How to Register a Startup Company in India

What is a Startup?

Startups emerge when individuals identify flaws or drawbacks within an existing system in which they are involved and aim to address these challenges by establishing their own company. These new ventures are characterized by their early-stage status, where they face considerable uncertainty and risks.

What are the eligible criteria for the startup?

To be recognized as a startup under the Startup India program, your company must meet specific eligibility criteria.

• Company Age: The duration of the company's existence and operations shall not exceed 10 years from the Date of Incorporation.
• Business Structure: The company should be registered as a private limited company, a registered partnership firm under section 59 of the Partnership Act 1932, or an LLP (limited liability partnership) as defined in the LLP Act 2008.
• Time Limit: The startup status is applicable for the first ten years from the date of registration. Previously, this duration was seven years, but it has been extended to provide longer-term opportunities and tax exemptions for startups.
• Turnover Threshold: The annual turnover of the company should not exceed ₹100 crore in any of the ten years. If the turnover surpasses this threshold, the company is no longer eligible to be classified as a startup. The Indian government has increased the turnover limit from ₹25 crore in recent times.
• Approval from DIPP: The startup must obtain approval from the Department of Industrial Policy and Promotion (DIPP), a government department responsible for formulating and implementing industrial policies.
• Funding Sources: The startup should be funded by an Angel Fund, Incubation Fund, or Private Equity Fund. This indicates that external investors have recognized the potential of the startup and provided financial support.
• Patent and Trademark Office Guarantee: A patron guarantee from the Indian Patent and Trademark Office is required, emphasizing the importance of intellectual property rights in innovation-driven startups.
• Incubation Recommendation: The startup should have a recommendation letter from an incubation center, further validating its potential and innovative nature.
• Innovative Ideas and Schemes: The startup must demonstrate innovative ideas, products, or services that differentiate it from existing solutions in the market. This emphasis on innovation is a key aspect of the Startup India program.
• SEBI Registration: The startup is required to register all funding-related details with the Securities and Exchange Board of India (SEBI), the regulatory authority for the securities market in India.
• Existing Business: The startup is not formed by splitting up or reconstruction of some existing business.
• Partnership Share: For partnership startups, 51% of the shares should be owned by a woman or individuals belonging to the Scheduled Caste and Scheduled Tribe categories. They should not have defaulted on any credit payments.

By meeting these criteria, a company can qualify as a startup under the Startup India program, unlocking various benefits and support offered by the government.

What is the process for Startup registration?

Startup Registration Process a Step-by-Step Process:

• Incorporate the Business: Start incorporating your business as a Partnership firm, Limited Liability Partnership (LLP), or Private Limited Company. Register with the Startup India Scheme: Next, register your business with the Startup India Scheme. This registration of startup is a prerequisite for obtaining the Department for Promotion of Industry and Internal Trade (DPIIT) certificate of recognition.
  Link: Startup India
  For DPIIT Recognition, log in with your registered profile (account) credentials on the Startup India website and click on the ‘Apply for DPIIT Recognition' option under the ‘Recognition’ tab. On the next page, click on ‘Apply as Company or LLP’ or ‘Apply as Partnership Firm.’ When clicking on the ‘Apply for Company or LLP’ button, it will redirect to the National Single Window System (NSWS) website. Companies and LLPs should register on the NSWS website and add the form ‘Registration as a Startup’ to get DPIIT recognition.
  
  
• Apply for Start-up Recognition: Access the Start-up India Recognition portal and register with Start-up India. Fill out the Start-up Recognition application with, the required details such as:
• Entity Details: Specify the nature of your entity, industry, sector, and categories, and provide the Company Incorporation Number and Registration of startup Date.
• Pan Number
• Proof of concept like pitch deck/website link/video (in case of a validation/ early traction/scaling stage startup)
• Full Address of the Entity: Provide the complete address of your business.
• Details of the Authorized Representative: Include the information of the entity’s authorized representative.
• Directors or Partner Details: Provide the details of the directors or partners associated with the business.
• Details of Intellectual Property Rights: Summarize any intellectual property rights your entity owns.
• Details of Funding: Mention any funding received by the entity.
• Recognition received by the entity: If your business has received any previous recognition or awards, provide the relevant details.
• Obtain the Startup Recognition Number: After reviewing your application and submitted documents, the ministry will examine the information. Once approved, the ministry will issue a unique startup recognition number. This number is crucial for availing tax benefits and other incentives provided to recognized startups.

Upon receiving the DPIIT Certificate of Recognition for Startups, you can register the startup for tax benefits.

What are the benefits of Startup registration?

Obtaining the DPIIT Certificate of Recognition for Startups opens up loads of advantages for your business.

• Self-Certification: Startups can self-certify compliance with three Environmental Laws and six Labour Laws, reducing bureaucratic burdens.
• Start-Up Patent Application: Startups receive an 80% reduction in fees for patent, trademark, copyright, and design applications. They can also benefit from expedited processing of patent applications.
• Easier Public Procurement: Recognized startups have the opportunity to list their products on the Government e-Marketplace (GeM). They are exempted from submitting Earnest Money Deposits (EMD) and are given priority in government procurement.
• Exemption from Experience/Turnover Criteria: Startups are exempted from the requirements of prior experience and turnover for participating in Central Government ministries and departments.
• Easy Winding Up: Startups can wind up their company within 90 days of applying for insolvency, as per the provisions of the Insolvency and Bankruptcy Code, 2016.
• Funds of Funds: Startups become eligible for funds amounting to ₹10,000 crore from Alternative Investment Funds (AIFs).
• Credit Guarantee Fund: Startups can avail of a Credit Guarantee Fund of ₹2,000 crore over a period of four years through the National Credit Guarantee Trust Company or SIDBI (Small Industries Development Bank of India).
• Tax Exemptions: Startups can apply for tax exemption under Section 80 IAC of the Income Tax Act. They are also eligible for Angel Tax Exemption, providing relief from tax implications on the issuance of shares at a premium. Additionally, recognized startups enjoy income tax exemption for three consecutive fiscal years out of their first ten years of existence.

These benefits aim to provide financial support, reduced regulatory burdens, and access to government programs, thereby fostering growth and innovation in the startup ecosystem.