Incorporation of Start ups
Category: Public & Regulatory
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INCORPORATION OF START UPS
Start-ups, as name suggests, to start with implementation of new business ideas, an entrepreneurship with self-designed business models with limited resources and ventures with technological edge committed to contribute in nation’s GDP.
The start up culture started in India somewhere in 2013, since then the country has witnessed rise of various start-ups in sectors such as information technology, education technology, financial technology, medical technology etc. and converting some of the start ups in unicorns. Many start-ups after turning in to unicorns, incorporate as public limited companies, invite for initial public offering of shares, get the shares listed on national and international stock exchanges and aspire to get international recognition and fundings.
One significant reason for the growth of start-ups is policies and schemes framed by Government of India for boosting start-up culture in India. In September 2014, government launched Make In India campaign. This campaign provides various tax incentives, funding support at low cost and subsidies on raw materials, which attracted youth of India to take risk and work on their innovative ideas and skills to set up small ventures.
In 2015, government came up with several policy reforms to promote women entrepreneurship. In 2016, government launched Startup India campaign which contributed significantly in exponential growth of startups and made country as Startup hub.
About Startup India
Startup India is flagship program by Government of India to promote startup eco system in country. The program was launched on 16th January, 2016 and rolled out several programs with an objective-
1. To support entrepreneurs with introduction of various policies and incentives;
2. To develop robust eco system of start ups for economic growth;
3. To transform India into country of job creator than job seeker.
In the past 8 years, since the launch of Start up India campaign, India has witnessed remarkable growth and significant developments in multiple fronts. From registering more than 140000 start ups out of which more than 58000 start ups are promoted by woman entrepreneurs to creating more than 1.5 lakhs jobs to more than 17000 Crores of funds being injected by SIDBI and 945 Crores by Department for Promotion of Industry and International Trade. This has made India 3rd largest start up ecosystem in the world.
This program is organized and administered by Department for Promotion of Industry and International Trade (DPIIT), under Ministry of Commerce and Industry. Under the Start up India initiative, eligible start ups can get recognised by DPIIT, in order to access, tax benefits, easier compliances, IPR fast tracking, government grants and funding etc.
Criteria to be considered eligible start up for DPIIT start up recognition-
1. Age of start up- Period of existence and
operations should not be exceeding 10 years from the Date of Incorporation.
2. Type of incorporation- Incorporated as a
Private Limited Company, a Registered Partnership Firm or a Limited Liability
Partnership.
3. Annual Turnover- Should have an annual
turnover not exceeding Rs. 100 crore for any of the financial years since its
Incorporation.
4. Original Entity - Entity should not have
been formed by splitting up or reconstructing an already existing business
5. Innovation and Scalable - Should work towards
development or improvement of a product, process or service and/or have
scalable business model with high potential for creation of wealth &
employment
Procedure for incorporating start ups in India
1. Incorporate
start up either in private limited company, partnership firm of limited
liability partnership
The first step is to incorporate start ups as a Private Limited Company, Partnership firm, or Limited Liability Partnership (LLP).
I For incorporation as private limited company, following procedure to be followed-
a. Limited Liability -
Private limited company is privately held entity with limited liability. Shareholders
are liable only amount unpaid on the shares held by them.
b. Minimum number of Member-
Minimum 2 members
are required to incorporate private limited company.
c. Minimum
number of directors - Minimum 2 directors are required to incorporate private
limited company.
d. Minimum Share
capital – Minimum paid capital of Rs. One Lakh.
e. Application
for DIN- Director must apply for DIN from MCA before incorporation.
f. Selection of
name and registered office of the company
g. Acquire
digital signature certificate (DSC) of all the directors and promotor
shareholders issued by Controller of Certification Agencies (CCA).One can apply for DSC by
submitting essential details such as passport-sized photos, PAN, Aadhaar Card,
phone number, and email address.
h. Name
reservation of company at company registration online portal i.e. SPICe+ Part
A. It is a form to be filled in to secure the unique name of the company. Two different names have
to be mentioned for approval.
i.
Submission of Company details at SPICe+ Part
B form - Comprehensive
information regarding capital, registered office address, subscriber and
directors' details, stamp duty, PAN and TAN application to be provided along
with necessary attachments.
j.
Preparation and Submission of Incorporation Forms
SPICe+ MOA and AOA- Drafting of incorporation documents i.e. Memorandum of
association (MOA) and Article of Association (AOA), getting it digitally signed
by subscribers i.e. promotors of the company and professional and finally
submitting it with ROC through online mode.
k. Upon successful document
verification, the MCA will issue the Certificate of Incorporation (COI) with
the Company Identification Number (CIN), PAN, and TAN.
II For incorporation as partnership firm or limited liability partnership, following procedure to be followed-
a. Minimum two partners are
required, either individual or body corporate. At least two partners who must
be individual and to be appointed as designated partners.
b. Obtain DSC and digital
partner identification number (DPIN)
c. Checking
the availability and registering a unique name of the LLP by filing e Form 1. Once name gets approved by MCA, it is
available for 90 days. If LLP does not incorporate in 90 days then reservation
gets cancelled and name is available for others.
d. Incorporation of LLP by filing e Form 2.
e. Drafting the agreement for the
LLP.
f.
Filing
of agreement in e Form 3 electronically within 30 days from incorporation of
LLP.
g.
Applying for and issuing the Certificate of Incorporation along
with the Limited Liability Partnership Identification Number (LLPIN) after
getting approval on LLP agreement by ROC.
A Partnership firm is where two or more persons come together
to establish a business and divide its profits amongst themselves in
the agreed ratio. The partnership business includes any kind of trade,
occupation and profession. The Indian Partnership Act, 1932 governs
and regulates partnership firms in India.
The contract between the partners is known as a partnership
deed which regulates the relationship among the partners and also
between the partners and the partnership firm.
2. Register with Start up India
a. Visit start up India website and click on “Register”
b. Provide name, email ID,
and mobile number, and create a password, then click ‘Register.’
c. Enter the OTP sent to email and provide additional details, such as the type of user, name, and start up stage.
d. Click on the ‘Submit’
button to create Start up India profile.
3. Obtain DPIIT recognition
Following steps to be followed for obtaining recognition-
a. Login into the profile created in above step with credentials at Startup India website.
b. Click the ‘Apply for DPIIT Recognition’ option under the ‘Recognition’ tab.
c. On the following page, choose ‘Apply as Company or LLP’ or ‘Apply as Partnership Firm.’
d. If ‘Apply for Company or LLP,’ is selected then applicant will be redirected to the National Single Window System (NSWS) website.
e. Companies and LLPs should register on the NSWS website and add the ‘Registration as a Start up’ form to initiate the DPIIT recognition process.
f. Applicant has to fill “Start up Recognition Form”, accept term and condition and click on submit button.
4. Submission of documents
Following documents to be
submitted electronically-
b. Proof of
funding, if any
c. Authorization letter of the company’s authorized representative, LLP, or partnership firm
d. Patent and trademark details
e. PAN Card
f. List of awards or certificate of recognition
g. Proof of concept, such as a website link, a pitch deck, or a video (applicable for validation/early traction/scaling stage start ups).
5. Self Certification of Eligibility Conditions-
Applicant must self certify that start up meets all the eligibility criteria-
a. That start up is either Private Limited company, LLP, or partnership firm
b. Start up is in continuance for less than 10 years
c. Annual turnover is less that 100 Crores
d. That start up will emphasis on innovative ideas and processes
e. It is an original entity and not formed through split up or reconstruction.
6. Recognition Number-
Upon completion of all above mentioned five steps, immediately recognition number will be generated. The certificate of Registration or Incorporation is issued after the authority reviews all your uploaded documents.
Benefits obtained after getting recognised by DPIIT by a recognised startups
1. High quality intellectual property services
2. Self certification for labour and environmental laws
3. access to Fund of Funds like Start up India Seed Fund
4. tax exemption for three consecutive years, including tax exemption on investments above fair market value.
5. relaxation in public procurement norms
