Most India-entry advice assumes you set up the entity first and hire afterwards. In practice it rarely happens in that order. The hiring is urgent, the entity is paperwork, and the two get separated by months.
This is what that gap looked like for one client, and how it was handled.
Client details are anonymised. This is representative of engagements we handle rather than a named account.
The situation
A US-based company had built an eight-person team in India — engineering and support roles, all working full time for the parent, all based in different Indian cities.
There was no Indian entity. There was no immediate plan for one either. The team had been hired because the people were available and the work was urgent, and the structural question had been left for later.
By the time they came to us, two things needed answering:
- How do we actually get money to these eight people every month, reliably?
- What is the minimum we have to do so this doesn’t become a problem?
The second question was the honest one, and it was the right one to ask. They were not looking for the most elaborate structure. They wanted to know where the floor was.
What made it awkward
Paying people in India from abroad is not difficult in itself. Money moves. The difficulty is what the arrangement means.
Three issues sat underneath the question:
The people looked like employees. Full time, working only for the parent, directed day to day by the parent’s managers, using the parent’s systems. Whatever the paperwork said, the substance of the relationship pointed one way. Treating them as independent contractors indefinitely was not a position that would hold up if anyone examined it.
Activity in India can create exposure for the parent. A team working in India for a foreign company raises the question of whether the parent has a taxable presence here. It is a facts-and-circumstances assessment, not a bright line, and eight people doing core work is not nothing.
Individual obligations don’t disappear. Each of the eight had their own Indian income tax position regardless of how the parent classified them. Several were unclear on what they personally owed, which is its own kind of risk — an employee who gets a notice tends to escalate it to the employer.
None of these had an emergency deadline attached. That is exactly why they get postponed.
What we did for the first eight months
We were clear at the outset that this was an interim arrangement, not a destination. The brief was to keep payments running and keep exposure contained while the entity decision was made properly rather than in a panic.
Documented the arrangement honestly. Contracts, scope and payment terms written to reflect what was actually happening, rather than language borrowed from a template that described something else. Where the relationship carried employment characteristics, the documentation did not pretend otherwise.
Set up a clean payment route. Payments structured so each person received a predictable amount on a predictable date, with the remittance documentation the banks would ask for, and records the parent’s own finance team could reconcile without a monthly explanation.
Handled the withholding position. Where tax was required to be deducted on payments, it was deducted, deposited and reported — rather than discovered later as a default with interest attached.
Gave the eight individuals clarity. Each got a plain explanation of their own Indian tax position and what they needed to file. This was not strictly the parent’s problem, but eight people confused about their own tax is a retention problem and eventually an escalation problem.
Kept a written record of the exposure. We told them, in writing, what the residual risks were and what would resolve them. That mattered later — when the entity discussion happened internally, the parent had a document rather than a recollection.
The entity, eight months in
The subsidiary was registered around eight months after we started. By then the India team was clearly permanent, and the interim arrangement had gone as far as it usefully could.
Incorporation was the straightforward part. What mattered was the sequence afterwards, because the obligations start from the incorporation date rather than from when the company starts trading:
- The first board meeting and the appointment of the first auditor, both within thirty days
- The commencement of business filing, within one hundred and eighty days — until that is approved the company cannot legally commence business or borrow
- Statutory registrations for payroll, so the eight could move onto a proper Indian payroll from a clean date
- Salary structures designed rather than copied, because how CTC is split drives the statutory cost for years afterwards
- The first payroll cycle run in a way that did not create a messy transition mid-month
The eight moved from the interim arrangement onto employment with the Indian subsidiary in a single cycle, with no gap in payment.
What we would say to the next company in this position
Eight months was reasonable. Two years would not have been. An interim arrangement is defensible while a decision is genuinely being made. It stops being defensible once it has become the permanent answer by default.
Ask the second question early. They asked “what is the minimum we have to do” at the start rather than after something went wrong. That is the whole reason this was manageable. The same conversation two years and twenty people later is a different conversation, with backdating in it.
The structure decision belongs to the parent, not to the accountant. Our job was to lay out what each route commits you to and what it costs to unwind. Whether an eight-person team justifies a subsidiary is a commercial judgement, and it was theirs to make.
Document the interim period as if it will be examined. It usually isn’t. But when it is — during diligence, during a funding round, when an employee leaves unhappily — the difference between a documented interim arrangement and an undocumented one is substantial.
If you are in the same position
If you have people in India and no entity yet, or an entity and no clarity on what it now obliges you to do, we can map the position before you commit to anything.
Global payroll and India entry → Company registration → Global Desk — everything India-side under one contact →
This case study describes a past engagement in general terms. It is not advice on your circumstances, and outcomes depend on facts specific to each situation.
