WHAT IS STARTUP ?
A startup is a newly established business, usually small, started by 1 or a group of individuals. What differentiates it from other new businesses is that a startup offers a new product or service that is not being given elsewhere in the same way. The keyword is innovation. The business either develops a new product / service or redevelops a current product/ service into something better.
WHAT IS STARTUP INDIA ?
Startups are becoming very popular in India. In order to develop Indian economy and attract talented entrepreneurs, the Government of India, under the leadership of PM Narendra Modi, has started and promoted Startup India initiative to recognize and promote startups.
How To Register...
Incorporate Your Business
You must first incorporate your business as a Private Limited Company or a Partnership firm or a Limited Liability Partnership. You have to follow all the normal procedures for registration of any business like obtaining the certificate of Incorporation/Partnership registration, PAN, and other required compliances.
It’s very easy to register as a startup thanks to the various government initiatives. However, you can focus on your key area while we at GSPUSTARTUP help you from the start to finish right from incorporating your company to getting your startup recognition. Do visit our website to know more about startup services.
Incorporation makes a business real. When does one switch from pursuing a project to turning it into a business and what is the best reason to do the same? These are some of the questions that we routinely come across and we have put all of these questions down in this segment so you can decide the time and the nature of incorporation that you require in whichever stage you are at.
The best time to incorporate is when you are about to be paid by a client. The client needs to cut a check in the name of your company and not you.Having said that, if you are undertaking work that involves upfront outlay of capital or creation of intellectual property, you should go ahead and incorporate your business as soon as you decide to start it. The outlay would reflect in the book of accounts of the company. Also helps build vintage for the company in case you wish to take a loan at a later date.
There are broadly 5 types of firms that one can incorporate to start a business:
- PROPRIETORSHIP FIRM
A proprietorship firm is owned by a single person and is an unlimited liability entity. The person himself/herself is responsible for all the liabilities of the company. It is the easiest to incorporate, all you need to do is get a GST or a Shops and Establishments Certificate, get a bank account opened to get into business.
- PARTNERSHIP FIRM
A partnership firm is owned by several partners which can number up to 50 and is an unlimited company. The company is incorporated with a partnership deed that the partners agree to abide by. The company once registered can create its own bank account and start business under the name of the firm.
- LIMITED LIABILITY COMPANY(LLP)
An LLP is an organization much like the Partnership firm but with the marked difference of being a limited liability company. Partners can join or leave the company and sell their share of the company to another partner. This format is most useful when you are running a business where strong individuals and their profiles drive the business such as Architects, Investment bankers, lawyers, etc. Unlike the partnership, the company name must be approved by the ROC and there are mandatory filings that must be made which pushes up the cost of doing business.
- PRIVATE LIMITED COMPANY (PVT. LTD.)
A Private Limited company is a very evolved form of incorporation. The biggest advantage of this kind of a company is the separation of the management and ownership. Shareholders appoint the board of directors and the board appoints the CEO. Often in early stage companies all three are the same and so the distinction is hard to make. This structure though allows for investors to step into the company without having any involvement in running the company. Given the complexity of this structure, it also implies more disclosures and compliances. It is necessary to have two directors to start a Private Limited.
- ONE PERSON COMPANY (OPC)
A OPC is just like a Private Limited without the requirement for 2 Directors. It’s a Private Limited Company which has only one director. This works well for founders who do not wish to induct others into the company. But the same compliances that apply to the Private Limited also apply to the OPC. This kind of a company will have to be converted to a Private Limited if in case new investors or co-founders have to be inducted.
FREQUENTLY ASKED QUESTIONS
An entity incorporated as a Private Limited Company, Partnership Firm or a Limited Liability Partnership can register them selves under the startup India scheme. The annual turnover of these business entities should not exceed 100 crores, and they should have been in existence for up to ten years from the date of its incorporation/ registration. Such an entity should be working towards innovation, development or improvement of products or services or processes.
There are a number of benefits startups receive by the Startup India Scheme. Nevertheless, in order to avail these benefits, an entity is needed to be set up by the DPIIT as a startup.
Startups are allowed to self certify their compliance for six labour laws and three environment laws. This is allowed for a total period of five years from the date of incorporation/registration of the entity. Startups are allowed a three-year tax exemption and the best intellectual property services and resources solely built to help startups protect and commercialise their IPRs.
The most preferred business structures for a startup are Private Limited companies and LLPs. A Private Limited company is legally recognized and generally favoured by investors. However, it has stricter compliance and may have a higher cost of incorporation.
Whereas incorporation cost is lower for LLPs and they tend to have relaxed compliance in comparison to Pvt. Ltd. Co. In addition to that, LLPs have limited liabilities and are equally recognised by investors and all over the world.
To attract investors, not only do you need a stellar product with a scalable model, but you also need visibility. Make sure that your product receives healthy engagement and traction. You’ll need to register your startup on startup India and proactively seek out investors. Make sure you are able to effectively communicate your business idea to the investor and the sustainability of your business model.
Any entity that has at least one registered office in India can register itself on the hub, since the location preferences, for the time being, are only created for Indian states. However, soon the government hopes to start registrations for stakeholders from the global ecosystem too.
Startup incubators are typically institutions that help entrepreneurs by developing their business, especially in the initial stages. Incubation function is usually carried out by institutions who have experience in the business and the tech world.
Startup accelerators support early-stage, growth-driven companies. These programmes usually have a timeframe in which individual companies spend anywhere between a few weeks and a few months working with a group of mentors who are educated and may also provide financial help.
Any business entity that has completed 10 years from the date of its incorporation/registration, and has exceeded the previous years turnover of 100 crores shall stop to be a startup on completion of 10 years from the date of its registration/incorporation.
Yes, as per the law an existing entity can register itself as a startup, provided that it meets the prescribed criteria for a startup. They will also be able to avail various tax and IPR benefits that are available to startups. The criteria are the same as those mentioned in the article above.
Once the application is complete, and the startup gets recognised, you will receive a system-generated certificate of recognition. You will be able to download this certificate from the Startup India portal.