A Startup is a young company established by one or more entrepreneurs to create unique products or services. It is typically regarded as a company in the early stages of its development. Most people do have new ideas but many of them have no clue about starting a company or how to convert those ideas into a business venture. They don’t know how to register their company as a startup.
Startups should be incorporated. I.e. it should create a separate legal entity. The reason is that the business structure can provide a company with numerous benefits including tax structures that can save money, liability protection and safeguard personal assets, and investor approvals that can help raise funding.
Let’s look at the main stages of a Startup Incorporation and Registration in India.
1. Firstly, you need to incorporate your business as a Private Limited Company or a Limited Liability Partnership or a Partnership firm. You have to follow the normal incorporation procedure that includes filling up a form to get the registration.
2. After a business is eligible to be recognized as a Startup, it needs to register itself on the Startup India portal. The business entity must attach a letter of recommendation after filling the form of registration. This letter of recommendation can be given by:
1. An incubator (In a post-graduate college) attesting to the innovativeness of the business.
2. The letter of recommendation can be given by an incubator 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 that recognized the innovativeness of the business.
4. A letter of recommendation from either the state or central government.
After attaching the letter of recommendation, the following processes of registration will happen:
1. If there are areas of business that are patentable, then a patent must be filed and published at the Journal of Indian Patent office.
2. It is recommended that the business entity has a valid PAN ID.
3. A registration or incorporation certificate that states that the business entity is a private company or a limited liability partnership.
4. A brief description of the business must be given regarding the company’s business structure. Its registration must be in India (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 a new one and not a result of the remodelled version of an already existing business. A self-certification of all these points must be made.
5. If the entity requires a tax exemption, it should be mentioned clearly. Startups don’t need to pay income tax for the initial period of three years if they are certified by an Inter-Ministerial Board. Additionally, if a company is affiliated with the DIPP, it will be provided with a lot of benefits.
6. After submitting the documents and the registration form, a recognition number will be generated. After a detailed examination is done by the authorities, approval will be given and 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 will be fined.
There are many great ideas floating around which are still struggling to find a platform for execution. This is where startups come into the picture as they are initially financed by the founders and have access to easy registration, along with numerous tax benefits. It’s a great way to start your dream business venture and transform it to reality.
Now that you understand the main processes for the incorporation and registration for a Startup, get ready to register your company in the Startup India scheme and reap all the benefits provided by the government authorities.
