Start-ups Funding: A Quick Checklist for all the requirements to raise fund

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Essential Pre-requisites

Particulars/Details

1.

Finance and Tax Compliances

A. General Compliances-

Startups need to be vigilant about a range of finance and tax compliances to ensure lawful operation and to avoid penalties.

i.

Incorporation and Business Structure- Choose the appropriate structure like Private Limited Company, LLP, Partnership or Sole Proprietorship as each structure contain different tax implications.

ii.

GST Registration- it must be taken if there is interstate supply or threshold limit (INR 40 lakhs/20 lakhs) prescribed under GST has been crossed by the business.

iii.

Income Tax- Filing ITR annually, making advance tax payment and adherence of TDS regulations.

iv.

Book Keeping and Accounting- Maintaining books of accounts and preparing annual financial statement as per companies act.

v.

Professional Tax- It is a state tax where registration and payment of professional tax is required as per the state laws.

vi.

PF and ESI Registration- It is mandatory if company employed 20 or more and 10 employees or more employees on any day during the financial year.

vii.

FEMA Compliances-It is required when foreign exchange transactions are involved in the business.

viii.

Annual Return Compliances- If you are registered as a company as per Companies Act then compliances in respect of annual accounts, returns and other disclosures are to be made.

ix.

Audit Compliance- It involves Statutory Audit or Audit as per Income Tax Laws.

x.

IPR Registration- Ensure brand which is your recognition must be registered as per IPR Act to avoid future chaos.

B. Start-up India Registration

It’s Key Benefits include-

i. 

Fast Track of IPR Registration upto 80% rebate in legal fee

ii. 

Angel Tax Exemption u/s Section 56 of Income Tax for consideration of shares received by Start-ups.

iii. 

Deduction u/s 80-IAC to pay income tax for 3 consecutive years out of first 10 years since inception.

Contractual Agreements

A. 

Agreement with Vendors- These agreements protects both parties’ interests by detailing expectations and requirements, thereby minimizing risks and potential disputes.

2.

B. 

Agreement with Employees- It is a formal contract that outlines the terms of employment, setting clear expectations and legally binding conditions for both parties.

C. 

Agreement with Promoters- This contract establishes the legal and business relationship between the promoters and the company, detailing their mutual obligations, rights, and responsibilities.

3.

Licenses and Permission- when establishing a business, it’s important to obtain the necessary licenses and permits from various government authorities, which vary depending on the company’s industry, location, and operations.

E.g

For Food Business- FSSAI License, Fire Safety Certificate, Health/Trade License, Lift License, Liquor License, Pollution Clearance, License for playing Music/Videos.

For Engaged in International - It is important to get Import Export Code (IEC) from DGFT.

For Manufacturing Entities – Ensure compliances are made as per Environment Act.

For Companies involve in Data- Ensure to register with relevant data protection authority and comply as per Data Protection Regulations.

For Pharmaceutical Companies- Ensure License must be obtained from Central Drugs Standard Control Organization (CDSCO) in India.

4. 

Financial Projections & Pitch Deck- Financial Projections gives an insight to investors for company’s future revenue, expected growth and business scalability, helping assess the investment opportunity size and potential.

Pitch Deck- It is a precise presentation that gives investors a quick insight into your business.

Key Points to be included in Financial Projects are- Revenue Projections, Cost of Goods Sold (COGS), Gross Margin, Operating Expenses, EBITDA, Cash Flow, Break Even Point, COCA, Capex.

Key Points to be included in Pitch Deck are-Introduction, Problem, Solution, Market Opportunity, Product/Service, Business Model, Financials, Investments and use of Funds.

5. 

Valuation Report- It must be prepared and signed by Registered Valuer which is generally valid for 6 months.

For Private Investment- Valuation Report attracts investors and justified the valuation of the company.

For IPO: It is a legal requirement in case of companies

6. 

Due Diligence

Due Diligence is of following types- Financial Due Diligence, Legal Due Diligence, Operational Due Diligence, Market and Industry Due Diligence, Management and Corporate Governance Due Diligence, ESG Due Diligence, Tax Due Diligence, Technology and IP Due Diligence, Exit Strategy Due Diligence.