited, LLP, or a branch, liaison, or project office — is Decision Two, and turns on what you intend to do, not on what is most common. We will take that apart next. The point here is narrower: decide whether you need an entity at all before debating which one.
Three questions resolve most cases
- Employing, transacting, or both?People only points to an EOR. Rupee invoicing only points to an SNRR account. Both, or any local contracting, points to an entity.
- How many, over what horizon?Up to five to eight for the foreseeable term, and an EOR is cheaper and faster. Beyond that, or clearly scaling, and the entity wins.
- Own IP, sign local contracts, or operate in a regulated space?Any "yes" points to an entity, regardless of headcount.
The two expensive mistakes
Two errors drive most of the avoidable cost. The first is incorporating too early — carrying a Private Limited company's full filing, audit, and FEMA load for a team of three. The second is its mirror: clinging to an EOR past the cross-over, where a once-trivial markup quietly exceeds the cost of your own entity.
Depending on how work is directed and where decisions are made, a foreign company can create a taxable presence in India through its people or agents even without an entity. An EOR mitigates employment liability; it does not resolve PE. Settle it in the advisory phase, not in an assessment.
Why this decision comes first
Decision One gates the other four. Get it right and every subsequent choice rests on a sound footing; get it wrong and Decisions Two through Five optimise a structure you never needed. The highest-leverage moment in an India entry is the conversation before any incorporation document is signed.
The decision in one paragraph
Foreign companies entering India have three routes to choose from before incorporation: EOR (employ Indian staff via a third-party legal employer; fast, capped at roughly 5 to 8 employees by economics), SNRR account (FEMA-permitted INR settlement for contracts without people on the ground), or own entity (Private Limited, LLP, Branch, Liaison, or Project Office — heaviest commitment, lowest unit cost above EOR cross-over). The right choice depends on whether you are employing people, transacting locally, or both — and over what horizon. Settle this question before debating which entity structure.