Startup

Introduction

A startup is a company that launches innovative products or services to tackle existing societal problems or needs. It might also improve upon an existing product or service, providing a superior solution. The core of a startup is its dedication to introducing new ideas and creative solutions to the market.

What sets it apart from other new businesses is that a startup provides a unique product or service that is unavailable in the same way elsewhere. The primary motivation behind startups is innovation and the drive for growth and development.

How to Register a Startup?

A startup can be registered in India through the following steps:

Step I: Incorporate Business

The initial step is to register your business as a Private Limited Company, Partnership firm, or Limited Liability Partnership (LLP). This requires adhering to standard business registration procedures, including submitting the necessary application and obtaining the Certificate of Incorporation or Partnership registration.

Step II: Register with Startup India

First, go to the Startup India website and click the ‘Register’ button. Enter name, email ID, and mobile number, create a password, and then click ‘Register.’

Then, input the OTP (One-Time Password) sent to your email and fill in additional information, such as the user type, name, and startup stage. Click ‘Submit’ to complete your Startup India profile. Once registered, your business will be officially recognized as a startup under the Startup India scheme, making it eligible for various benefits and support.

Step III: Obtain DPIIT Recognition

The next important step is to secure recognition from the Department for Promotion of Industry and Internal Trade (DPIIT). DPIIT recognition can be gained on the basis of the following criteria:

• A recommendation from an incubator affiliated with any post-graduation college.
• A recommendation from a government-recognized incubator.
• A patent filed and published by the Indian Patent Office relevant to the product or service.
• Registration with SEBI for startups offering funding and equity services.
• A funding letter from a state or central government scheme aimed at promoting innovation.

To apply for DPIIT Recognition, log in to the Startup India website with your registered credentials and select the ‘Apply for DPIIT Recognition’ option under the ‘Recognition’ tab. On the next page, choose either ‘Apply as Company or LLP’ or ‘Apply as Partnership Firm.’ If you choose ‘Apply as Company or LLP,’ you will be redirected to the National Single Window System (NSWS) website. Companies and LLPs must register on the NSWS site and add the ‘Registration as a Startup’ form to begin the DPIIT recognition process.

This recognition provides startups with numerous benefits, including access to premium intellectual property services, relaxed public procurement norms, self-certification for labor and environmental laws, simplified company winding-up processes, access to the Fund of Funds, and tax exemptions for three consecutive years, as well as exemptions on investments exceeding fair market value.

Step IV: Submit the Documents for Registration

The following documents need to be submitted:

• Incorporation/Registration Certificate of your startup.
• Proof of funding, if any.
• Authorization letter of the company’s authorized representative, LLP, or partnership firm.
• Proof of concept, such as a website link, a pitch deck, or a video (applicable for validation/early traction/scaling stage startups).
• Patent and trademark details, if any.
• List of awards or certificates of recognition, if any.
• PAN (Permanent Account Number) Number.

Step V: Eligibility Conditions

The following conditions need to be fulfilled to register as a startup:

• Your business is structured as a Private Limited Company, LLP, or Partnership Firm.
• Your business has been incorporated or registered in India for no more than five years.
• Your company’s annual turnover does not exceed Rs. 100 crore.
• Your company is engaged in continuous innovation or improvement of existing systems.
• Your business is founded on a new idea and is not a result of splitting up or restructuring an existing enterprise.

Step VI: Obtain the Registration number

Upon applying for registration, you will instantly receive a recognition number. The Certificate of Registration or Incorporation will be issued after the authorities review all your uploaded documents.

Benefits of Registering a Startup in India

• Simple process

The government of India has introduced a mobile app and website to simplify the registration process for startups. Individuals interested in establishing a startup can complete a straightforward form on the website and upload the necessary documents. The entire process is conducted online.

• Reduction in cost

The government also offers directories of patent and trademark facilitators who provide premium Intellectual Property Rights services, including expedited patent examinations at reduced fees. The government covers all facilitator charges, with startups only responsible for statutory fees. Startups benefit from an 80% reduction in patent filing costs.

• Easy access to Funds

The government has established a Rs. 10,000 crore fund to provide venture capital funding to startups. Additionally, the government is offering guarantees to lenders to incentivize banks and other financial institutions to extend venture capital support.

• Tax holiday for 3 years

Startups will get exemption from income tax for 3 years provided they get a certification from the Inter-Ministerial Board (IMB).

• Apply for tenders

Startups are eligible to apply for government tenders and are exempt from the “prior experience/turnover” criteria typically required for regular companies bidding on government tenders.

• Easy compliances

Several compliance procedures have been streamlined for startups to reduce both time and costs. Startups can self-certify their compliance with 9 labor and 3 environmental laws using the Startup mobile app.

• Tax savings for investors

Investors who reinvest their capital gains in government-established venture funds will receive exemptions from capital gains tax. This initiative aims to enhance investor interest in startups.

• Easy exit

A startup can finalize the closure of its business within 90 days from the date of applying for winding up.

FAQs

What is the start-up India scheme?

The Start-up India scheme is a flagship initiative launched by the Indian government in 2016 to foster entrepreneurship and innovation. It aims to create a robust ecosystem for nurturing start-ups in the country. The scheme offers various benefits including tax exemptions, easier compliance, patent application support, and funding assistance. It also provides a platform for networking and mentorship. Eligible start-ups can receive recognition through a simple certification process. The initiative focuses on sectors like technology, biotechnology, and agriculture. It seeks to drive sustainable economic growth and generate large-scale employment opportunities in India.

Who is eligible for startup in India?

Eligibility for startup recognition in India includes entities incorporated as a private limited company, registered partnership firm, or limited liability partnership. The business should be innovative, scalable, and not older than 10 years from incorporation. Annual turnover must not exceed ₹100 crore in any financial year. The entity should work towards innovation, development, or improvement of products/processes/services, or have a scalable business model with high potential for employment or wealth creation. It shouldn’t be formed by splitting or reconstructing an existing business. Recognition is granted through the Startup India portal.

What is the minimum amount required to start a startup in India?

There is no specific minimum amount legally required to start a startup in India. The capital needed varies widely depending on the nature of the business, industry, and scale of operations. Some startups begin with minimal investment, utilizing personal savings or bootstrapping. Others may require substantial funding for product development, infrastructure, or regulatory compliance. While there’s no set minimum, entrepreneurs should consider operational costs, legal fees, and initial working capital. It’s advisable to create a detailed business plan to estimate required funds. Many startups start small and seek additional funding through investors or incubators as they grow.

What is the minimum turnover for a startup?

There’s no universal minimum turnover for a startup as it varies greatly depending on factors like industry, business model, funding, and growth stage. Some startups may generate minimal revenue in their early years while focusing on product development and market penetration. Others might need substantial turnover to be considered viable. Generally, investors and stakeholders look for consistent growth and a path to profitability rather than a specific turnover figure. A tech startup might operate on venture capital with little revenue, while a retail startup may need significant sales from the outset. Ultimately, what’s considered “minimum” depends on the startup’s unique circumstances and goals.