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Startup Registration

The word start-up is becoming a household term in India. The youth in particular want to get into the industry and begin their careers in the start-up ecosystem. The start up is all about solving existing problems in a unique manner. Off late the word 'start-up' has been added into several Corporate Laws which give various benefits to start-ups to boost their business. Lets try to understand who all can be registered as a start-up:

Eligibility Criteria

Any Individuals who want to start a business, should set up an entity. The entity can be either of the following which can be subsequently registered as a start-up:

  1. Private Limited Company.-https://www.setupcompany.online/private-limited-company

  2. Limited Liability Partnership.

  3. Partnership firm.

Once the entity is set up, the entity which satisfies the following conditions can be registered as a start-up:

  1. The entity turnover must be less than Rs. 100 crores in any of the previous financial years.

2. An entity can be considered for start-up recognition for upto 10 years from the date of its incorporation.

3. As mentioned before, the start-up must be working towards innovation of a certain product or service and must possess the potential to generate wealth or employment. A business that has split up will not be considered for start-up status.

The application for start-up registration must be applied through https://www.startupindia.gov.in/.

Once the Govt. approves the application, a start-up recognition certificate will be issued to the entity.

Exemption for Start up:

80IAC Tax Exemption - Once the entity gains startup recognition, it can apply for a tax exemption under section 80IAC of the Income Tax Act. With the exemption, the start-up can avail of a tax holiday for 3 consecutive financial years out of its first 10 years since incorporation. The start-up must have been incorporated after the 1st of April 2016 to be eligible.

Section 56 of the Income Tax Act (Angel Tax) - A start-up can apply for Angel Tax exemption if it is a DPIIT recognised start-up and if the aggregate amount of the paid share capital and share premium after the proposed issue of shares does not exceed Rs. 25 crores.

Patents/Trademarks/Design Registration - The government provides a list of facilitators that can help you acquire a patent or trademark for your start-up. There will be a fee discount for the start-up while filing the application for Patents/Trade Mark.

Funding - The government has set up a fund with an initial corpus of Rs. 2500 crore with a total corpus of Rs. 10000 crore over a period of 4 years. The government will not directly invest in start-ups itself, but will contribute to SEBI registered Venture Funds. A start-up can approach the Govt. for grants as well.

Self Certification Under Employment and Labour Laws - Start-ups can self certify so that their compliance costs are reduced. Self certification is allowed under 6 labour laws and 3 environmental laws for a period of 3-5 years from incorporation.

Raising Funds via Convertible Note - Only start-ups are allowed to raise funds from India or from abroad by way of issuing Convertible notes to the Investors. A Convertible note is an instrument which can be converted to equity shares or can be repaid within a period of 5 years. For early stage start-up this instrument helps them to postpone the stake dilution.

Documents required for start-up recognition:

  1. Company website.

  2. Name and contact details of the applicant company.

  3. A brief write up about the start-up, which denotes what activity the start-up does and how it solves the problem.

  4. Also a write up about how the start-up will generate a revenue and uniqueness of the solution provided.

  5. Other certain details like has the start-up applied for trademark or patent? Details of funds raised if any and details of existing employees.

Govt. can seek any additional details or documents about the start-up before they approve the application.


For any further details please write to vighnesh@bclindia.in

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