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Legal formalities for starting a business in India



A 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 the 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.

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–  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.


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

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 the 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 the 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 that 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 the 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 the 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 the business being promoted.

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


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 the submission of such application and/ or supporting such application."      

Auxiliary Requirements

  • The firm/entity shouldn't be formed by splitting up or by a reconstruction of an earlier business that is already into existence or has been created as a subsidiary of an existing company or ant foreign entities.
  • Moreover, a Proprietorship or a Public Limited Company shall not be eligible as a Startup.

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 upon by the Startups.

The List of Documents to be furnished

  • The Copy 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.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not corpseed, and have not been evaluated by corpseed for accuracy, completeness, or changes in the law.


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