How to Register a Startup In India – A Complete Guide

Have you ever wondered what are the benefits of being registered as a Startup in India? Startups are a twenty-first-century rediscovery, which has changed the world of business in the recent years. While we might be aware of the plethora of benefits associated with it, an even more pertinent question is whether we know how to register a Startup in India? Startups are small pools of innovation and efficiency. They are usually owned by a single owner or a bunch of founders who are ready to scale their small businesses to greater heights.

The task of registering a Startup in India may seem daunting but in reality, it is not. The Government of India has introduced the Startup India scheme to encourage and provide leniency to the compliances that Startups need to follow. A streamlined registration process helps these Startups to concentrate on their core competencies and not be weighed under regulatory burdens.

The Startup Eligibility Criteria

The government of India has put forward certain prerequisites for an organization to be termed as a Startup. The Department of Industrial Policy and Promotion (“DIPP”) needs to recognize an entity as a “Startup” under the Startup India Scheme. An approval from the DIPP can only be acquired if the following eligibility criteria are met:

1. Private Limited Company or Limited Liability Partnership

The registering firm mandatorily must be either a Private Limited Company or a Limited Liability Partnership. The registered start-up must remain a Startup until ten years of its registration. However, the start-up is a company that exists as a Startup if it continues to have a yearly turnover of not more than 100 crores. The government has incentivized the ten-year commitment by providing tax exemptions and other opportunities.

2. Innovation and Promotion

Apart from the above-mentioned prerequisites, an entity should not be a restructured organization and must be a fresh idea. Subsequently, the entity should work towards the innovation and promotion of a product or service. The business model should have the capacity to create employment and wealth to get approval from DIPP.

How to Register a Startup in India – Process & Legal Requirements

The Startup registration process in India has been simplified. After an entity is eligible to be recognized as a Startup, it needs to register itself on the Startup India portal. After filling the form of registration, the entity must attach a letter of recommendation. This letter of recommendation can be given by:

1. An incubator (situated in a post-graduate college) attesting to the innovative module of the business.

2. Alternatively, the letter of recommendation can be given by an incubator that has been funded or recognized by the government of India in the format given by DIPP.

3. Letter of funding which shall be treated as a letter of recommendation (which is not less than 20% in equity) by a Private Equity Fund, Incubation fund, Accelerator, Angel Fund that is registered with SEBI and attests to the innovativeness of the business.

4. A letter of recommendation from either the state or central government.

After attaching the letter of recommendation, the process of registration includes:

1. If the areas of business are patentable, then a patent must be filed and published at the Journal of Indian Patent office.

2. It is recommended that the entity has a valid PAN ID.

3. A registration or incorporation certificate that states that the entity is a private company or a limited liability partnership.

4. A brief description of the business must be given regarding the company being a private limited company or a limited liability partnership. Its registration must be in India that is done not before five years. The company’s turnover and its innovativeness must be mentioned. The description should also state that the business idea is brand new and not a result of the reconstruction of an already existent business. A self-certification of all these factors should be made.

5. It should be further mentioned if the entity requires a tax exemption. Startups don’t need to pay income tax for the initial three-year period if they are certified by an Inter-Ministerial Board. Additionally, if a company is affiliated with the DIPP that itself ascertains a lot of benefits to the company.

6. After submitting the following documents and the registration form, a recognition number is generated. When a thorough examination is made by the authorities and approves, then a certificate of incorporation is issued. If any discrepancy is found with the documentation or data enclosed then either fifty percent of the paid-up capital or Rs 25000 can be fined. 

Conclusion

We live in times where innovation and the entrepreneurialship gets rewarded. The recognition and incentives that the Indian government has provided to Startups verify these facts. When a Startup is registered it hosts compliance benefits under environmental and labour laws. Startups gain tax exemptions and exemptions on capital gains and investments. Registration of Startups also helps in winding up businesses within a ninety-day window. Additionally, Startups also receive an eighty per cent rebate on filing patents and innumerable investment opportunities.

Frequently Asked Questions

1. Can a One Person Company (OPC) enjoy the incentives under the Startup India Initiative?

Yes, One Person Company can register and enjoy the incentives under the Startup India initiative. 

2. What is the timeline of receiving a Startup recognition certificate?

When an application is made along with all the pre-requisite documents then approval will be received within a period of two working days.

3. Can a foreigner be registered under with Startup India initiative?

A foreign person can enter into a partnership by being affiliated under the LLP Act and get that LLP registered on the Startup India website.

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