Wholly Owned Subsidiary
What is a wholly owned subsidiary?
A wholly owned subsidiary is a foreign legal entity that's entirely owned and controlled by a parent company based in another country. Setting one up means registering a new legal entity in the target country, complying with its corporate and tax law, and building out the systems needed to run payroll, benefits, and HR independently there.
What building a wholly owned subsidiary in India actually involves
Registering a wholly owned subsidiary in India typically means incorporating under the Companies Act, obtaining a Permanent Account Number and Tax Deduction Account Number, opening a local corporate bank account, and registering for GST if applicable. Realistically, this process takes anywhere from two to six months depending on how quickly documentation moves through the relevant government departments, and it usually requires local legal and accounting support to navigate correctly.
Once the wholly owned subsidiary is registered, the company still needs to build compliant payroll, understand Indian labor law well enough to draft proper employment contracts, and set up statutory benefits administration, none of which happens automatically just because the entity exists.
Why companies still choose a wholly owned subsidiary despite the cost
Given the time and expense, a wholly owned subsidiary might seem like an obviously worse option compared to an Employer of Record. But it earns its cost in specific situations. Companies planning a genuinely large, long-term presence in India, with dozens or hundreds of employees over time, often find the per-employee cost of an EOR eventually exceeds what running their own entity would cost at scale. A wholly owned subsidiary also gives full control over local branding, banking relationships, and direct legal standing in the country, which matters for companies planning significant local business activity beyond just employing remote staff.
Where a wholly owned subsidiary falls short for most companies
For a company testing the India market, building an initial team of five to fifteen people, or simply wanting to move fast on a hiring decision, a wholly owned subsidiary is usually the wrong tool. The multi-month setup timeline alone can mean losing a strong candidate who won't wait around for a company to finish incorporating before starting work. And the ongoing compliance burden, filing corporate returns, managing statutory audits, staying current with changing labor law, requires either hiring dedicated local staff or paying for ongoing professional support, both of which add real cost beyond the initial setup.
The middle path most companies actually take
A pattern that's become increasingly common: start with an Employer of Record to build the initial team and validate the India strategy, then transition to a wholly owned subsidiary once the team has grown large enough that the economics clearly favor owning the entity directly. This avoids betting months of setup time and legal cost on a strategy that hasn't yet proven out, while still leaving the door open to full ownership once the case for it is genuinely clear.
kaam.work supports companies through exactly this kind of transition, handling the EOR phase while a company builds and proves its India team, so the eventual decision to establish a wholly owned subsidiary, if it comes, is based on real operating data rather than a guess made before hiring anyone.
The genuine trade-off to weigh
At its core, the choice between a wholly owned subsidiary and an EOR comes down to a trade-off between control and speed. A wholly owned subsidiary gives maximum long-term control at the cost of significant upfront time and investment. An EOR gets you operating within days at a somewhat higher ongoing per-employee cost, without the entity management burden. Neither is universally right. The correct choice depends on team size, timeline, and how confident you already are in the long-term commitment to India.
Frequently asked questions
- How long does it take to set up a wholly owned subsidiary in India?
- Typically two to six months, depending on how quickly registration, tax ID, and banking setup move through the required government processes.
- Is a wholly owned subsidiary cheaper than an Employer of Record?
- It can be at larger scale, since EOR fees are typically charged per employee, but the upfront setup cost and ongoing compliance burden of a wholly owned subsidiary usually only pay off with a larger, longer-term team.
- Can I switch from an EOR to a wholly owned subsidiary later?
- Yes, this is a common path. Companies often start with an EOR to build and validate their India team, then transition to a wholly owned subsidiary once scale justifies the investment.
- What ongoing obligations come with a wholly owned subsidiary in India?
- Regular corporate filings, statutory audits, and continuous compliance with evolving Indian labor and tax law, typically requiring dedicated local staff or professional support.
