The growth of entrepreneurship in India has seen an upswing of late with more and more people choosing to set up their own venture rather than continuing with a job. The many campaigns by Government of India have also helped tremendously to boost this growth, such as the Make in India initiative, Startup India campaign and Standup India. However, the intention to start a business is just the beginning. One should also know how to get the status of a recognised startup. In this post, we will help you look at the process of registering a startup company in India.
The steps can be clearly divided into two:
- setting up a business
- applying for startup status under the Startup India campaign.
Step 1: Setting up a Business in India
The first step is to set up a business. There are five types of formats you can use to set up your start up business in India. These are:
- Registered Partnership Firm
- Limited Liability Partnership (LLP) Firm
- One Person Company (OPC)
- Private Limited Company
Here is how you go about the process for each category:
1. Registered Partnership Firm
To create a registered partnership firm, here is what you need to do:
- Choose the firm name.
- Prepare the partnership deed. It will contain details such as name and address of the firm and the partners, nature of business, capital contribution, and profit sharing ratio, among others.
- Get the firm registered with the Registrar of Firms in your state. You will need to file:
- Application for registration.
- A certified copy of the partnership deed.
- Proof of ownership of the place of business or rental agreement.
- Once the firm is registered, the partners need to apply for a PAN card and open a current account.
2. Limited Liability Partnership (LLP) Firm
Here is how you register an LLP:
- Apply for a Designated Partner Identification Number (DPIN) and a Digital Signature Certificate (DSC).
- Prepare the partnership deed and the agree on important details such as address, name of partners, nature of business, capital contribution, profit sharing ratio, etc.
- Apply to the Ministry of Corporate Affairs (MCA) with 2-3 options for the firm name.
- File the Incorporation Document, the Subscriber’s Statement, and details of Designated Partner like his name, address and consent to act as such.
- After incorporation, file the LLP Agreement within 30 days with the MCA.
- Thereafter, apply for PAN and TAN for the LLP.
3. One Person Company (OPC)
An OPC being a type of private company is eligible to be called an entity under the Startup India programme. The MCA has provided a simple process called the SPICe format to register an OPC. Here is how it works:
- Apply for a Digital Signature Certificate (DSC).
- Apply for company name in INC-1
- Prepare the Memorandum and Articles of Association (MOA and AOA)
- File the Form INC-32 along with the MOA and AOA. The form contains applications for:
- Allotment of company name approved under the INC-1 application
- Allotment of DIN
- Incorporation of the new company
- Company PAN
- Company TAN
- Submit an affidavit from the shareholder along with the nominee’s consent to act as such, proof of his ID and address.
- Once the incorporation is given along with the PAN and TAN, you can open a current account.
4. Private Limited Company
Here is how you register a private company in India if the number of shareholders is more than seven (in case it is seven or less, you can use the SPICe format described above under OPC formation):
- At the outset, apply for your Director Identification Number (DIN) and your Digital Signature Certificate (DSC).
- Check the name availability by visiting the MCA site and apply for one with 2-3 options in order of preference.
- Then, file the Form INC-2 with the Memorandum and Articles of Association within 60 days with the Registrar of Companies (ROC) of your state.
- After the registration is done, apply for your company PAN and TAN. In case the turnover is expected to exceed Rs. 20 lakh, apply for a GSTIN also.
Step 2: Getting the Start-up Status in India
The Startup India Action Plan from the Government of India helps startup companies in India in three ways:
- Simplifying the overall business process through various initiatives.
- Providing funding support and incentives.
- Fostering partnerships between the industry and the academia and incubation of firms in campuses.
The definition of a start up business in India for this purpose is any private limited company, registered partnership or a limited liability partnership, which is not more than seven years old (ten years for biotech ventures) with annual turnover not exceeding Rs. 25 crore. Various initiatives have been launched to help startups. Some of these include:
- Self-certification for various labour and factory laws.
- No tax on profits for 3 years.
- No tax on capital gains for 3 years.
- Establishment of a Fund of Funds with a total corpus of Rs. 10,000 crore.
- Setting up a startup hub to create a single point of contact for everyone to get things done quickly and help in increased exchange of knowledge and access to funds.
- Legal support for filing patents and fast-tracking of the patent examination process.
- Relaxed procurement norms by doing away with prior experience or turnover requirements.
- A faster winding up process.
Application for Start up India Registration
One can apply for the start up India registration, called the Certificate of Recognition for Startups, by visiting the Startup India portal and filling in the application form and uploading the necessary documents.
There are five sections to fill for startup companies in India, viz:
1. Entity Details: Here you need to put in your entity type (company, LLP, partnership), industry, sector, category, incorporation or registration number and date, name of entity and PAN details.
2. Authorised Representative Details: These will include name, designation and contact details of the person thus authorised.
3. Director(s) / Partner(s) Details: These include their name, gender, address and contact details.
4. Additional Information: You need to provide some additional details such as number of employees, stage of development of the product/ service, details of Intellectual Property Right applications, etc.
5. Tax Benefits: These are available for businesses formed/to be formed between 1st April 2016 and 31st March 2019.
6. Self-Certification: Here you need to upload your company incorporation certificate that has been issued by the MCA. The file can be in JPG, PNG or PDF format with size less than 5 MB
7. Additional Documents/Details: You can provide additional documents/details to support your application such as website link, videos, pitch deck, etc.
Once the application is complete, it will be examined and the start up India registration certificate will be provided to the entity.
Under the Startup India Action Plan, the government has also introduced initiatives like the Standup India scheme to help weaker sections of society and women entrepreneurs get bank loans between Rs. 10 lakh to Rs. 1 crore. Initiatives like the Pradhan Mantri MUDRA Yojana (PMMY) have been introduced to help small/micro enterprises get the necessary funds to make and market their products. Such incentives have helped entrepreneurs think of setting up what they feel is the best business to start in India.
You might also want to read: Does Registering A Company In India Differ From State To State?