You've successfully subscribed to OkCredit Blogs - Business Ideas, Tips, Government Schemes & more
Great! Next, complete checkout for full access to OkCredit Blogs - Business Ideas, Tips, Government Schemes & more
Welcome back! You've successfully signed in.
Success! Your account is fully activated, you now have access to all content.
Success! Your billing info is updated.
Billing info update failed.
Startups & Small Companies in India: Eligibility, Registration & more

Startups & Small Companies in India: Eligibility, Registration & more

. 6 min read

India is presently the third largest ecosystem in the world. The Government of India has projected an annual turnover of approximately amounting to INR 250 million just from startups which are headquartered in the country. In the year 2016, Prime Minister Narendra Modi had announced the Start-up India campaign which aims to promote and encourage entrepreneurship. And ever since, there has been an incredible swell in the number of upcoming startups with the majority of the startups having young and talented owners. The following article discusses various aspects of Startups and Small businesses in India.

STARTUPS

What is a Startup?

A Startup is a business that is in its initial stage and is founded by a sole or group of entrepreneurs to develop a unique product or service which can solve an existing problem through its introduction in the market. The Government of India encourages young companies by aiding them through measures such as enabling tax exemptions, as it creates job opportunities and improves sustainable economic development.

Eligibility Criteria for Startup

The criteria concerning the eligibility of a Startup are briefly discussed below:

· The company should be a private limited company or a limited liability partnership (LLP).

· The business should continue as a startup for the initial 10 years after the registration, and the annual turnover should not be above INR 100 crore.

· The company should be approved by the Department of Industrial Policy and Promotion (DIPP).

· The company should be financed either by an Angel Fund, a Private Equity Fund or an Incubation Fund.

· A guarantee should be compulsorily obtained from the Patent and Trademark Office in India.

· All the details relating to funding and finances has to be duly registered with the Securities and Exchange Board of India (SEBI).

Startup License and Registration

Primarily 6 major steps have to be undertaken to acquire a license and registration for a Startup, and they are discussed below:

Step 1: The first step is to incorporate the business and to ensure the eligibility criteria are met.

Step 2:  The second step is to register the business as a startup with the Startup India Scheme, which is managed by the Government. This can be done online on the allocated website by filling out the necessary details.

Step 3: Uploading of the required documents is the third step. You need the following:

a. Brief description of the business

b. Incorporation Certificate

c. Registration form and letter of recommendation. The letter of recommendation which is obtained from either of the following will suffice-

· An Incubator, either acknowledged in any post-graduate college situated in India, following the format approved by the Department of Industrial Policy and Promotion; or

· An Incubator that is funded by the Indian Government as part of any particular scheme; or

· Any of the Incubators that is accepted by the Indian Government; or

· A letter of funding which is not less than 20% in equity, by either an Incubation Fund, Private Equity Fund, Angel Fund or Accelerator. And it must be registered with the Securities Exchange Board of India that authorises the innovative nature of the business; or

· Either by the Central Government of India or any State Government of India; or

· A patent that was filed in the Patent Office and later issued in the Journal of Indian Patent.

Step 4: The fourth step is to acquire the certification provided by the Inter-Ministerial Board to avail the benefits of income tax exemption. The companies which are registered with the Department of Industrial Policy and Promotion enjoy these perks.

Step 5: Self-certification for the following prerequisites need to be completed-

· The company should be a partnership or  a private limited company or a limited liability partnership.

· The company should be incorporated or registered in India, but not sooner than 5 years.

· The turnover produced by the company should not exceed INR 100 crores.

· The company should be consistent with the introduction of new ideas or the contributions towards the development of the current system.

· The idea behind the business should have been invented and should not be a mere innovation added to an existing business solution.

Step 6: The final step is obtaining a recognition number which is generated on the completion of the application for registration. The certificate of registration will be provided once the concerned authorities complete the verification of the uploaded documents.

Discrepancies in the uploaded data may result in a fine of up to 50 per cent of the paid-up capital or minimum of INR 25,000.

The Startup India Scheme

The Startup India Scheme is an effort taken by the Indian Government in support of the Startup India Initiative. The scheme was put in motion to boost the introduction of unique as well as modern products and services in the economy and thereby supports the same. Under this specific scheme, upon completion of the Department for Promotion of Industry and Internal Trade enrolment and other necessary formalities, certain benefits such as the ones mentioned below may be availed:

· Simplified process. Beginning from registration, all the way to establishing the primary infrastructure of the business.

· Financial support provided through the various startup funding schemes run under the management of the Government.

· Aids in growing networks and connections. Further, it also enables the utmost exploitation of beneficial opportunities.

· Among other perks, exemptions from paying income tax and benefits of intellectual property are also provided.

SMALL COMPANY

What is a Small Company?

A small company may be a project or venture which involves a small budget and is run by a small group of people. The initial capital financial commitment made by the owner generally does not surpass INR 1 crore.

Registration of Small Company

The process of registering a company in India may seem exhaustive, but with the right guidance, the process can be completed with ease. The below mentioned is the standard step-by-step process that will walk you through aspects that need to be considered when registering a small company.

1. Obtaining a Digital Signature: In recent times, most business functions are conducted online, and therefore a digital signature will help when conducting online transactions such as when e-filing Income Tax.

2. Procuring the Director Identification Number: An Indian citizen with a PAN number and a foreign national with a passport can obtain the director identification number through an easy one day process.

3. Securing a Company name: It is essential to first conduct an analysis to ensure the name chosen for the company is not already in use by a different entity. Upon confirmation of the same, one can state the company name on the INC-29 Form.

4. Drafting the Craft Memorandum and Articles of Association: These are crucial documents of the company that need to be drafted with the utmost attention. It should also be attached with the INC-29 Form.

5. Filing INC-29 and receiving the Incorporation Letter: The INC-29 Form needs to be filled with the Registrar of Companies to obtain an Incorporation Letter. Ensure to avoid any error as that would require resubmission of the form.

6. Obtaining a Permanent Account Number (PAN) and Opening a Current Account: The PAN needs to be obtained from an authorised franchise or agent who is appointed by the National Securities Depository Ltd. or the Unit Trust of India Investors Services Ltd., as outsourced by the Income Tax Department. Upon completion of the same, a current account can be opened in the bank.

7. Micro, Small and Medium Enterprises Udyog Aadhaar Registration: This registration is simple and aids the business through various benefits.

8. Obtaining a TAN number and Service Tax Registration: This is an important aspect in relation to tax payment. Service Tax registration number is mandatory for any individual or entity that is providing taxable services of over INR 9 lakh.

9. Securing a Shops and Establishments Act License: This can be obtained by any shop or establishment that comes within the purview of the Act. According to the Act, every shop or establishment that has commenced work 30 day prior qualifies under the Act, whether or not employees are hired.

10.  GST Registration: It is mandatory for every existing business and new business to complete the Goods and Service Tax registration.

11.  Obtaining Professional Tax Registration: Procuring this is compulsory for all business entities within 30 days of hiring employees.

12.  Registering with Employees Provident Fund and Employees State Insurance Corporation: This is applicable only to companies having more than 20 employees. Further, the State Insurance Corporation scheme provides monetary and medical benefits to employees.

13.  Registering Intellectual Property: It is advisable to protect any intellectual property the company may own, such as an innovative product or the brand name by registering the same.

CONCLUSION

Majority individuals have great ideas but struggle to convert them into a business opportunity. The Government has been persistently taking measures to encourage and help these individuals by simplifying the processes and enabling businesses to be conducted in ease, in the hope to inspire these potential entrepreneurs.

Also read:
What type of permissions are required before starting any business?
10 Things You Should Know About Before Starting A Business
Top-10 Cities to Do Business in India