STARTUP INDIA REGISTRATION

STARTUP INDIA REGISTRATION

Indian Government has initiated its marquee scheme “Startup India” in January, 2016 in order to strengthen Indian Economy .

OVERVIEW


In order to strengthen Indian economy and include the highly skilled entrepreneurs into the system, the Indian Government has initiated its marquee scheme “Startup India”. This scheme was started by the Government of India in the year of January, 2016. The basic motto behind the initiation of this scheme is to generate employment through the promotion of startups. This is also seen as a step to change the mindset of the youth from the job-seeker to the job-provider. The whole scheme is managed by the Department of Industrial Policy and the Promotion abbreviated as DIPP.
 

WHAT IS STARTUP?

A Company has to fulfill certain criteria’s in order to be enlisted as “Startup” and to be recognized by DIPP.
 

  • Incorporation date of the Company should not exceed 10 years. Earlier this time period was 7 years but in order to promote the promotion of the startups, the Government of India exceeded this time limit for 3 years and effectively made it 10 years.
     
The Company incorporation should have been in the form of –
  • Private  Limited Company
  • Registered Partnership Firm
  • Limited Liability Partnership Firm
  • The annual turnover for any financial year since the incorporation of the Company should not be more than Rs. 100 crores.
  • The Company formation should be in the form of “Original Entity” which means the company should have been formed by the promoters and not by restructuring of an already existing business.
  • One of the most important criteria that the Company should be innovative. The existing business of the Company should either be providing a new service or improving something which exists already in an innovative manner.
     

BENEFITS FROM DIPP

Once an entity gets registered and recognized by DIPP, the entities becomes eligible to receive certain benefits, which can be summarized as follows:

  • The procedure for compliances, legal support systems, speeding up of applications pertaining to patent matters becomes much easier and simplified. The startup has not to undergo, the tedious compliance procedures and other related aspects.
  • Startups are also eligible for income tax exemptions and capital tax gains, Fund of Funds facility to pump up more capital into the startup entity.
  • Helping these entities by creating incubators which help the entrepreneurs in various ways such as business development. These incubators are generally those institutions who have prior experience in such fields.
     

REGISTRATION PROCEDURE OF STARTUPS

We will simplify the whole registration process of startups step by step:

Step 1: The first step of startup registration is the incorporation of the business in the categories mentioned above such as Private Limited Company, Registered Partnership Firm and Limited Liability Partnership Firm. One has to follow every single aspects of the business registration process such as obtain DSC, DIN, Name Application, filing of SPICe+ web form, getting certificate of incorporation along with PAN and TAN, Certificate of Commencement of business, opening of bank account etc.

Step 2: Registration of the Business- The next step is the registration of the business as “Startup”. One has to login to the Startup India website. After login, you have to fill up a simple form related to your business. One This whole process is simple and can be done via online.

Step 3: Uploading of Documents - The next step is to upload the documents such as 

  • Recommendation letter/Letter of Support - Recommendation letter or Letter of support in any  of the following forms is to be uploaded

The recommendations should be obtained from an incubator which approves the innovative nature of the startup. There is a format for this recommendation which is laid down by the DIPP. The incubators can be of any of the following categories-

  1. The incubator which is established in a PG college in India.
     
  2. The incubator which is funded by the Government of India. The funding should be in relation to the startup project.
     
  3. The incubator which is recognized by the Government of India in the Department of Industrial Policy and Promotions (DIPP) specified format.
  • A letter of funding issued by the Government of India/State Government as a part of Government scheme to help in promoting the startup innovation. A letter of funding issued by incubation fund/PE fund/Angel fund/Accelerator. The amount of this funding should not be less than 20% in equity. These fund providers should be registered with SEBI under the category that promotes the innovative nature of the startup. This letter of funding is not applicable if the startup is bootstrapped.
     
  • A patent which is filed and published in a journal by the Indian Patent office. This should be endorsing the nature of the startup business.
  1. Next document which is to be uploaded as Certificate of Incorporation or Registration Certificate
  2. A description about the unique nature of the services which are being offered by the startups

Step 4: Tax benefit details- As we have already mentioned that startups receive some benefits once they get registered under DIPP, one of those being Tax exemptions. Generally, there is an exemption from income tax for 3 years provided the startup is certified by the Inter Ministerial Board (IMB). But if a startup is recognized by DIPP, they are entitled for directly avail the benefit of tax exemptions without the additional requirements of certificates from IMB.

Step 5: Self Certification – In the next step you will have to yourself certify-

  • Registration of the new entity as Private Limited Company, Registered Partnership Firm and Limited Liability Partnership Firm.
  • Incorporation Date should not exceed 10 years.
  • Annual Turnover must be less than Rs. 25 crores per year
  • One of the most important criteria that the Company should be innovative. The existing business of the Company should either be providing a new service or improving something which exists already in an innovative manner.
  • The Company formation should be in the form of “Original Entity” which means the company should have been formed by the promoters and not by restructuring of an already existing business.
     

Step 6: Allotment of Recognition Number – If all the procedures mentioned from Step No. 1 to Step No. 5, have been duly completed, you will be allotted a specific recognition number for your startup business. Once, all your documents gets properly examined you will be issued a Certificate of Recognition thereafter. One has to be extremely careful while uploading the documents. It should be done with utmost care as if any documents is not uploaded/incorrect upload of the document/forged documents upload is found on examination, you will be liable to  a hefty fine of 50% of the paid-up capital for the said startup with a minimum fine of Rs. 25,000/-.
 

OTHER IMPORTANT POINTS OF STARTUP

There is also an added advantage for the startup businesses when it comes to a patent or trademark registration. There is a deduction of 80% in the payment of fee as you will have to pay only the Statutory fee by approaching any of the facilitators. The list of these facilitators is issued by the Government of India.

One of the Key aspects of these kind of business is Funding. Generally, these entrepreneurs have a lack of experience, therefore they are not able to invite big investors to infuse the capital into the business. Moreover few startups are high risk business and there is a probability that they might fail to stay afloat. As we mentioned in this article that DIPP also provides funding support to the eligible startups. The Government of India has formed a fund with an initial corpus of Rs. 2500 crore per year and thus a total corpus of Rs. 10,000 crore for a period of 4 years. This very fund is known as Fund of Funds. To simplify it further this fund of fund will not be invested directly into the startup businesses but it will participate in the Capital of SEBI registered venture funds. The fund of funds is managed by a Board which constitutes of skilled professionals from Industry, Academics and Successful Startups.LIC is a co-investor in the Fund of Funds.
 

CONCLUSION

It is best to say that in a current scenario where Government is providing a set of benefits to the emerging entrepreneurs who wish to start a new venture, it is advisable to go for a startup registration in order to avail all those benefits as provided.
 

FREQUENTLY ASKED QUESTIONS (FAQ’s)


Am I eligible to register with Startup India?

One has to fulfill certain criteria’s in order to be enlisted as “Startup” and to be recognized by DIPP. Incorporation date of the Company should not exceed 10 years. Earlier this time period was 7 years but in order to promote the promotion of the startups, the Government of India exceeded this time limit for 3 years and effectively made it 10 years. The Company incorporation should have been in the form of Private  Limited Company, Registered Partnership Firm, Limited Liability Partnership Firm. The annual turnover for any financial year since the incorporation of the Company should not be more than Rs. 100 crores. The Company formation should be in the form of “Original Entity” which means the company should have been formed by the promoters and not by restructuring of an already existing business. One of the most important criteria that the Company should be innovative. The existing business of the Company should either be providing a new service or improving something which exists already in an innovative manner.
 

Will Startup India guide me for setting up my business?

Startup India conducts a free online program for entrepreneurs. The basic aim is to help them so that there innovative thoughts reach to the execution stage. It’s a four week program and interested candidates can enroll to this free course at https://www.startupindia.gov.in/content/sih/en/learning-and-development_v2.html.
 

Is my entity allowed to be registered as “Startup” on portal without a PAN card?

Yes. However it is advisable to provide the same at the time of registration.
 

What are the benefits of registration with Startup India?

Once an entity gets registered and recognized by DIPP, the entities becomes eligible to receive certain benefits, which can be summarized as follows:

  • The procedure for compliances, legal support systems, speeding up of applications pertaining to patent matters becomes much easier and simplified. The startup has not to undergo, the tedious compliance procedures and other related aspects.
     
  • Startups are also eligible for income tax exemptions and capital tax gains, Fund of Funds facility to pump up more capital into the startup entity.
     
  • Helping these entities by creating incubators which help the entrepreneurs in various ways such as business development. These incubators are generally those institutions who have prior experience in such fields.
     

In addition to these, Startup’s are also allowed to self certify there compliances for 6 labor laws and 3 environmental laws.
 

How to attract investors for my startup?

Unique ideas and product visibility is the best tool which attracts the investors.
 

Is a Foreign Company allowed to be registered under the Startup India?

Business entities that have at least 1 registered office in India are allowed.
 

How will I come to know that my registration process is done?

Issuance of a Certificate of Recognition is the indicative of the completion of the registration process.
 

EDITED BY MINU MISHRA

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