"The society we live in is blessed with an abundance of creativity & entrepreneurial spirit."
Having said this, with each passing hour, we are marching towards an AI-first world and this is a great time for tech startups to make their mark. The Venture Capital Firms & Investors are having a close eye towards all the novel ideas that can be turned into reality. As the new motto says - "Dream Big, Act Now."
In this blog, we will be discussing how to do a startup in India.
A start-up is defined as a company or a project initiated by an entrepreneur to seek, develop, and validate a scalable business model. Entrepreneurship refers to all new businesses, including self-employment and businesses that never intend to become registered, whereas startups refer to the new businesses that intend to grow large beyond the solo founder.
Startups & Small Business Statistics In India
Did you know that India is the 3rd largest startup ecosystem in the world? India is expected to witness year-over-year (YoY) growth of a consistent 12-15%.
The Indian government defines a startup as an entity less than seven years young with an annual turnover of less than 250 million rupees and headquartered in India.
Our beloved PM Narendra Modi announced the Start-up India campaign in 2016 to promote and encourage entrepreneurship. This mainly revolves around financing, incorporation, tax exemptions etc, to ease the functioning of startups. With these benefits being provided by the Government, the majority of the start-ups have young owners, this shows the diversity and volumes of talents that India has.
Now that you have a better understanding of a startup, let us look into the Startup in India scheme.
According to the revised announcement on 23rd May 2017, an organization will be considered as a Startup, if it is incorporated in India as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership corporation (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008).
An organization created by splitting up or reconstruction of existing commerce will not be considered a 'Startup'.
What Are The Eligibility Criteria For Startup Registration In India?
The following conditions must be fulfilled in order to be eligible as a Startup :
- Being incorporated or registered in India for less than seven years and for biotechnology startups up to 10 years from its date of incorporation.
- Annual turnover not exceeding Rs 25 crores in any of the preceding financial years.
- Aims to work towards innovation, development, deployment, or commercialization of new products, processes, or services driven by technology or intellectual property.
- It is not formed by splitting up or reconstructing a business already in existence.
- It must obtain certification from the Inter-Ministerial Board set up for such a purpose.
- It can be incorporated as a private limited company, a registered partnership firm, or a limited liability partnership.
Benefits Of Startup India Scheme
The Indian Government has come up with various schemes to promote startups. The stated vision is to transform India from a nation of job seekers to job creators. To fulfil this vision the GOI has launched the scheme viz Startup India registration under DIPP (Department of Industrial Policy and Promotion) under the Ministry of Commerce and Industry.
This scheme supports Startups by providing various benefits to the registered entity. The benefits include financial as well as non-financial benefits. To register under this scheme the entity must fulfil the criteria specified.
The benefits include :
- Administrative and tax benefits.
- Capital gains exemption.
- Government help for startup funding.
Self- certification compliance framework with regard to labour and environmental laws. (startup's businesses would be excluded from any inspections of the place of business from up to 3-5 years.)
Qualified to incorporate 80% reduction in patent registration fees and 50% reduction in the trademark filing.
Benefited by free of cost legal help in conjunction with simplified entry and exit norms and protection of Intellectual Property Rights (IPR).
Partnership Firm: To start a partnership firm, the parties have to draft a partnership deed where the terms and conditions of the partnership firm shall be mentioned. This partnership deed must be registered with the registrar of firms. We can assist you with partnership formation. Click below to know more https://adca.in/partnership-registration-bangalore.php
Limited Liability Partnership Firm: Limited Liability Partnership(LLP) as the name indicates, is a partnership firm with an additional feature of partner liability is limited. For income tax purposes LLPs and partnership firms are treated at par. The Ministry of Corporate Affairs is the registration authority for LLPs. For more details on LLP registration, click here. https://adca.in/llp-registration-bangalore.php
Private Limited Company: Private Limited Company is the most preferred structure for businesses that plan to grow big, get investments by way of equity, wish to offer sharing of ownership with employees by way of ESOP, wish to get FDI, etc. The major advantage of the Private Limited structure is the segregation of management from ownership. Directors form the management of the company, and Shareholders are the owners of the company.
The online registration process of a startup in India