Business visa for a sole proprietor - ability to earn a living!

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#1 Apr 12th, 2012, 16:16
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#1
Hi folks,

I'm facing a lot of confusion on how I might go about getting a bonafide business visa for India as a sole proprietor. I'd love to connect with someone else who's managed to crack this conundrum! Here are the details of my situation:

My intention had been to apply for a business visa from the UK in June, and then head to India (where I've been off and on for around six years, mostly on a research visa before I changed occupations). My business is provision of humanitarian and social development communications services (specifically photography) to NGOs and the CSR departments of large corporates. I have identified an Indian photographer who, along with his wife, has a company in Bangalore and is interested in collaborating with me. As such, they're happy to issue me with an invitation letter.

The complication seems to be how to do this in a way in which I can legally earn a living through my work in India. I've since read that business visas are intended for representatives of foreign companies to come to India to explore and make arrangements for doing business in India. If one wants to earn, it seems that one should instead have an employment visa. But to have one of those, one needs an offer letter for a full time permanent position from an Indian company stating a commitment to an annual salary of $25,000. This is impossible in my case - no organisation will pay so much for a humanitarian photographer. So the question seems to be, how can sole proprietors do business in India?!

What I'm currently wondering is whether the following could be a way forward (and also technically legal!):
  1. Bangalore company would invite me to India to explore possible collaboration between our two companies; my UK sole proprietorship's letter for the visa application should say that it's sending me to consult for the Bangalore company (I'm not quite sure how this bit should be phrased).
  2. The Bangalore company would raise my invoices in their name.
  3. I would raise all invoices for photography assignments from my UK proprietorship, and the Bangalore company would pay what I'm owed direct to my UK account via wire transfer.
  4. It might make things easier if I register my UK business (currently a simple sole proprietorship) with Companies House, though I'm not too sure about this.
I've also heard talk of setting up an entity in India, though I gather that this can be extremely fraught with difficulties owing to red tape that can be crippling for a sole trader or simple partnership. However, if this is THE way then of course I'm willing!

So... if anyone has any insights, or knows anyone who is a sole trader and who makes a living from India who they'd be willing to put me in touch with, I'd sincerely appreciate it!

Cheers,

ttaywnibor
#2 Apr 15th, 2012, 17:09
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#2
How long would you want to go? If it is once for around 3 to 6 months or something, I would go by the way you suggested. If you want to cooperate for a longer period, you can consider a partnership (I think either LLP or PvtLtd are required). These are not meant for small business again though, you need a turnover of 1 crore (10 million Rupees) within 2 years from start up to keep qualifying for the B visa.

Generally, B visa are for people who come to do business - meetings, checks on progress of work or inspection, internal training, networking, sales, etc. and E visa are for actually executing work. Being a part of a startup or partnership you can kind of fit in either one. I donīt know what is required for a recognised 'partnership' if it is not a Pvt Ltd or LLP.

But with the profession you mentioned, won't they consider that as journalism?
#3 Apr 21st, 2012, 18:10
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#3
Many thanks, Mishka! Much appreciated.

I recently got some legal advice that seems to tally with what you've said. I can go to India on a Business Visa upon invitation from an Indian business, and can then explore options. While here, I can start an entity (I think Pvt. Ltd., not LLP) and that entity can earn from clients, which would pass to me via dividend income. I would need at least one Indian partner in this, which is a bit of a pain as the outfit I'd been talking with before is already a Pvt. Ltd. and was expecting simply to collaborate with me, not set up a whole new entity with me.

Yes, there does seem to be an expectation that my business should be turning over a crore per annum within two years. That's quite a bunch of money!

I see your point about my profession. However, I am not simply a 'photographer'. I am more of a visual media consultant for social development initiatives. This is not just a fancy re-definition. I do a lot more than take photographs, so I think I should be ok on this front. I'm pretty sure I could not actually live in India on a Journalist Visa, as these are limited to three months, right? Besides, no journalist accreditation body in the UK would recognise me as a journalist in what I do. In fact, I actively distance myself from photojournalism.

The legal advice included the suggestion that I should not turn my sole proprietorship in the UK into a company, as this could lead me into complications. This surprised me, as I thought it would look a bit more credible for a company to be sending me, rather than me sending myself (as it were). The advice did not elaborate on what those complications might be, so I'm confused. Any thoughts on this?!

Cheers!!
#4 Apr 22nd, 2012, 04:05
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Originally Posted by robinwyatt View Post ... I can start an entity (I think Pvt. Ltd., not LLP) .... I would need at least one Indian partner in this....
Not necessarily - some business sectors are allowed 100% FDI.

AndyD 8-)₹
#5 Apr 22nd, 2012, 04:47
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Originally Posted by robinwyatt View Post so I'm confused. Any thoughts on this?!
Basically you want to live in India. You would be hard pressed to sell your photography skills as world-class; as that would entail you easily topping >$25,000 per year.

It is not true that journalists get 3 month visa; NYT, Post, AP, Reuters send their correspondents for multi-year long assignments.

Quote:
Originally Posted by a_f_d View Post Not necessarily - some business sectors are allowed 100% FDI.

AndyD 8-)₹
Not in his case. What is his business ? What are the assets he's putting 100% FDI on ? Canon Mark II ? Macbook Pro with Aperture ? It will not stand even a barest of scrutiny.

If they buy that argument, next they'll have to concede to novelist as a 100% FDI eligible Creative writing and fantasy Development Business.
#6 Apr 22nd, 2012, 04:54
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Originally Posted by ttaywnibor View Post My business is provision of humanitarian and social development

ttaywnibor
Quote:
Originally Posted by robinwyatt View Post a visual media consultant for social development initiatives.
Same person ? or Two different folks in the same business; who also happen to be on IM ?
#7 Apr 22nd, 2012, 11:19
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#7
Sorry for the confusion - the original post was also written by me from another account. Both accounts have since been merged.

I'm definitely not a journalist, nor a photojournalist.

It's interesting that some business sectors are allowed 100% FDI. Though mine may not be one such sector, I wonder how one finds details of such things. I've not seen it anywhere online.
#8 Apr 22nd, 2012, 13:26
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Hi Robin,

I think you should stick to that line 'I am a visual media consultant for social development initiatives.' Don't mention photography as your headline or you will face difficulty by being seen as journalist instead.
Anyway you may still get some interview to explain yourself. I think it is hard to make people believe you will earn your money with this as you already indicated here, so it would be good if you have a plan that at least looks credible in the sense of potential earning capacity.

About the Indian partner bit: what was done before is you own 99%, your CA or anyone else with an Indian passport owns the remaining 1%. This can be a silent partner. This has been done before by foreigner-owned Pvt Ltds. I think LLPs are at least planned to be allowed for FDI when I looked at it in 2010. It seemed like a better deal than a Pvt Ltd, but that time the actual regulations for FDI weren't put up yet by the ministry. I think worth to look into.

About the sole propriety: I have sent myself to India while being one, and this was not a problem at all. But staying in India having the original company, that could run into complications. Again, not sure how they would find out, but they had a drive checking on people on business visa before and actually sent a lot of them back home. The reason was: you actually do work in India so you are supposed to pay tax in India, and should be here on employment visa*. At the same time you are taxed back home and even in case of tax treaties I am sure it would not be a smooth affair. I closed my sole propriety once the Indian Pvt Ltd started giving returns.

* as mentioned before: if you are a director of an Indian company, you actually CAN work in India on business visa, this is the only way foreign start-up entrepreneurs can function right now if they start as boot-strap. After two years you either need to earn 1 crore/year as a company (stay on Business Visa) or 1 lakh/month as salary (come back on Employment Visa).

A third option would be that you would become a director in your partners company. If that is an option from your partners perspective as well, you could for instance take a minority share in their company. For you to get business visa on that would require their business to have a turnover of 1 crore/year within 2 years from their start up, so depending on when they started and their current turnover you could use this option.
#9 Apr 22nd, 2012, 14:45
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#9
Thanks a bunch, Mishka.

I am so much more than just a photographer. It just so happens that the main piece of hardware my consulting business uses in carrying out contracts is a camera. I am in no sense a journalist. I'm not sure how the Indian government defines 'photojournalist', but my dictionary says photojournalism is "the art or practice of communicating news by photographs, esp. in magazines". I've not even once provided content for a newspaper or magazine, whether physical or digital. Rather, I work with NGOs and companies' CSR departments to help them use powerful and compelling images to reach out to both donors and beneficiaries to communicate their messages more effectively, demonstrate the difference their initiatives are making. I do a lot more than just take photographs. I work as a one-stop-shop, working with my client's communications team on conceptualisation, liaising with field task to gather images and audio material, then crafting all this into a finished product and assisting with the strategy for rolling it out.

Are you saying that the silent partner / 1% Indian ownership thing is no longer how it works / is now forbidden? Because you said "what was done before is...".

You said to look into FDI rules, so I checked the RBI's website, and their FAQs on Foreign Investments in India (last updated on 13th October 2010) say:
Q. 1. What are the forms in which business can be conducted by a foreign company in India?

Ans.
A foreign company planning to set up business operations in India may:
  • Incorporate a company under the Companies Act, 1956, as a Joint Venture or a Wholly Owned Subsidiary.
  • Set up a Liaison Office / Representative Office or a Project Office or a Branch Office of the foreign company which can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, 2000.
This was last updated 18 months ago, and I think the government reviews FDI policy every six months or so. I read here that the nod has been given to FDI in LLPs. I then tried to search for FDI rule changes and sole proprietors... . Unfortunately, the more I read on this online, the more monumentally confused I became. I couldn't seem to work out from the legal language whether things applied to me or not.

But from what I understand from what you've said, I can be the director of a company registered in India and earn from that. Do you mean earn through a salary, dividend income, or how?

I'm just not sure at this stage whether those I'd been in talks with are keen on setting up an entity separate from the one they already have. They have not yet touched a crore, by the way, and it's been more than two years (they are close to that turnover, though).

So it would be good to know whether recent changes have yet made having a sole proprietorship in India possible, or whether being a director of a business here alongside one or more Indian nationals is the only way.

By the way, if the business turns over less than a crore per annum after two years, can THAT business sponsor my employment visa? And then, at that point, I must resign my director's status?
#10 Apr 22nd, 2012, 17:33
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I wasn't saying that I see you as a journalist... just that embassies and FRRO's may get nervous about what exactly you are doing in India. So a 'consultant for public communication strategy for corporate CSR' sounds good. Nothing to worry about.

Sole proprietorship is still not possible as far as I can tell. The 99 / 1% is still possible, I was just saying 'used to be' as in before 100%FDI was allowed that was a common practice. My assumption is that now people will opt for 100% ownership. I also don't know for which sectors this is allowed. You may find more here http://www.femaonline.com/ or here http://www.rbi.org.in/scripts/Fema.aspx
About the LLP: it is possible that the LLP rules still didn't come through. You need to ask an Indian CA or CS about this. Or perhaps some other Indiamikers know. I know people who have companies with their CA or CS owning the 1% and that does not seem to give any problems. They cant run off with your money really, and they don't need to be authorised signatories (means they can't take the decisions or sign stuff on the companies behalf unless you entitle them to).

If after two years your company earns less than 1 crore, and you can afford to pay yourself a salary of 1 lakh per month, then your company should be able to sponsor your employment visa. You would do that while being a director - which is immediately a reason for your company to not be able to find an Indian for the job as you are the leader of the company. I havenīt tried that myself yet, so I am not 100% sure how that works. Would be interested to know. It should be fairly straightforward.

Yes, you can earn as a director. Just to be sure I call it 'directors compensation' while in effect it is a salary. You need to make sure that you personally pay income tax on it as well in India (apart from the income tax your company pays for its earnings).
#11 Apr 22nd, 2012, 18:07
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#11
Hi again,

I really appreciate this help, thank you.

Sure, I realise you weren't seeing me as a journalist. I suppose I was clarifying on that more for the wider public that might be reading this thread. And any visa official who may check up on my background online! (If they do that... .)

On 100% FDI, I didn't find anything via those two links. However, I found some lists of what's allowed sector-wise here and here. I'm not absolutely sure that these are the up-to-date lists, nor where I'd find the current list. What's bugging me now is that I'm not sure what I fit under, if anything. The closest I can suggest is 'advertising' (on the basis that 'communications' tends to come under 'marketing', and 'marketing' is often nested with 'advertising'). Still, this seems a bit tenuous. If it IS accurate to say my business fits here, then it would appear that 100% FDI is ok. Does that mean I can act as a sole proprietor in India?!

Thanks for clarifying on the salary / earnings / employment side of things. I think this is now pretty clear to me!

Thanks again!!
#12 Apr 23rd, 2012, 00:13
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Originally Posted by robinwyatt View Post ....
[INDENT][B]Q. 1. What are the forms in which business can be conducted by a foreign company in India?
.....
... but you are not a foreign company are you?
Quite a lot of people (not least Goan politicians!) seem to get confused by trying to apply the rules intended for branches/ subsidiaries of foreign companies to foreign individuals setting up purely Indian companies.
There is absolutely nothing to stop** you or any foreigner setting up an Indian company with 100% (of your) FDI, providing either that it falls under the RBI general exemption or you get specific permission (I think that the latest sector-wise rules say 'all sectors allowed except nuclear, defense, gambling, loan-sharking, agriculture etc.').
All the above is completely separate from visa considerations - to get a B visa the 1 Crore turnover within 2 years rule*** will apply, for an E visa the $25,000 pa rule. It is something of a moot point as to what visa you can get if your company does not meet these levels; quite possibly an X visa (which does NOT allow you to work!).

** but best not to do it in Goa - they will bend over backwards to block you/ overcharge you.

*** 1 crore seems very high, assuming a return on capital of around 7% that implies capital of around 15 Crores, which is rather more than a foreigner needs to get an entrepreneur/ investor visa for the UK.

AndyD 8-)₹₹
#13 Apr 23rd, 2012, 11:55
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@AndyD Turnover means how much you sell, not how much you make profit (profit = turnover - costs). 1 crore is for turnover. If you donīt meet their company turnover/personal income targets, you will not receive B nor E visa, and you probably will have to operate your company from abroad. I also wondered about that in fact, because it uncomfortable to even have to close your company from abroad. I read somewhere on Indiamike years ago that they were sending people away who were running 'petty businesses' like shops, and it did sound problematic for these people.

I don't think you can get visa on being an Indian sole proprietorship. 100% FDI means that you can have another foreigner to own the remainder of the shares instead of an Indian person. A sole proprietorship is not a īcompanyī under the Companies Act in India, and you need to be a director of a company to get access to the B visa. E visa also not possible under sole proprietorship as far as I can tell.
#14 Apr 23rd, 2012, 16:10
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I could very easily switch my sole proprietor status into 'company' status in the UK. All the instructions are here and it seems like a cakewalk. Are you saying that this is necessary, or at least highly recommended? I was recently told by a lawyer that this could get me into all sorts of difficulties in India, though I'm not really sure why. I'll be calling that person later today, so will report back here.

On sectors, are you saying that anything is fine as long as it's not on the prohibited list? If so, how can I ascertain what percentage FDI is acceptable?
#15 Apr 23rd, 2012, 18:18
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#15
Quote:
Originally Posted by robinwyatt View Post I could very easily switch my sole proprietor status into 'company' status in the UK. All the instructions are here and it seems like a cakewalk. Are you saying that this is necessary, or at least highly recommended? I was recently told by a lawyer that this could get me into all sorts of difficulties in India, though I'm not really sure why. I'll be calling that person later today, so will report back here.

On sectors, are you saying that anything is fine as long as it's not on the prohibited list? If so, how can I ascertain what percentage FDI is acceptable?
Sector List - and everything else...
Looks like investment in partnerships needs specific RBI approval
(note that 'firm' does not mean plc).

@Mishka - I understand what turnover is, I was just estimating what capital would be required to achieve a turnover of 1 Crore - e.g.by an investment company.


AndyD 8-)₹
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