Three entity types are technically available to a foreign parent setting up a captive centre in India. In practice, one of them is right almost every time, and the interesting decisions sit one level below the entity choice itself.
The three structures, compared
A branch or liaison office cannot freely undertake manufacturing or full commercial activity, and sits under a more restrictive RBI approval regime under FEMA, with each permitted activity typically requiring specific authorisation from an AD Category-I bank. That makes it a poor fit for a GCC that expects its scope to grow. A Limited Liability Partnership carries a structural problem for foreign-owned captive centres: FDI into an LLP is permitted under the automatic route only in sectors with 100% FDI and no performance-linked conditions, which excludes a meaningful share of GCC-relevant activity, and an LLP’s capital structure is less familiar to future acquirers or listing counsel if the parent ever wants to convert or divest. A private limited company — a wholly-owned subsidiary (WOS) under the Companies Act, 2013 — gives the parent 100% ownership under the automatic route for most GCC-relevant sectors, limited liability, and a corporate form every bank, auditor, and future acquirer already understands. That is why it is the default, not a rule we apply out of habit.
Equity or ECB: the funding decision behind the entity decision
Once the entity is chosen, the parent still has to decide how it funds the subsidiary. Pure equity is the simplest: no repayment obligation, no dilution since the parent owns 100% of the cap table, and a single, well-understood FC-GPR reporting event to the RBI. External Commercial Borrowing (ECB) can be more tax-efficient, since interest paid to the parent is a deductible expense, but it brings its own RBI framework — minimum average maturity, an all-in-cost ceiling linked to a benchmark rate, end-use restrictions, and a separate reporting track via Form ECB — and the interest deduction itself is capped under Section 94B of the Income Tax Act, which limits interest deductibility on related-party debt above a threshold. Most captive GCCs default to equity for exactly this reason: the administrative simplicity outweighs the marginal tax benefit of ECB, unless the funding amount is large enough to make the thin-capitalisation math worthwhile.
The director residency requirement, in practice
The Companies Act requires at least one director who has been resident in India for a minimum of 182 days in the preceding financial year, under Section 149(3). Most parents nominate their own officers to the remaining board seats and satisfy this single requirement either with a Clairvoyis nominee director or with an India-based hire, depending on how much operational board presence the parent wants day to day. This is a small requirement on paper that surprises first-time parents in practice, since it has to be resolved before incorporation, not worked around afterward.
Where IP ownership actually gets decided
Where the IP a GCC creates or touches legally sits is a structuring-stage decision, not a legal afterthought. It needs to be written into the entity documents and, downstream, into every employment contract from the first offer letter, which is where it actually gets enforced. Fixing this retroactively, after a team has already shipped work product, is materially harder and more expensive than deciding it once, correctly, before incorporation.
This article is general information, not tax or legal advice for your situation. Speak with a qualified adviser before acting.