With a fast-changing economic environment in the country, more and more new businesses are being set up in India. However, setting up new business can be a formidable proposition. A lot of planning is required. You may have a brilliant idea and the funds to start a business, but it needs meticulous planning and research to venture into it. However, if you are ready to start your own venture, a start-up, it is important to give it a proper legal structure. The two most common business set-ups are private limited companies and setting up LLC in India.
With a lot of young entrepreneurs venturing into their own business, India has become home to a large number of start-ups. These young entrepreneurs, though armed with brilliant business ideas, are not well versed with the legal requirements of starting a new business. The first and foremost is to register their business with a proper legal structure. In this article here we will discuss a few important steps of registering your start-up with Start-up India.
What is a Start-up and Start-up in India?
Before going into the steps of registering a small business, let’s understand what a start-up is.
A start-up is a newly established small business, generally promoted by an individual or a group of two or three people. A start-up offers product or service which has not been offered in a similar way before. It is purely based on innovation or some exclusive idea. It is aimed at solving some problem faced by customers of an existing product/service or offer an entirely new product or service.
To promote entrepreneurship and new product and service development, the Government of India has started the Start-up India initiative where a lot of concessions and incentives are provided to the business.
Important steps to register your business are:
Incorporate your Small Business
The first step of the registration process is to incorporate your business. The business is usually incorporated as a private limited company, partnership firm, or a limited liability company. The incorporation procedure is the same as that for any other business structure where you incorporate your company with the registrar of companies by submitting all the necessary documents.
Register with Start-up India
Once the company is incorporated it has to be registered with Start-up India. The entire process of registration is online and quite simple. You have to log in to the Start-up India website and fill in certain forms giving all the details of your business and upload the necessary documents.
As mentioned above, there are few documents that are needed to be submitted along with the registration form. These documents are:
A letter of recommendation regarding the innovative nature of the business from an incubator from a post-graduate college in India, or one recognized by the Government of India, OR
A letter from an equity fund or an incubation fund committing at least 20% of the paid-up capital. The funding letter can also be from an angel fund or an accelerator. Whoever be the funding partner, it has to be SEBI registered and must certify that the venture is purely innovative, OR
A letter of funding under any innovation promotional scheme of the central or state government, OR
A patent filed and published in the journal of the Indian Patent Office, AND
The Certificate of Incorporation/Registration with a brief description of the innovative nature of the Products/Services.
Whether you would like to Avail Tax Benefits
Start-ups are given many concessions and tax benefits, such as income tax exemptions for three years. If you want to avail these benefits, you must procure a certificate from the Inter-Ministerial Board. Start-ups recognized by the DIPP are automatically qualified to receive these benefits.
You have to furnish a self-certification stating that your company has been incorporated as a private limited company, partnership firm or an LLP with the Registrar of Companies in India within the last five years. Also, you have to certify that the annual turnover is not more than 25 crores. It is also compulsory that the business is primarily based on innovation and that it is an entirely new company and not a result of the restructuring of an existing company.
Once the application process is complete and all the documents examined and verified, a recognition number for your start-up is issued. If on subsequent verification of the documents, any information is found to be incorrect or forged, a fine of 50% of the paid-up capital or Rs. 25000, whichever is higher, will be levied.
If you have to register a patent, trademark or any intellectual property, you can do so with various authorized government agency on payment of a prescribed fee.
Since start-ups are a risky business, attracting funds is quite difficult in the initial stages. Therefore, to help the start-ups with funding, the government has set a start-up fund which can be availed indirectly through SEBI registered venture capitals.
Mentioned above is the registration process of start-ups in India, which can be in the form of partnerships, private limited company or setting up LLC in India.