The term startup refers to a company in the first stages of operations. Startups are founded by one or more entrepreneurs who want to develop a product or service for which they believe there is demand. These companies generally start with high costs and limited revenue, which is why they look for capital from a variety of sources such as venture capitalists.
Through this article let us know about the Registrations and Licenses for setting up a Startup.
Before registering the startup, it is important to decide on the company structure. The company structure must be in such a way that is more beneficial to the Startup and suits its business objectives. It also depends on the following factors-
- Nature of business
- Size of the Startup
- Capital Requirements
- Number of members
- Scale of operations
Each Company Structure has its own advantages and disadvantages. There are various forms of company structure to choose from-
- Limited Liability Partnership(LLP)
- Partnership Firm
- Public Company
- Private Limited Company
- Sole Proprietorship
- Nidhi Company
After deciding on the company structure, they can proceed with the registration.
A Startup shall be classified as Micro, Small and Medium enterprise if it meets the following criteria-
Investment in Plant & Machinery or Equipment
Up to one Crore Rupees
Up to Five Crore Rupees
Up to Ten Crore Rupees
Up to Fifty Crore Rupees
Up to Fifty Crore Rupees
Up to Two Hundred and Fifty Crore Rupees
There are various benefits of obtaining MSME registration and few of them are listed below-
- Lower Interest on Loans: An entity having Registration can avail the bank loan at a lower interest rate.
- Easy Access to Credit: An entity having registration can avail the benefits of various credit schemes launched by the Government for the promotion of MSMEs.
- Quick approvals from CG/SGs: Entities having registration are treated on priority for approval of any license/certification.
- Tax Concessions: Various tax rebates and concessions are provided by the Government to the MSMEs.
- Access to Government Tenders: There are various government tenders for which only MSMEs can make a bid
Enrollment in Startups in India
The following companies can apply to Startup India if such company falls within the definition of incorporation as per the DIPP notice-
- A company registered as a Private limited company under the Companies Act 2013
- A partnership firm under Section 59 of the Partnerships Act 1932, or
- A Limited Liability Company under the Limited Liability Partnership Act 2008.
Additionally, such companies are also required to meet the following criteria-
- Not more than ten years have passed since the date of business registration.
- The annual revenue of the company for the fiscal year since its registration does not exceed Rs. 100 crores.
- Companies work to innovate, develop or improve products or processes or services, or a scalable business model with high potential to create jobs or create wealth
There are numerous benefits of enrollment in Startups in India like minimal compliance requirements, exemption from taxes, protection of patents, relaxed norms for public procurement etc.
Every company, whether engaged in manufacturing goods or rendering services must obtain GST registration if it meets the following criteria-
- In case of persons engaged in the activity of the sale of goods-
- Normal Category States: Turnover exceeds Rs. 40 lakhs
- Special Category States: Turnover exceeds Rs. 10 lakhs
- In case of persons engaged in the activity of rendering services- Turnover exceeds Rs. 20 lakhs
The registration must be done within 30 days of meeting the above-mentioned criteria.
Udyog Aadhaar Registration
Udyog Aadhaar Registration is an initiative to support small businesses. It is a substitute for SSI registration and MSME registration. Once an enterprise obtains Udyog Aadhaar registration, it will benefit from various subsidies and programs specifically provided by the government to support small businesses in India.
Purchase and Manufacture License for Startup Registration
Every state has an independent Shop and Establishment Act, which provides rules that every business and establishment operating in that state must follow. The law also regulates business licenses or business permits.
Import Export Code Registration
All Startups which look forward to importing or exporting goods/services to/from India must have a valid IE code. The IE Code must be mentioned in all relevant customs documents. Bankers also require a valid IE Code for overseas payments. It is mandatory to have a PAN and bank account to obtain IE code.