Starting a new business venture is always an exciting journey, but it can also come with its own set of challenges. In India, the government has been increasingly supportive of entrepreneurs, introducing several initiatives and programs designed to streamline the process of starting a business and offer resources for growth.
One of the most prominent initiatives for entrepreneurs in India is Startup India, a flagship program launched by the Government of India to foster innovation, promote entrepreneurship and simplify the regulatory environment for startups. The program offers many benefits, such as tax exemptions, funding opportunities and recognition, which can be vital to your business's success in the early stages.
In this blog, we’ll walk you through the steps involved in registering a startup with Startup India, along with the key features of the Fund of Funds program that can help boost your venture.
What is a Startup?
Let us first define a startup. A startup is a company or organisation in its early stages, typically characterised by high uncertainty and risk. Such companies are formed when the founders find some negative aspects in the existing system they have been working in and intend to solve the issues by creating a new company.
Startup India Scheme is an initiative by the Indian government, headed by Prime Minister Narendra Modi, to promote the growth of startups in India. It was announced on 16th January 2016 in New Delhi.
Steps to Register Your Startup With Startup India
Registering a startup in India through Startup India is a multi-step process. The steps are straightforward but require you to meet specific eligibility criteria and follow the proper procedure to ensure your business gets the recognition and benefits it deserves.
Here’s a step-by-step guide to the startup registration process:
Step 1: Incorporate Your Business
Before registering your startup with Startup India, you must legally incorporate your business. You can choose from several options, such as:
Private Limited Company: Private Limited Company is a popular option for small and medium-sized businesses.
Limited Liability Partnership (LLP): Registering your company as LLP provides the flexibility of a partnership with the benefits of limited liability.
One Person Company (OPC): OPC are Ideal for individual entrepreneurs who want the benefits of a private limited company but with a single founder.
Once you choose the business structure that suits your needs, you’ll need to obtain the required legal documents, such as your company's Certificate of Incorporation and PAN Card.
Step 2: Register with Startup India
After incorporating your business, you can proceed to register with Startup India. This registration is crucial to avail of the various benefits provided by the government. To register, you must visit the official Startup India website and fill out the application form. You will need to provide details about your business, such as its name, industry and nature of operations.
The registration process is online. Once you submit the application, you will receive an acknowledgement email confirming your registration.
Step 3: Get DPIIT Recognition
To avail of additional benefits like tax exemptions and access to funding, your startup must get DPIIT (Department for Promotion of Industry and Internal Trade) Recognition. The recognition process is simple and can be done through the Startup India portal.
You will need to provide basic details about your business, including the nature of innovation and whether it is scalable and sustainable.
Step 4: Recognition Application
After you have gathered all the necessary details, you can apply for DPIIT recognition. The application form asks for information such as:
The type of business (technology-driven or innovative)
A brief about the product or service
Market potential and scalability
Once your application is processed, the DPIIT will provide you with a Recognition Certificate.
Step 5: Documents for DPIIT Recognition
To ensure a smooth startup registration process, keep the following documents handy:
Incorporation Certificate of the company or LLP
PAN Card of the business
GST Registration (if applicable)
Trademark Registration (if applicable)
A brief description of the product or service offered by your startup
Director’s details, including their names, contact information and any other business-related information
Step 6: Recognition Number
Once your application is processed and approved, you will be given a Recognition Number. This number is essential as it signifies your official recognition as a startup by the Government of India.
This number can be used when applying for various benefits, including tax exemptions and funding from the Fund of Funds
Step 7: Other Areas
In addition to registering your startup with Startup India, you may also need to:
Apply for a PAN and TAN for tax-related matters.
Register for GST if your business turnover exceeds the prescribed limit.
Apply for MSME registration, which is essential for availing government schemes and credit support.
Covering all these areas will ensure that your startup complies with the necessary legal requirements and has access to a range of benefits.
The Startup Eligibility Criteria
What makes you a startup under the Startup India program?
The firm has to be a Private Limited Company or a Limited Liability Partnership.
The company remains a startup for the first ten years after registration. In recent years, the Indian government changed that to 10 years from 7 years to give companies longer-term opportunities and tax exemptions.
The company remains a startup if its turnover per year does not cross the Rs 100 crore mark in any of the 10 years. Once the company crosses the mark, it no longer remains eligible to be called a startup. The Indian government has also improved the mark of Rs 100 crore in recent times from Rs 25 crore.
The firm should have the Department of Industrial Policy and Promotion (DIPP) approval.
The firm should be funded by an Incubation Fund, an Angel Fund or a Private Equity Fund.
A patron guarantee from the Indian Patent and Trademark Office is necessary.
You must have a recommendation letter from an incubation.
The firm must come up with innovative ideas and schemes.
All the details regarding the funding must be registered with SEBI (Securities and Exchange Board of India).
Key Features of the Fund of Funds
The Fund of Funds for Startups is an initiative under the Startup India scheme designed to provide financial assistance to startups. Managed by SIDBI (Small Industries Development Bank of India), this fund aims to support innovative startups by providing them with access to venture capital and funding from various sources.
Here are some key features of the Fund of Funds:
The Fund of Funds is managed by the Small Industries Development Bank of India (SIDBI), with Life Insurance Corporation (LIC) acting as a co-investor.
The Fund of Funds contributes up to 50% of the capital to SEBI-registered Venture Funds (referred to as "daughter funds"). To qualify for this contribution, the daughter fund must have already secured the remaining 50% of its funding.
The fund supports startups by providing financial assistance to eligible venture funds that, in turn, invest in startups.
The Fund of Funds specifically targets startups that are involved in innovation, technology development and scalable businesses.
The Fund of Funds doesn’t directly provide money to startups. Instead, it works through registered venture capital funds.
The fund supports startups from various sectors, including manufacturing, IT, healthcare, agriculture and more.
Frequently Asked Questions
Who can register with Startup India?
Any business that meets the definition of a startup under the Startup India initiative can register with the program. To qualify, your business must:
Be a Private Limited Company, Limited Liability Partnership (LLP) or a One Person Company (OPC).
Have been incorporated within the last 10 years.
Have an annual turnover of less than ₹100 crores.
Be working towards the development or improvement of a product, process or service that is innovative, scalable and has the potential for high growth.
What are the benefits of signing up with Startup India?
Registering with Startup India offers a wide range of benefits, including:
Tax Exemptions: Up to 3 years of tax holidays in the first 7 years, allowing you to reinvest profits back into the business.
Easy Access to Funding: Through the Fund of Funds for Startups, there is easier access to venture capital and angel investors.
Self-Certification: Reduced compliance requirements, including easier labour law and environmental law registrations.
Faster Patent Process: Reduced fees for patent and trademark filing and expedited processes for startups.
Incubation and Mentorship: Access to various incubators, accelerators and mentorship programs.
Government Schemes: Eligibility for government schemes, grants and tax rebates designed for startups.
What kind of business structure should I choose for my startup?
The choice of business structure depends on your business goals and funding needs. The most common structures for startups in India are:
Private Limited Company
Limited Liability Partnership (LLP)
One Person Company (OPC)
What can I do to attract investors to a startup?
Attracting investors to your startup involves showcasing a strong business case, including:
Solid Business Model: Ensure your business model is clear, scalable and profitable.
Strong Market Opportunity: Provide evidence of a growing market for your product or service.
Traction: Demonstrate early traction in terms of users, revenue or partnerships.
Innovative Product/Service: Highlight what makes your product or service unique and innovative.
Clear Vision and Team: Show that your team has the skills, commitment and experience to execute the plan.
Financials: Have solid financial projections and a clear plan for managing funding.
What is the cost of startup registration?
The cost of Startup India registration itself is free, as the entire process is handled online. However, there may be associated costs depending on the type of business you are registering, such as:
Incorporation fees: Varies based on your business structure (Private Limited Company, LLP, etc.).
Professional Fees: If you hire a consultant or legal expert to handle the registration process, they may charge for their services.
The DPIIT recognition (which qualifies you for the Startup India benefits) is also free, but some businesses may need to pay for additional services like trademark registration or GST registration.
Which registration is best for a startup?
The best registration for your startup depends on your goals:
Private Limited Company (PLC) is the most common choice for startups, especially if you plan to raise funding and scale quickly.
Limited Liability Partnership (LLP) is suitable if you are starting with a small team and need flexibility in management but still want to limit your liability.
One Person Company (OPC) is ideal for solo entrepreneurs who want the benefits of limited liability without the complexities of a private company.
What is the age limit for a startup?
To register as a startup under Startup India, your business should be less than 10 years old. However, there is no age limit for the founders themselves. So, whether you're in your 20s or 50s, you can still launch a startup as long as it meets the eligibility criteria.
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