Legal formalities for starting a business in India

Startup has been defined as an entity that is incorporated or registered in India. Furthermore an entity will be considered as a Startup as per the following delineated below:

  • For a Period of up to Seven Years from the Date of Incorporation/Registration.

  • In case of Bio Technology Firms, the period shall be Ten Years.

  • Imparted it has an annual turnover not exceeding Rs. 25 Crores in any preceding Financial Year.

  • Required to work towards innovation, development or improvement of products or processes or services, or if it's a scalable business model with a high potential of employment generation or wealth creation.

–  With respect to startups in the Biotechnology Sector, an entity shall cease to be a startup on completion of Ten years from the date of its registration or if its turnover for any previous year exceeds Rs. 25 Crore.

Entity

Private Limited Company (under The Companies Act, 2013) or a Registered Partnership Firm (under The Indian Partnership Act, 1932) or Limited Liability Partnership (under The Limited Liability Partnership Act, 2008)        
        
Identification of businesses covered under the definition        

Procedure to Startup Registration
 
Our Expert team will draft & file the application with the Startup Registration Department & will follows-up with Startup Registration Department. For more information contact our customer care on 8448 444 985 or info@corpseed.com.
 

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A business is covered under the definition if it aims to develop and commercialize:

  • A new product or service or process; or

  • A significantly improved existing product or service or process, that will create or add value for customers or workflow.

The mere act of developing:

  • Products or services or processes which do not have potential for commercialization; or

  • Undifferentiated products or services or processes; or

  • Products or services or processes with no or limited incremental value for customers or workflow would not be covered under this definition.

In order for a “Startup” to be considered eligible, the Startup should

  • Be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator established in a post-graduate college in India; or

  • Be supported by an incubator which is funded (in relation to the project) from GoI as part of any specified scheme to promote innovation; or

  • Be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator recognized by GoI.

  • Be funded by an Incubation Fund/Angel Fund/ Private Equity Fund/ Accelerator/Angel Network duly registered with SEBI that endorses innovative nature of the business; or

  • Be funded by GoI as part of any specified scheme to promote innovation; or

  • Have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.

* DIPP may publish a ‘negative’ list of funds which are not eligible for this initiative."        

Turnover

As defined under The Companies Act, 2013        
        
Inter-Ministerial Board        

  • An Inter-Ministerial Board setup by DIPP to validate the innovative nature of the business for granting tax related benefits.

  • Approval from the Inter-Ministerial Board shall not in any manner, limit or absolve the entity(ies) from any liability incurred in case of any misrepresentation/ fraud arising from submission of such application and/ or supporting such application."        

Auxiliary Requirements        

  • The firm/entity should'nt be formed by splitting up or by a reconstruction of an earlier business which is already into existence or have been created as an subsidiary of an existing company or ant foreign entities.

  • Moreover a Proprietorship or a Public Limited Company shall not be eligible as a Start up.

Recommendations of StartUps By Incubators        
Pre-Requisites to be Fulfilled by the StartUp

  • The StartUps are required to deliver and provide a complete application form along with the relevant documents to the Incubator. If the StartUp fails to submit the respective application the same shall not be considered by the Incubators.

  • The StartUps  shall have to agree to personally visit or interact with the Incubator as per the relevant requirements.

  • The Undertakings provided by the Incubators must be agreed by the Startups.

The List of Documents to be furnished         

  • The Copy of of an Incorporation Certificate issued by the ROC or the registered partnership deed as applicable.

  • Self attestation of a copy of Audited Accounts Statements from the Date of Inception.

  • Self attestation of a copy of Income Tax Returns filed from the Date of Inception.

  • The Undertaking must be duly signed by the Founder(s)/Promoter(s) of Startup on the Letter Head.

  • The Other Documents must be listed in the Application Form.    


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One Person Company

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If you want to have full control over your business with limited liabilities, then OPC is the best choice to start with. But ensure that you convert your business structure (within six months) to the private limited company after crossing an average turnover of 2 crores over three consecutive years or has a paid-up capital of over 50 lakhs.

Partnership Firm

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When two or more people agree to do business together and both might be from same family or same association. Once partners are engaged in a business, each partner is personally liable for the actions of that business, including the obligations of the other partners There are no shields against personal liability.

LLP Registration

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If you don’t want to take responsibility or liability for another partner's misconduct, incompetence or negligence and also want to limit your liabilities for the debt and losses. If you want to enjoy tax benefits, then LLP might be the best option to go with. It’s the most flexible type of business structure to start with.

Private Limited Company

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It’s the most renowned legal structure for business. The financial liability of the shareholders is limited to the their shares in case of any defaults, bankruptcy and/or any suits or recovery by banks/creditors. This simply means that personal assets of the sahreholders are kept seperate from the Company itself. Private limited company has more credibility as compared to other business structures available.


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