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.
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 submitting the registration application and obtaining the
Certificate of Incorporation/Partnership registration.
You can incorporate a Private Limited Company or a Limited Liability Partnership (LLP) by filing the registration application to the Registrar of
Companies (ROC) of your region. You can establish a Partnership Firm by filing the application for registration of your firm
with the Registrar of Firms of your area. You need to submit the required
documents and fees to the Registrar of Companies or Registrar of Firms along
with the registration application.
Then the business must be registered as a startup. The entire
process is simple and online. Visit the Startup India website and click on the ‘Register’ button as shown below.
Next, enter the OTP which is sent to your email and other
details like, the type of user, name and stage of the startup, etc and click on
the ‘Submit’ button. After entering these details, the Startup India profile is
created.
Once, your profile is created on the website, startups can apply
for various acceleration, incubator/mentorship programs and other challenges on
the website along with getting access to resources like Learning and
Development Program, Government Schemes, State Polices for Startups and
pro-bono services.
The next step after creating the profile on the Startup India
Website is to avail the Department for Promotion of Industry and Internal Trade
(DPIIT) Recognition. This recognition helps the startups to avail benefits like
access to high-quality intellectual property services and resources, relaxation
in public procurement norms, self-certification under labour
and environment laws, easy winding of company, access to Fund of Funds, tax
exemption for 3 consecutive years and tax exemption on investment above fair
market value.
For getting DPIIT Recognition, log in with your registered
profile (account) credentials on the Startup India website and click on the
‘DPIIT Recognition for Startups’ button under the ‘Schemes and Policies’ tab.
On the ‘Startup Recognition Form’, you need to fill the details
such as the entity details, full address (office), authorized representative
details, directors/partner details, information required, startup activities
and self-certification. Click on the plus sign on the right-hand side of the
form and enter each section of the form.
That’s
it! On applying you will get a recognition number for your startup. The
certificate of recognition will be issued after the examination of all your
documents which is usually done within 2 days after submitting the details
online.
However,
be careful while uploading the documents. If on subsequent verification, it is
found to be obtained that the required document is not uploaded/wrong document
uploaded or a forged document has been uploaded then you shall be liable to a
fine of 50% of your paid-up capital of the startup with a minimum fine of Rs.
25,000.
Patents, trademarks
and/or design registration: If you need a patent for
your innovation or a trademark for your business, you can easily approach any
from the list of facilitators issued by the government. You will need to bear
only the statutory fees thus getting an 80% reduction in fees.
Funding: One
of the key challenges faced by many startups has been accessing finance. Due to
lack of experience, security or existing cash flows, entrepreneurs fail to
attract investors. Besides, the high-risk nature of startups, as a significant
percentage fail to take off, puts off many investors.
In
order to provide funding support, the Government has set up a fund with an
initial corpus of INR 2,500 crore and a total corpus of INR 10,000 crore over a
period of 4 years (i.e. INR 2,500 crore per year). The Fund is in the nature of
Fund of Funds, which means that it will not invest directly into Startups, but
shall participate in the capital of SEBI registered Venture Funds.
Self-Certification
under Employment and Labor Laws: Startups can self-certify under labor
laws and environment laws so that their compliance costs are reduced.
Self-certification is provided to reduce regulatory burden thereby allowing
them to focus on their core business. Startups are allowed to self-certify
their compliances under six labor laws and three environment laws for a period
of 3 to 5 years from the date of incorporation.
Units operating under 36 white category industries as published on the website
of the Central Pollution Control Board do not require clearance under 3
environment-related Acts for 3 years.
Tax Exemption: Startups are exempted from
income tax for 3 years. But to avail these benefits, they must be certified by the
Inter-Ministerial Board (IMB). The Startups incorporated on or after 1st April
2016 can apply for the income tax exemption.
Startup India has changed the procedure of
registration since its inception. It has exempted most of the previous
requirements now. Many documents which were required to be filed previously are
waived off. The list of documents that are not required to be filed at the time
of the registration are:-
v Letter
of Recommendations
v Letter
of funding
v Sanction
Letters
v Udyog
Aadhar
v MSME
Certificate
v GST
Certificate
v The
Fund of Funds shall be managed by the Small Industries Development Bank of
India (SIDBI)
v Life
Insurance Corporation (LIC) shall be a co-investor in the Fund of Funds
v The
Fund of Funds shall contribute to a maximum of 50% of the SEBI registered
Venture Funds (“daughter funds”). In order to be able to receive the
contribution, the daughter fund should have already raised the balance 50%. The
Fund of Funds shall have representatives on the board of the venture fund based
on the contribution made.
v The
Fund shall ensure support to a broad mix of sectors such as manufacturing,
agriculture, health, education, etc.
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 Clear Tax help you from start to finish right from
incorporating your company to getting your startup recognition. Do
visit our website to know more about startup services.