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HOW TO START A STARTUP IN INDIA
Startup

HOW TO START A STARTUP IN INDIA

In recent years, India has witnessed a remarkable surge in entrepreneurial activity, with start-ups playing a pivotal role in driving innovation, economic growth, and job creation. Recognizing the significance of start-ups in fostering economic development, the Indian government. This comprehensive program aims to nurture and support budding entrepreneurs, streamline regulatory processes, and create a conducive ecosystem for start-up growth. If you're aspiring to launch your own venture and contribute to India's vibrant start-up landscape, here's a detailed guide on how to start a start-up in India.

Understanding Start-ups in India

Before delving into the intricacies of starting a start-up in India, it's essential to grasp the fundamental concept of what constitutes a start-up. In broad terms, a start-up is a fledgling enterprise that offers innovative products, services, or solutions to address existing societal challenges or enhance existing offerings. Start-ups are characterized by their agility, disruptive potential, and relentless pursuit of growth and innovation.

Key Steps to Launch Your Start-up

1.  Incorporate Your Business: The foundational step in setting up a start-up is to formalize your business structure. You have several options to choose from, including Private Limited Company, Limited Liability Partnership (LLP), or Partnership Firm. Each structure has its own set of advantages and regulatory requirements. Ensure compliance with all registration formalities and obtain the requisite certificates of incorporation or partnership registration from the Registrar of Companies or Registrar of Firms.

2.  Register with Start-up India: Once your business entity is established, leverage the benefits offered by the Start-up India initiative by registering your start-up on the official Start-up India website. This online registration process is user friendly and facilitates seamless access to a plethora of resources, mentorship programs, funding opportunities, and government schemes tailored for start-ups.

3.  Attain DPIIT Recognition: DPIIT (Department for Promotion of Industry and Internal Trade) recognition is a significant milestone for start-ups seeking to unlock a myriad of benefits and incentives provided by the government. DPIIT recognition offers access to high quality intellectual property services, relaxation in public procurement norms, self-certification under labour and environmental laws, tax exemptions, and more. Apply for DPIIT recognition through the Start-up India portal, adhering to the prescribed guidelines and documentation requirements.

4.  Submit Recognition Application: Complete the Start-up Recognition Form meticulously, furnishing essential details such as entity information, office address, details of authorized representatives, directors/partners, start-up activities, and self-certification declarations. Ensure comprehensive documentation, including incorporation certificates, proof of funding, authorization letters, patent/trademark details, awards/certificates, and PAN number, to support your application.

5.  Obtain Recognition Number: Upon submission of the recognition application, await the issuance of a unique recognition number for your start-up. The certificate of recognition is typically issued expeditiously, usually within two days, following a thorough examination of the submitted documents.

6.  Explore Additional Opportunities: Beyond the initial registration and recognition process, delve into supplementary avenues and resources available for start-ups in India. These include securing patents, trademarks, or design registrations to protect your intellectual property, accessing funding through initiatives like the Start-up India Seed Fund Scheme (SISFS), and leveraging self-certification provisions under labour and environmental laws to streamline compliance burdens.

7.  Maximize Tax Benefits : Take advantage of the tax incentives and exemptions extended to start-ups by the government to foster growth and innovation. Start-ups are eligible for a three year income tax exemption, subject to certification by the Inter-Ministerial Board (IMB). Ensure compliance with the stipulated criteria and timelines to avail of these tax benefits effectively.

8. Tap into Venture Funding : Securing adequate funding is paramount for start-up success and scalability. Explore various funding avenues, including venture capital firms, angel investors, crowdfunding platforms, and government backed schemes like the Start-up India Seed Fund Scheme. Craft a compelling pitch deck and business plan to attract potential investors and demonstrate the viability and potential of your venture.

9. Harness Government Schemes: Familiarize yourself with the plethora of government schemes and initiatives aimed at fostering start-up growth and innovation. From technology development funds to incubator and accelerator programs, government schemes offer invaluable support, mentorship, and funding opportunities to catalyse start-up growth across diverse sectors.

10. Cultivate Strategic Partnerships: Collaborate with industry experts, mentors, incubators, and accelerators to harness their expertise, networks, and resources. Strategic partnerships can provide invaluable guidance, mentorship, market access, and funding opportunities to accelerate your start-up’s growth trajectory.

Frequently Asked Questions (FAQs) on Start-up Registration in India:  

To provide further clarity and address common queries surrounding start-up registration in India, here are answers to frequently asked questions:

1.Who can register with Start-up India?  

Any entity incorporated as a Private Limited Company, Partnership Firm, or Limited Liability Partnership (LLP) can register under the Start-up India scheme. The entity should demonstrate a commitment to innovation, development, or improvement of products, services, or processes.

2.What are the benefits of signing up with Start-up India?  

Start-ups registered under Start-up India can avail themselves of a multitude of benefits, including tax exemptions, self-certification under labour and environmental laws, access to funding schemes, intellectual property support, and more.

3.What kind of business structure should I choose for my start-up?  

 The most commonly preferred business structures for start-ups are Private Limited Companies and LLPs. Each structure offers distinct advantages in terms of liability protection, compliance requirements, and investor appeal.

4.How do I attract investors to my start-up?  

To attract investors, focus on developing a compelling value proposition, demonstrating market traction, showcasing a scalable business model, and articulating a clear growth strategy. Leverage platforms like Start-up India to connect with potential investors and participate in pitching events and networking forums.

5.Can foreign companies register under the Start-up India hub?  

 While the current registration framework primarily caters to entities with a registered office in India, efforts are underway to extend registration opportunities to stakeholders from the global ecosystem in the future.

6.What is the difference between an accelerator and an incubator?  

 Incubators typically support early stage start-ups by providing infrastructure, mentorship, and resources to nurture their growth from ideation to commercialization. Accelerators, on the other hand, focus on rapidly scaling start-ups by providing intensive mentoring, networking, and funding support over a fixed period.

7.For how long is a company recognized as a start-up?  

A start-up remains eligible for recognition benefits for a period of up to ten years from the date of its incorporation/registration, provided it meets the prescribed turnover criteria and continues to demonstrate innovative growth potential.

8.Can an existing entity register as a start-up on the Start-up India portal?  

Yes, existing entities that meet the stipulated criteria for start-ups can register themselves on the Start-up India portal and avail of the associated benefits and incentives.

9.How do I know if my registration is complete?  

Upon successful registration and recognition, you will receive a system generated certificate of recognition, confirming your start-up’s official recognition status. This certificate can be downloaded from the Start-up India portal for your records.

10.Does a start-up need to be registered in India?  

Yes, for starting a start-up in India you need to avail yourself of the benefits and incentives offered under the Start-up India initiative, they must have at least one registered office in India. However, efforts are underway to facilitate registrations for stakeholders from the global ecosystem in the future.

Trademark Registration Process for a startup

Trademark registration is typically done for brand names, logos, slogans etc. Trademark registration provides right of exclusivity to the startup over its brand marks, logos, brand names etc. Trademark registration process, starts with a general trademark search. One needs to make sure before beginning the trademark registration process, that the trademark being applied for is not already taken by another entity. Once, the trademark search gets completed, one can begin the trademark registration process by filing the trademark with the Registrar of Trademarks. Typically, a trademark allotment number is granted and there is a publication of the proposed trademark in the trademark journal. If there is no opposition to the proposed trademark, then the trademark is registered and the trademark registration process if completed.

Conclusion:

Embarking on the journey of launching a start-up in India is an exhilarating endeavour laden with boundless opportunities and challenges. By navigating the registration process, leveraging government initiatives like Start-up India, and tapping into available resources and support networks, aspiring entrepreneurs can chart a path to success and contribute meaningfully to India's dynamic start-up ecosystem. With perseverance, innovation, and strategic foresight, your start-up can carve a niche, drive transformative change, and emerge as a beacon of entrepreneurship in the burgeoning Indian economy.

Visit startup lawyers for more details: https://www.legalkart.com/legal-consultants-for-startups

Tax Exemptions for Startups Explained: Eligibility and Incentives
Startup

Tax Exemptions for Startups Explained: Eligibility and Incentives

The Government of India launched the Startup Scheme with the primary objectives of fostering new business ventures, generating jobs, and generating income. The network of interactions between individuals, groups, and their surroundings is often covered by this startup ecosystem. These connections not only boost the current companies but also aid to develop new ones that have the potential to become successful businesses.

Also read: Startup Due Diligence explained

However, businesses that receive a Startup Recognition Certificate from the Department for Promotion of Industry and Internal Trade (DPIIT) are entitled to various benefits, the biggest of which are tax exemption and incentives.

 

Shri Narendra Modi, the Prime Minister of India, unveiled some ambitious plans to improve the startup ecosystem in his nation. The PM mentioned the Startup India initiative while promoting the startup philosophy. The initiative is designed to meet the needs of struggling business owners and motivate them to operate in a more practical way. Notably, new startup tax advantages and exemptions were covered in a separate section of the Budget 2016. The government wants to stimulate the economy by supporting technological advancements and consumer-focused enterprises.

What is a Start-up?

The Startup India action plan defines a "startup" as an individual entity that must be registered with the Government of India (no earlier than 5 years) and has an annual turnover of less than 25 crores in any financial year. It will operate in the field of development and create products for the benefit of society using innovation and technology.

Eligibility Requirements for Indian Startups

For Indian startups, there are a few requirements for qualifying that will guarantee the best possible level of cooperation with the Indian government. The startup must meet the following criteria in order to be eligible:

  • Funded by a business incubator which is funded by the GOI and works on any Government project

  • Recommended and Certified with the help of a proper format provided by SIPP (Startups Intellectual Property Protection)

  • Funded by investors that are registered with SEBI. some prominent investors are Angel network, Private equity fund, Incubation fund

  • Funded by GOI for promotion on any innovative technology

  • Patent granted via Indian Patent and Trademark from the respective regional office

  • A spitted or reconstructed business shall not be considered as a startup company

Tax exemption and incentives

Only startups who qualify for the Startup India program are granted tax exemptions:

Income tax exemption for a period of 3 consecutive years - The Startups that are formed after April 2016 are entitled for a tax rebate of up to 100% on the profits they produce for a period of three consecutive years in a block of & years under section 80 IAC of the Income Tax Act after receiving approval for tax exemption. It should be emphasized that such an entity must not have exceeded the 25 crores in turnover in any one financial year.

Also Read: Procedure, Document Checklist And Costs For Incorporation Of A Private Limited Company

Tax exemption on capital gains - Startups are exempt from taxation under Section 54EE of the Income Tax Act. This exemption relates to the tax on long-term capital gain and is applicable if any LTCG is realized and if all or a portion of that LTCG is invested in a fund that has been approved by the Central Government within six months of the asset's transfer date. If these two requirements are not met, the authority may revoke the exemption. The maximum investment amount in such an asset is Rs. 50 lakhs, and that amount must stay invested for a continuous period of 3 years.

 

Tax exemption on investments above fair market value - The government has exempted eligible start-ups from paying the tax on investments that exceed fair market value. Such investments may be made by a variety of parties, including angel investors, venture capitalists, friends and family, incubators, and others who invest money over fair market value.

 

Tax exemption to individual/HUF on investment of long-term capital gain in equity shares of eligible startups U/S 54GB - According to Section 54GB of the Income Tax Act, the government permits an exemption from taxation on long-term capital gains resulting from the sale of any residential property, provided that the gains are invested in MSME businesses as defined by the Micro, Small and Medium Enterprises Act of 2006 as well as qualifying startups. As a result, if an individual or HUF sells a residential property and uses the capital gains to purchase 50% or more of the equity shares of eligible startups, long-term capital gains tax will not apply as long as the shares are not sold or transferred within five years of the date of acquisition or purchase.

Also Read: Private Limited company

Set off carry forward losses and capital gains allowed in case of a change in shareholding pattern - Losses can be set off and carried forward only in relation to qualified startups where the shareholders have held those shares from the final day of the year in which the loss occurred to the final day of the year in which the loss is to be carried forward.

Conclusion

The government hopes to create a better ecosystem for new businesses and entrepreneurship with these tax exemptions for Startup India. The three-year tax exemption has sparked some interest, so Indian businesspeople should not really worry about the future and should feel free to take market risks. The government will offer all forms of assistance and support to startups that meet the aforementioned eligibility requirements.

Legal Compliances Checklist for Startups in India
Startup

Legal Compliances Checklist for Startups in India

The growth of start-ups in India has been impressive over the past years, making the Indian ecosystem conducive to them. The government of India announced an initiative – Start Up India - with regard to the same, which aimed at focussing on simplification and handling, funding support and incentives, and industry-academia partnership and incubation. The Nasscom Tech Start-up Report 2020–21 states that India has 38 unicorn companies or businesses valued at more than $1 billion. The start-ups in the Indian ecosystem have to meet with the set compliances to establish themselves. Out of this, there are certain legal requirements that start-ups are bound to comply with. These compliances are discussed below briefly:

Also ReadProcedure, Document Checklist And Costs For Incorporation Of A Private Limited Company

 

  1. Identification of business organisation structure: When starting a business, one should create a separate legal entity under which they will operate. It is the most important item on the legal checklist for start-ups in India.  Private Limited Companies, Limited Liability Partnerships, One Person Companies, Sole Proprietorship Firms, and Partnership Firms are the six main legal entities recognised in India. A start-up can opt for any according to the business structure it wants to establish.

  2. Registration: The two most crucial considerations for registering a start-up are as follows:  The start-up must be incorporated before registering with the "Start-up India Program," which is the second step. A start-up's incorporation includes obtaining a Directory Identity Number and a Digital Signature Certificate. By enrolling online, you can receive this recognition from the Department for Promotion and Industry and Internal Trade (DPIIT). The platform aims to encourage innovation in the nation by giving businesses access to a range of financial incentives and advantages like tax exemptions.

  3. Obtaining Licences: It's crucial to understand that these licences are necessary for businesses to function lawfully and that they must be obtained. Every business organisation has different compliances to make. A business may be subject to legal penalties, fines, or other consequences if it fails to secure the licences necessary to operate in its industry. For example, a restaurant business will want a Certificate of Environmental Clearance, a Food Security Licence, and a Prevention of Food Adulteration Act Certificate, while an e-commerce start-up will require service tax and VAT registration.

  4. Company Law Compliances: Meetings with board members, filling out crucial documents, auditing data, and producing reports are all things that a registered company must adhere to. They can be listed as:

  • Annual-General Meeting

  • Board Meetings

  • Appointment of Auditor

  • Director’s Report

  • Maintenance of statutory registers

  • Circulation of Financial Statement

  1. Taxation Compliances: The two types of taxes are taxes, both direct (Income Tax) and indirect (GST, Excise duty, Customs duty, etc.) In India, taxes are imposed according to nature and company operations. Here are several tax benefits provided to start-ups for their efficient growth while they are still in their nascent stage.

  • Three-year tax holiday in a block of seven years

  • Exemption from tax on long-term capital gains

  • Tax exemptions on investments above the fair market value

  • Tax exemptions to individual/HUF on LTCG from equity shareholding

  • GST based compliance

  1. IPR Compliances: Start-ups place a high value on originality, creativity, and uniqueness as the foundation of their success. They establish a company with the intention of introducing the world to a brand-new good, service, or method. Protecting the intellectual property rights necessary for growing their firm is vital for entrepreneurs. 

Also Read: How Can You Form A Company In USA From India?

Start-ups have a number of options for safeguarding these assets, including non-disclosure agreements, copyrights, trademarks, and patents.

  1. Labour Law Compliances: Start-ups must abide by the labour laws that come with opening a real firm. Rules like the Minimum Wage, Maternity Leave, or Protection Against Sexual Harassment in the Workplace, these laws are designed to shield employees from the possible exploitation of their employers. Additionally, they serve as a tool for holding both parties responsible for their conduct.

  2. Event-based compliances: Some are related to particular occasions or industries, such as compliance with FEMA for start-ups with FDI or Customs law for businesses who import or export. When a start-up deals with potentially hazardous goods or processes, environmental law clearance is required, whereas when it interacts with real estate, RERA approval and other compliance with property laws are required. Mergers and acquisitions or large transactions that would significantly harm competition in India would require clearance under the Competition Law.

  3. Contractual Obligations: Every business has agreements in place with various parties who play a role in how the firm operates, such as clients, workers, or vendors, through contracts.

Also Read: Startup Due Diligence explained

Any organisation must adhere to its regulatory requirements; the first step to ensure smooth operation is to comprehend and follow the applicable laws. To start a firm, every beginning entrepreneur must be familiar with all applicable regulations. One of the best ways to ensure that the business is always safe and avoids legal issues and implications is to hire an expert legal counsel who can advise, supervise, and maintain legal records.

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