A Step-by-Step Guide to Registering Your Business as Startup India

To be officially recognized as a startup in India and avail the associated benefits, a business must meet specific eligibility criteria laid out by the Department for Promotion of Industry and Internal Trade (DPIIT). These criteria are designed to support new enterprises that are innovative and have high potential for growth.

Here is a detailed discussion of the criteria for registration as a startup in India:

1. Business Entity Type and Age

Your business must be incorporated as one of the following:

• Private Limited Company: Registered under the Companies Act, 2013.

• Limited Liability Partnership (LLP): Registered under the Limited Liability Partnership Act, 2008.

• Registered Partnership Firm: Registered under the Indian Partnership Act, 1932.

Additionally, the entity should not have been in existence for more than 10 years from the date of its incorporation or registration.

2. Annual Turnover

The turnover of the entity for any of the financial years since its incorporation must not have exceeded ₹100 crore. If the turnover surpasses this limit in any financial year, the entity will no longer be eligible for startup recognition.

3. Original Entity Requirement

The startup must be an original entity. This means it should not have been formed by splitting up or reconstructing a business that is already in existence. The intent is to support genuinely new ventures, not existing businesses that have been restructured to gain startup benefits.

4. Innovation and Scalability

This is a crucial and subjective criterion. The entity must be working towards:

• Innovation: The development or improvement of products, processes, or services. This implies that the business should be introducing something new or significantly improving an existing offering.

• Scalability: The business model should be scalable, meaning it should have a high potential for employment generation or wealth creation. The business should have a clear plan to grow its operations, customer base, and revenue significantly.

5. Self-Certification

During the registration process on the Startup India portal, the applicant must self-certify that their business meets all the aforementioned eligibility criteria.

Special Conditions for Tax Exemptions

It is important to note that while meeting the above criteria makes a business eligible for DPIIT recognition, there are additional conditions to avail of specific tax benefits under the Startup India scheme:

• For 3-Year Tax Holiday (under Section 80-IAC of the Income Tax Act):

  • The entity must be a DPIIT-recognized startup.

  • It must be a Private Limited Company or an LLP.

  • It must have been incorporated after April 1, 2016.

• For Exemption from Angel Tax (under Section 56(2)(viib) of the Income Tax Act):

  • The entity must be a DPIIT-recognized startup.

  • The aggregate amount of paid-up share capital and share premium after the proposed issue of shares should not exceed ₹25 crore.

By fulfilling these criteria, a business can successfully register as a startup in India and unlock various government-backed benefits designed to foster its growth and success.

You have to go through by following two phases to get recognition as Startup-India:-

Phase 1: Incorporating Your Business Entity

Before your startup can be recognized by the government, it needs to be formally incorporated as a legal entity. The most common business structures for startups in India are:

• Private Limited Company: A popular choice for startups, it offers limited liability to its shareholders, a separate legal identity, and the ability to raise funds.

• One Person Company (OPC): Ideal for solo entrepreneurs, an OPC also provides limited liability and a separate legal identity.

• Limited Liability Partnership (LLP): This structure combines the benefits of a partnership and a company, offering limited liability to its partners and greater flexibility in management.

The incorporation process typically involves the following steps:

1. Obtain a Digital Signature Certificate (DSC): A DSC is an electronic signature used for filing forms online with the Ministry of Corporate Affairs (MCA). All proposed directors of the company must obtain a DSC.

2. Obtain a Director Identification Number (DIN): Every individual intending to be a director of a company must have a unique DIN. This can be obtained by filing an e-form on the MCA portal.

3. Reserve a Unique Company Name: The proposed name of your company must be unique and not resemble any existing company or trademark. An application for name reservation can be made through the MCA's RUN (Reserve Unique Name) service.

4. Prepare Incorporation Documents: This includes the Memorandum of Association (MoA), which outlines the company's objectives, and the Articles of Association (AoA), which detail the company's internal regulations.

5. File the Incorporation Form: The e-form SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) is a single application for reserving a name, incorporating a new company, and applying for DIN, PAN, and TAN. This form needs to be filed on the MCA portal along with the required documents.

6. Receive the Certificate of Incorporation: Once the MCA approves the application, it will issue a Certificate of Incorporation, which is conclusive evidence of the company's existence. The company's PAN and TAN will also be allotted.

Phase 2: Gaining Recognition under the Startup India Initiative

Once your company is incorporated, the next crucial step is to get recognized as a "startup" by the Department for Promotion of Industry and Internal Trade (DPIIT). This recognition is essential to avail the various benefits offered under the Startup India program.

The process for obtaining DPIIT recognition is as follows:

1. Visit the Startup India Portal: The entire process is conducted online through the official Startup India website.

2. Create a Profile: Register on the portal by providing your company's details, including the incorporation number, PAN, and other relevant information.

3. Fill the Recognition Application Form: Complete the online application form with details about your startup's innovation, scalability, and potential for employment and wealth creation.

4. Upload Required Documents: The key documents required for DPIIT recognition include:

   • Certificate of Incorporation/Registration.

   • PAN card of the entity.

   • A detailed write-up about the innovative nature of your product or service.

   • Proof of concept, such as a pitch deck, website link, or video.

   • Any patents or trademarks obtained.

   • A letter of funding, if any.

5. Self-Certification: You will be required to self-certify that your startup meets the eligibility criteria, such as being a new entity and having a turnover of less than ₹100 crore in any financial year since incorporation.

6. Receive the Recognition Certificate: Upon successful verification of your application and documents, the DPIIT will issue a Certificate of Recognition.

Key Benefits of Startup India Recognition

Registering your startup with the DPIIT unlocks a host of benefits designed to support and accelerate your growth:

• Tax Exemptions: Eligible startups can avail of a tax holiday for three consecutive financial years out of their first ten years of incorporation. They can also get an exemption from capital gains tax on investments made in specified funds.

• Easier Public Procurement Norms: Startups are often exempted from prior experience and turnover requirements when participating in government tenders.

• Self-Certification of Compliance: Startups can self-certify their compliance with certain labor and environmental laws, reducing the regulatory burden.

• Fast-tracking of Patent Applications: The process of filing and getting patents is expedited for recognized startups, with an 80% rebate on filing fees.

• Access to Funding: The government has established a Fund of Funds for Startups to provide capital to startups through alternative investment funds.

• Networking Opportunities: The Startup India platform provides opportunities for startups to connect with mentors, incubators, and other stakeholders in the ecosystem.

• Easy Winding Up: Recognized startups can be wound up within 90 days of filing an application for insolvency, as per the Insolvency and Bankruptcy Code, 2016.

By following these steps, entrepreneurs can successfully register their startups in India and leverage the supportive ecosystem created by the government to foster innovation and growth. It is advisable to consult with legal and financial professionals to ensure compliance with all regulations throughout the process.