EOR vs entity setup in India is a key decision businesses face when entering the Indian business environment. Choosing between partnering with an Employer of Record or establishing a local entity affects your speed to market, compliance obligations, and operational flexibility.
India offers vast opportunities driven by its growing economy and skilled workforce, but tackling local regulations can be challenging. This article examines both models, including their structures, costs, benefits, and risks, to help businesses determine the right approach for successful expansion.
EOR vs Entity Setup in India
India’s market is rapidly expanding, with GDP growth remaining strong, supported by resilient domestic demand and projected growth above 6% in recent forecasts. Its tech, business-services and pharmaceuticals sectors lead exports, while manufacturing and a booming startup scene (160k+ DPIIT-recognised startups) offer diverse entry points. India also provides a large, increasingly skilled labour pool, though compliance and labour rules vary by state.
Together, these factors create a favorable business environment for those looking to expand into India. However, this comes with a common dilemma: use an Employer of Record for speed and simplicity or invest in a local entity for control.
This ultimately leads to the question: What’s the best option: EOR or entity setup in India?
Introduction to Business Structures in India
If your business is looking to expand into India, it’s vital to understand the common local structures and how they differ in liability, compliance, and taxation. Here is a list of the typical business structures you can incorporate:
- Private Limited Company (LLC equivalent): Needs 2 shareholders, 2 directors (1 resident), and no minimum capital. Requires MCA filings and annual compliance.
- Branch / Liaison / Project Office: Extensions of a foreign parent company, not separate entities. Branch taxed ~40%, needs RBI approval; liaison/project offices restricted in scope.
- Subsidiary / Joint Venture: Separate legal entity taxed at ~25–30%. Eligible for GST credits, R&D benefits, and must meet ROC/MCA compliance. JV allows local partnerships.
- Limited Liability Partnership (LLP): Separate entity with 2+ partners. No capital requirement. An LLP with an annual turnover under ₹40 lakh and total capital contribution below ₹25 lakh is exempt from mandatory audit requirements.
- Others: Sole proprietorships, public limited companies, unlimited companies, and charities. Each of these structures varies in liability and compliance.
Choosing the right structure involves balancing liability protection, tax efficiency, compliance burden, and operational control. This is a crucial decision and feeds directly into the broader EOR vs entity setup in India debate when evaluating your expansion strategy.
Why Businesses Expand to India?
Business entity setup in India provides access to one of the world’s largest workforces, which is projected to reach over 1 billion working-age adults by 2030, with a median age of just 28.4. The country produces 1.5 million engineers annually, fueling its thriving IT sector and ensuring a steady supply of cost-effective, skilled talent.
Furthermore, industry strengths are supported by government incentives. For instance, India launched PLI programs across 13 sectors, backed by ₹1.97 lakh crore (~US $28 billion), to boost manufacturing such as EVs, apparel, electronics, and more. Additionally, startups can secure a 100% tax exemption on profits for any three consecutive years within their first decade.
With its youthful demographics, cost-efficient talent, and pro-business policies, India is a compelling destination for expansion. So, when weighing speed versus long-term control, businesses must carefully consider EOR vs entity setup in India.
Employer of Record (EOR) vs Own Entity in India
When evaluating EOR vs entity setup in India, businesses must understand how each model operates to make an informed expansion decision.
- Employer of Record in India: An EOR acts as the legal employer, managing payroll, taxes, benefits, HR compliance, and contracts under Indian labor laws. It allows companies to hire local talent without setting up an entity, enabling fast and low-risk entry.
- Own Entity Setup: Establishing a private limited company or subsidiary involves MCA registration, obtaining PAN/GST, appointing a resident director, and fulfilling annual ROC filings. Though more complex and time-consuming, it ensures full operational control and direct regulatory compliance.
To understand how these compare against each other, consider Employer of Record vs a subsidiary in India as an example. The former offers agility with minimal upfront investment, while the latter delivers long-term autonomy and deeper market presence.
Key Differences:
- Responsibility: EOR assumes employment obligations; entities manage compliance directly.
- Speed: EOR allows rapid entry; entity setup takes longer.
- Cost: EOR charges fixed service fees; entities incur setup and ongoing costs.
Setting Up a Local Entity in India: Costs & Key Considerations
Establishing a local entity in India demands a solid understanding of the financial, regulatory, and operational commitments involved. These considerations are critical when comparing EOR with entity setup in India.
Cost Breakdown
- Incorporation & Professional Fees: Govt. registration charges ₹6,000–₹30,000, depending on capital, directors, and state stamp duty. Legal/admin support adds ₹5,000–₹20,000.
- Registration Components: DSCs (₹500–₹1,500 per director), DINs (₹500), name approval (₹1,000–₹5,000), and stamp duty (₹500–₹10,000+ by state/capital).
- Post-Incorporation Compliance & Admin: Annual filings, audits, GST/EPF registrations, payroll/accounting services cost ₹1,000–₹20,000+ yearly.
- Office Setup & HR Payroll: Budget for office space, payroll systems, and statutory employee benefits (PF, ESI).
Regulatory Requirements
Under Indian law, a private limited company requires at least 2 directors (at least one must be a resident) and no minimum paid-up capital since 2015. Additionally, companies must maintain statutory records, submit annual filings with the Registrar of Companies (ROC), and comply with labour, tax, and industry-specific norms.
Timeline & Complexity
Incorporation via SPICe+ is largely online; name reservation, DIN/DSC issuance, and Certificate of Incorporation can be completed in about 4–7 days. Allowing for documentation, approvals, and potential ROC delays, the entire process realistically spans about 2 weeks.
Partnering with an EOR in India: Costs & Considerations
Partnering with an Employer of Record offers a streamlined alternative to establishing a local entity, especially for businesses seeking rapid market entry. This is an important choice to consider when weighing between EOR and entity setup in India.
How EOR Works in India
An Employer of Record in India acts as the legal employer of your hires, handling HR, payroll, employment contracts, and compliance with India’s complex labor laws, including statutory benefits like EPF, ESI, gratuity, and tax obligations. You manage the day-to-day workflows without bearing full employer responsibilities.
Advantages of Using an EOR
Partnering with an EOR in India allows businesses to reap some significant benefits:
- Rapid Market Access: Hire and onboard employees in days, with no entity setup delays.
- Reduced Compliance Burden: The EOR handles all filings, local labor law adherence, and statutory contributions across India’s varying state norms.
- Cost Predictability: EORs provide fixed or percentage-based pricing, helping businesses manage workforce expenses in a predictable manner.
EOR cost in India
Prices generally fall between $99–$599 per employee per month under flat-fee models, while some providers charge 5–15% of an employee’s gross salary instead. Pricing often depends on the scope of services, employee seniority, and benefits included. Below are a few common EOR service providers in India:
- Native Teams: $99 per employee per month
- RemoFirst: $199 per employee per month
- Deel: $599 per month
EOR vs Setting up Own Entity in India Cost Comparison
When evaluating EOR vs entity setup in India, businesses should weigh short-term flexibility against long-term control. EORs offer predictable monthly fees, while local entities involve upfront incorporation costs and recurring compliance expenses.
| Cost Component | EOR in India | Own Entity Setup in India |
| Service Fee | $99–$400 per employee/month or 8–15% salary | N/A |
| Incorporation & Professional Fees | N/A | ₹6,000–₹30,000 + ₹5,000–₹20,000 legal/admin |
| Registration Components | Included | DSCs ₹500–₹1,500, DIN ₹500, name ₹1,000–₹5,000, stamp duty ₹500–₹10,000+ |
| Compliance & Admin | Included | ₹1,000–₹20,000+ annually |
EORs are ideal for companies seeking quick entry and reduced administrative workload, as they transfer most compliance and payroll responsibilities to the provider. However, relying on an EOR often means ongoing per-employee costs that can add up over time.
By contrast, establishing an entity in India requires higher upfront investment and management effort, but it provides greater control over operations and can lead to significant long-term savings once the business scales.
When to Use an EOR vs When to Incorporate an Entity in India
Deciding between an EOR and entity setup in India depends on your expansion goals, team size, and long-term strategy.
Use an EOR if:
- You want to enter the Indian market quickly without establishing a local entity.
- Your focus is on testing market demand or building a small pilot team.
- Minimizing administrative and compliance responsibilities is a priority.
Incorporate an Entity if:
- You’re committed to a long-term presence in India.
- You plan to grow a larger team and scale operations locally.
- Full control over HR, payroll, and regulatory compliance is essential.
Employer of Record vs Entity Setup: What Should You Choose in India?
When considering EOR vs entity setup in India, the choice largely depends on your expansion goals, risk tolerance, and operational strategy. An EOR provides a low-risk, fast way to enter the Indian market, handling payroll, compliance, and HR obligations for a small team. This model is ideal for testing the market or managing short-term projects with minimal administrative burden.
However, for businesses planning a long-term presence, establishing a local entity offers greater control over operations, direct compliance management, and potential cost savings as the workforce grows. While incorporation requires higher upfront investment and ongoing administrative effort, it reduces reliance on third-party providers and mitigates regulatory risks.
Ultimately, the decision should align with your strategic objectives: use an EOR for rapid, low-risk entry, but consider entity setup for sustainable, scalable growth and full operational autonomy in India.
How Commenda Simplifies Entity Setup in India
Setting up a local entity can be complex, but Commenda streamlines the entire process, helping expand your business in India quickly and compliantly. Our platform guides you through incorporation, resident director appointments, statutory filings, tax registrations, and ongoing compliance, ensuring every step meets regulatory requirements.
With Commenda, you gain a centralized dashboard to manage company documents, monitor deadlines, and automate filings, reducing administrative burdens and minimizing risk. Whether you’re establishing a private limited company, subsidiary, or joint venture, our experts support you at every stage, from initial setup to day-to-day compliance management.
Simplify your Indian expansion and maintain full operational control with a trusted partner. Book a free demo today to see how Commenda can accelerate your growth while keeping your business fully compliant.
FAQs on EOR vs Entity in India
Q. What is an Employer of Record in India?
An EOR is a service provider that legally employs your workforce in India. It handles payroll, taxes, benefits, and labor law compliance while you manage daily operations and team direction.
Q. Is using an EOR legal in India?
Yes. EORs operate under Indian labor and tax regulations, allowing foreign companies to hire employees without establishing a local legal entity.
Q. How long does it take to set up an entity in India?
Setting up a private limited company usually takes 2 weeks. This includes name approval, director registration, incorporation filings, and obtaining required tax registrations.
Q. What is the cost of using an EOR in India?
EOR fees typically range from $99–$599 per employee per month or 5–15% of the employee’s gross salary. The exact cost depends on services offered, employee seniority, and statutory benefits included.
Q. Can an EOR hire contractors and full-time employees?
Yes. Most EORs in India can hire both contractors and full-time staff, managing contracts, payroll, and statutory compliance for all types of employees.
Q. What are the tax implications of setting up an entity in India?
A local entity is liable for corporate income tax (~25–30%), GST, and statutory contributions such as EPF and ESI. Proper accounting and timely filings are essential to avoid penalties.
Q. EOR vs PEO: What’s the difference in India?
An EOR acts as the legal employer, taking on full compliance responsibilities. A PEO provides HR outsourcing services, but your company remains the legal employer.
Q. Can an EOR manage employment contracts in India?
Yes. EORs draft, maintain, and update contracts according to Indian labor laws and statutory requirements, ensuring compliance with local regulations.
Q. What risks are involved in entity setup?
Entity setup carries risks such as non-compliance with tax or labor laws, delays in registrations, administrative burdens, and potential fines or penalties for missed filings.
Q. How do I choose the right option for my business in India?
Evaluate your expansion goals, workforce size, timeline, budget, and desired level of control. Use an EOR for fast, low-risk entry and small teams. Incorporate an entity for long-term growth, operational control, and potential cost savings as your business scales.
