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There is an immense drive across the globe to nurture entrepreneurship and fuel economic growth and generate large scale employment opportunities. The initiative to provide clarity about Startup Laws in India and create platforms that facilitate greater ease to set up a start up in India has become one of the most determined motivation for the country.

Startup Law in India

Startup India was launched by the Government of India on 16th January 2016 to build a strong eco-system to promote innovation and Startups in India. It is imperative that startups be made aware of all the laws and rules of conducting business in India.

To be recognised as a StartUp in India and avail all the benefits:

  • Considering the long gestation period by Startups to establish, an entity shall be considered as a “Startup” up to seven years from the date of its incorporation/ registration. However, in the case of Startups in the biotechnology sector, the period shall be up to ten years from the date of incorporation/ registration.
  • Incorporated as either a Private Limited Company or a Registered Partnership Firm or a Limited Liability Partnership
  • Turnover for any fiscal year has not exceeded INR 25 crore
  • Entity should not have been formed by splitting up or reconstruction a business already in existence
  • Working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation

What do you need to set up a startup in India:

  • Structuring – The first thing to starting any business is to recognize the nature and type of the business as per law. Founders will need to incorporate the business as a specific business type – sole proprietorship, private limited, public limited, partnership, limited liability partnership, etc. It is very essential to have this clarity at the very beginning as this is integral to the business, both short term and long term.
  • Incorporation / Startup Registration in India – Depending on the choice of structure, you will require to register your entity. For such purpose the requirements are:
    • Suitable Name
    • Paid up capital
    • A minimum number Directors and members
    • DIN (Director Identification Number) and DSC (Digital Signature Certificate)
    • PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number)
    • Appropriate documentation such as Founders Agreement/Shareholders Agreement
    • Duly filled forms to be filled and filed with appropriate government Authority

Basic documentation for Startups to do business in India

For any business to function both smoothly and safely, it is extremely important to have a strong base and not cut corners for short term growth. Some of basics for an entity should be to:

Licenses and Permits – Ensure that all licenses and permits to function have been procured.

Employment / Labour – Template of the employment agreements which can be executed with the employees and at some stage to have an employment manual that enumerates the rules and regulations that govern the employees. In India, it is mandatory to make employees aware of their rights prior to their employment;

Confidentiality – To keep your business safe execution of NDA’s/Confidentiality Agreement is a must to be executed with the vendors;

Good and experienced Professional Guidance – Undermining the need for legal and financial advice from the time of commencement is the Achilles heel of most startups. Advisory and assistance on all registrations and documentation that may be required at the time of incorporation of Company and post incorporation (such as Director identification number, PAN Number, Digital Signature, TAN registration, Name Approval of the company, MOA and AOA drafting etc.) is most crucial when setting up a Startup in India. This will prove most beneficial when looking for funding and investor options.

IP Protection – Ensure trademark registration

Taxes – Proper registration as per law and GST registration provides start ups in India the perfect impetus needed for uninterrupted and cost effective setting up a business in India;

Startup Registration in India

Under the Startup India Action Plan, startups that meet the definition as prescribed under the G.S.R. notification 501 (E), are eligible to apply for recognition under the program. The Startups have to provide support documents, at the time of application.

No letter of recommendation from an incubator/industry association shall be required for either recognition or tax benefits.

Start-up registration with Department of Industrial Policy and Promotion (DIPP) provides you with all government benefits such as tax saving, etc.