Among the founders, the majority are programmers, designers, marketers, and other professionals. When it comes to creating and registering a business, one thing that most entrepreneurs aren’t very good at is the fundamental laws. Let’s understand how to register a startup company in India because the last thing you want is to pay a fine for a legal blunder that you were completely unaware of!
We understand that your priority is to flesh out your business concept and assemble a team that shares your vision. You spend all of your time pitching to prospects, completing transactions, meeting with investors, and improving the product.
When you initially start as an entrepreneur, though, the first thing you should do is understand how to register a startup company in India. Furthermore, if you’re looking for capital, investors will never invest in an unregistered firm. Or, if the company structure is improper, they will ask you to correct it first.
So, we are providing all you need to know about how to register a startup company in India here to help you avoid making registration mistakes.
What is a Startup?
A startup is a new business found by a single person or a group of people. There could be two motives for starting a business:
- To provide a novel idea or product for which no one else has before held the copyright/patent.
- To invent new ways to redevelop existing products or facilities
These questions may bog you down if you’re intending to start your own business:
- Is it necessary to register a startup if it is still in its early stages?
- Is it necessary for startups that provide legal, agricultural, or technological services to register?
The answer is “Yes”, to take advantage of several government perks, you should register your business under the “Startup India” scheme.
How to register a Startup Company in India?
To get in-depth knowledge about how to register a startup company in India we have explained the types of business structures in India, procedures, and the documents that are required for each of them below.
Types of Business Structures in India
In India, one can register five different types of businesses these are:
1. Sole proprietorship
In India, forming a sole proprietorship is the simplest way to start a business. A sole proprietor is a person who handles sole ownership. This option is great if you want to have complete control over your firm.
How to register a sole proprietorship company?
You must have the following documents before you can register:
- PAN card
- Aadhaar card
- Account in a bank
- Proof of a registered office
Once you have these, you can get a registration certificate from any chartered accountant.
2. One-person company
In 2013, the Indian government approved a new type of business structure known as the One Person Company (OPC). Until 2013, a single person could not form a corporation; you needed at least two directors to do so. But, if you’re a sole owner, why would you need to incorporate a business instead of going with a sole proprietorship?
Entrepreneurs can limit their obligations and take advantage of some tax benefits by forming a corporation. However, with OPC, an individual might form a corporation and serve as its sole director while owning 100% of the company.
How register for a one-person company?
- Obtain a Certificate of Digital Signature (DSC)
- Request a Director Identification Number (DIN)
- Request Name Approval
The following documents are required:
- Association Memorandum (MoA)
- Association Articles (AoA)
- Evidence of the registered office
- Affidavit and director’s consent A declaration that all requirements have been met.
- All paperwork must be filed with the Ministry of Corporate Affairs (MCA)
- Take possession of your certificate of incorporation.
Approach a CA, and they should be able to handle the whole thing for a small charge.
3. Partnership firm
The simplest method to proceed if you desire to have partners in your business is to form a partnership firm. A partnership deed, which is an agreement between the partners, is all that is required. This contract will outline all of the partners’ responsibilities and obligations, as well as how profits will be split.
Details to include in the partnership agreement:
- All partners’ names and address
- The partnership firm’s name and address
- Capital invested by each partner since the firm’s inception
- Partners’ profit-sharing ratio
- Partners will be paid salaries and commissions.
- Each partner’s rights
- Each partner’s responsibilities and obligations
- Other terms that have been agreed upon by both parties
The Indian Partnership Act, 1932, allows you to register your partnership firm, although it is not required and is entirely up to the partners’ decision.
4. Limited liability company (LLC)
LLC stands for Limited Liability Company, and it is a corporate structure that separates personal and business liability. Tax responsibilities will be split among all owners. LLCs, unlike other corporate formations, are not accountable for business obligations and have a limited lifespan.
What is the procedure for forming a limited liability company (LLC)?
- Fill out the online form to apply for a DPIN (Designated Partner Identification Number).
- Get a Digital Signature Certificate and register it with the MCA portal.
- The Ministry of Corporate Affairs must approve the name of your LLC.
- Fill out the incorporation form to register the LLC and acquire the LLC agreement after it has been approved.
5. Private limited company
A Private Limited Company, or LTD, is a business entity with a minimum of two members and a maximum of 200. As the name implies, it is unable to raise funds from the general public, which means the corporation is unable to publicly issue shares. To form an LTD, you don’t need any paid-up capital now.
What is the procedure for registering a private limited company?
- Obtain a Directors Identification Number (DIN), which is a one-of-a-kind code that requires a PAN card, an Aadhaar card, a bank statement, a phone bill, and an electricity bill.
- After that, you must file a name registration application.
- You must now draught MOA and AOA. The company’s objects are stated in the MOA, while the company’s rules and regulations are stated in the AOA.
- Now go to MCA’s website and fill out the SPICE-E form to get your PAN and TAN applications.
You are done with your application if all of your papers are in order.
How to come up with a Business Name?
Coming up with a name for your business is just as difficult as building up your business. Finding a name that is relevant to your business takes time, and rushing into a name only to get the website up and running causes more harm than good.
Before registering your company name, examine the following factors to avoid making a mistake:
- Choose a name that is simple to recall, pronounce, and short enough to effectively represent your brand to customers. Avoid using difficult terms so that the name may be easily communicated over the phone.
- Your company’s mission should reflect in the name. Allow the name to convey the essence of the business and the things it sells.
Guidelines for naming a Company
According to the Companies Act 2013 and the Companies Incorporation Rules 2014, the following are some guidelines for naming a company:
- “A name relating to financial issues is necessary for a company that deals with financial activities.
- Few names, such as Union, Prime Minister, Statutory, Scheme, National, Small Scale, and Federal, require the consent of the Central Government.
- The words Nidhi Limited can be added to the end of any company name that has been incorporated as a Nidhi.
- The name should associate with the company’s main objective.
- Regulatory organizations such as SEBI, IRDA, and RBI must approve any name that incorporates the words insurance, venture capital, bank, or mutual fund.
- After three years, you can alter your name.”
Limitations on naming a Company
- “Generic names that include the location’s name or other generic names are not permitted. For example, names like solar power, corporate technology, and Karnataka business are not permitted.
- A proposed name should not be insulting or infringe on any trademarks or insignia.
- A name cannot suggest the presence of a foreign embassy or government.
- If the name is too close to that of a limited liability partnership, it cannot be used.
- Only the term “State” can be used in the name of the Government Company. For Example, Karnataka State Tourism Development Limited, Karnataka State Construction Corporation Limited, and others.
How to start a Business in India?
For everything to go successfully, you’ll need a plan and a procedure list, here are the following actions.
1. Make sure your concept is feasible
So, you’ve come up with a solution to a market problem. That’s good, but how realistic is it? Is it going to solve a problem that your target audience cares about? What is your projected income at the beginning? All of these should be evident to you and your team, and you should have a plan in place to move forward.
2. Prepare your business plan
You should have a business plan ready before you start your operations. It should include the following items:
- Opportunity and Market Descriptions for the Company
- Strategy
- Management and Organization
- Business Models
- Financial Plan
- Marketing Plan
- Operational Plan
With a business plan, you will be able to gain a complete understanding of how your business will operate. Additionally, it will help you when you present your business idea to others.
3. Select the appropriate business structure
You can choose the correct business structure depending on how you wish to scale your business. We have already explained all the types of business structures in India.
4. Seek out funds
To survive as a startup, you’ll need a lot of money to start. Searching for money can be done in a variety of ways. Angel Investors, Venture Capital, and Bank Loans are a few of the most significant ones to attempt.
5. Register your business
The next step is to register your business using the steps we have covered earlier.
6. Enrol in the startup India program
You can register your firm on the Startup India website and take advantage of many of the Indian government’s programs. The definition of a startup was altered by the Indian government in 2017, and the total age limit for startups was raised from five to seven years. Being a part of the Startup India program would make it easier for you to secure funding.
7. Inventive characteristics
Your startup must have a distinct name, logo, and other creative assets. Make sure you have all of the essential intellectual property rights to safeguard them. Obtaining a trademark for your logo, as well as having a domain name for your brand, are a few examples.
8. Establish a strong online presence
You cannot ignore the importance of establishing a strong online presence in the 21st century. You must have an eye-catching website that portrays what your company is all about. In addition, it should provide an overview of what you do and how it benefits your clients.
9. Set up a good work environment
For any business, having an office space is essential. If you are just starting, a home office may be appropriate depending on the type of business. However, when your firm grows, you can move into a coworking space or a business center to receive a proper workplace.
Startup India
In India, startups are getting increasingly popular. The Government of India, led by Prime Minister Narendra Modi, has launched and supported the Startup India program to recognize and promote businesses to improve the Indian economy and recruit creative entrepreneurs.
How to register for Startup India?
Step 1: Incorporate your business
Your company must first be formed as a Private Limited Company, a Partnership Firm, or a Limited liability company. You must follow all of the standard steps for registering a business, including filing an application and receiving a Certificate of Incorporation/Partnership Registration.
Step 2: Register with startup India
The company then must be registered as a startup. The entire procedure is straightforward and it is easy to complete online.
Steps:-
- Click the ‘Register’ button on the Startup India website.
- Click the ‘Register’ button after entering your name, email address, phone number, and password.
- Then, enter the OTP that was provided to your email, as well as other information such as the user’s type, name, and stage of the business, and click the ‘Submit’ button. The Startup India profile is established after these facts are entered.
Step 3: Obtain DPIIT certification
The Department for Promotion of Industry and Internal Trade (DPIIT) Recognition is the next step after creating a profile on the Startup India website. This recognition allows startups to take advantage of several benefits provided by the Indian government.
- To obtain DPIIT Recognition, log in to the Startup India website using your registered profile (account) credentials and select the ‘DPIIT Recognition for Startups’ button under the ‘Schemes & Policies’ tab.
- On the next screen, click the ‘Get Regonized’ button. A new window will appear. Scroll down to the bottom of the page and click the ‘Click here to submit your application for Startup Recognition’ option.
Step 4: Recognition application
You must fill out the ‘Startup Recognition Form’ with information such as the entity’s name, full address (office), authorized representative’s name, directors/name, partner’s required information, startup activities, and self-certification. Enter each section of the form by clicking the + symbol on the right-hand side of the form. Accept the terms and conditions and click the ‘Submit’ button after filling out all of the sections of the ‘Startup Recognition Form.’
Step 5: Documents for registration
- Incorporation/Registration Certificate of your startup
- Proof of funding, if any.
- Authorization letter from the company’s, LLP’s, or partnership firm’s authorized representative
- In the event of a validation/early traction/scaling stage startup, a proof of concept such as a pitch deck/website link/video is essential.
- Details of any patents or trademarks, if any
- PAN Number
Step 6: Recognition number
That concludes our discussion. Your startup will get a recognition number after you submit your application. The certificate of recognition will be given after all of your documents have been examined, which normally takes 2 days after you submit your information online.
However, be careful when submitting documents. Because, you have to pay 50% of the startup’s paid-up capital, up to a maximum of Rs. 25,000 as a fine, if it is found that the required document was not uploaded, it was the incorrect document or a fake document.
Benefits of Startup India
- Patents, trademarks, and/or design registration: If you require a patent for your invention or a trademark for your company, you can easily contact one of the government-approved facilitators. You will only be responsible for the statutory fees, resulting in a charge reduction of 80%.
- Funding: Entrepreneurs face many obstacles when it comes to obtaining funding. Due to their lack of experience, security, or established cash flows, entrepreneurs are unable to attract investors. Furthermore, many investors stop by the high-risk nature of startups, because a large number fail to take off.
The government has established a fund with an initial capital of INR 2,500 crore and a total corpus of INR 10,000 crore over a four-year period to provide financial assistance (i.e. INR 2,500 crore per year). The Fund is structured as a Fund of Funds, which means it will not invest directly in startups, but will instead contribute to the capital of SEBI-registered Venture Funds.
- Self-certification underemployment and labour laws: Startups can lower their compliance expenses by self-certifying under labour and environmental rules. Self-certification is available to help companies decrease regulatory load and focus on their primary business. Startups have three to five years from the date of formation to self-certify their compliance with six labour laws and three environmental legislation.
As a result, units operating under the 36 white category industries listed on the Central Pollution Control Board’s website do not require permission under three environmental statutes for three years.
- Tax exemption: Startups are free from paying income taxes for three years. However, they must be certified by the Inter-Ministerial Board to receive these benefits (IMB). Startups that were formed on or after April 1, 2016, are eligible for an income tax exemption.
Conclusion
In the last decade, the Indian government has pushed for the growth of startups. Various government-created business-friendly regulations have resulted in the rise of startups in a variety of industries.
Through their unique ideas, these firms have helped to bridge the gap between people from various financial backgrounds. Thousands of people have been employed as a result of their efforts, and they have had a significant impact on society.
After all, if we see everything from beginning to end, understanding how to register a startup company in India has become quite simple, from company registration to incubation support, government funding, and tax advantages, the government has done a lot to help the economy. So, by making the Indian landscape more appealing for burgeoning entrepreneurs, the government is supporting, establishing a bright future for Make in India and limiting the brain drain to foreign countries.
FAQs
1. What is a startup?
Ans: A startup is a new business founded by a single person or a group of people.
2. What are the stages in the formation of a company?
Ans: There are 4 major steps in the formation of a company:
- Promotion stage.
- Registration stage.
- Incorporation stage.
- Commencement of Business stage.
3. What are the major types of business structures in India?
Ans: There are five main types of business structure in India:
- Sole proprietorship
- One-person company
- Partnership company
- Limited liability company
- Private limited company
4. How much time does it take for startup registration in India?
Ans: Normally, it takes 2 days after you submit your information online for startup registration in India.
5. How to Register a Startup Company in India?
Ans: The procedure of creating a profile on the Startup India website is quite straightforward. You just need to follow the 6 steps we have already mentioned to understand how to register a startup company in India.
