The act of forming a business, city, or other organization as a legal corporation is known as company registration. In order to incorporate a business in India, one must follow the regulations outlined in the Companies Act of 2013. Although establishing legal compliance requires a lot of work, there are significantly more benefits to incorporating a business.
Startup India Scheme
In 2016, the Indian government launched the Startup India Scheme. The promotion of companies, development of jobs, and wealth creation are Startup India’s three main goals. A number of initiatives have been started by Startup India to create a strong startup ecosystem and make India a nation of job creators rather than job seekers. The Department for Industrial Policy and Promotion oversees these initiatives (DPIIT).
Definition of “Startup”
Any business that fits into one of the categories below will be referred to as a “startup,” and it will be able to get DPIIT recognition and incentives from the Indian government.
- Age of the Company – The Incorporation Date shouldn’t be older than ten years.
- Type of Company: Should have been incorporated as a Limited Liability Partnership, a Private Limited Company, or a Registered Partnership Firm.
- Annual Turnover: No financial year since incorporation should have an annual turnover of more than Rs. 100 crore.
- Original Entity – The firm or Entity should have been founded by the promoters in its whole and shouldn’t have been created by dismantling or reorganising an already-existing corporation.
- Unique & Scalable – Should have a strategy for creating or improving a good, process, or service, and/or have a scalable business model with the potential to generate a lot of money and jobs.
What are the Benefits from DPIIT?
The following advantages are available to company registration with DPIIT under the Startup India Initiative:
- Legal assistance, simplified departure procedures for unsuccessful firms, simplified compliance procedures, expedited processing of patent applications, and a website to lessen information asymmetry are all examples of simplification and help.
- Funding & Incentives: Credit guarantee programmes, a fund of funds to inject more money into the startup ecosystem, and exemptions from income tax and capital gains tax for qualified firms.
- Creation of multiple incubators, innovation laboratories, events, contests, and grants. Incubation & Industry-Academia Partnerships.
The process of self-certification helps startups with their compliance with regulations. The Startups might also concentrate on their main business.
What are the Advantages of Company Registration?
- Through a straightforward online process, startups are permitted to certify their own compliance with three environmental laws and six labor laws.
- For a period of five years, there won’t be any inspections of labor regulations. Startups will only be inspected if the inspecting officer receives a genuine and verified written report of a violation.
- Startups that fit into the “white category” [as defined by the Central Pollution Control Board (CPCB)] for environmental rules will be allowed to self-certify compliance and will only have random checks made in such circumstances.
What is the Registration Process?
- The startup must register their business on the “Shram Suvidha Portal,” which is a part of the Ministry of Labor and Employment.
- Login to the Shram Suvidha Portal after registering.
- Click the “Is Any of your Establishment a Startup?” link following a successful login.
- Following the instructions will allow you to complete the registration.
Tax Exemption under 80 IAC
The first 10 years after incorporation, eligible startups are free from paying income tax for three consecutive fiscal years.
Eligibility for the 80 IAC tax exemption
Only Private Limited Companies or Limited Liability Partnerships are eligible for a tax exemption under Section 80IAC, and the company must be recognised by the DPIIT.
- The startup must have been formed on or after April 1, 2016, at the latest.
- Documents & Registration Procedure
- Register at the Startup India website.
- Apply for DPIIT recognition following registration.
- Access the application for the Section 80 IAC exemption
- Complete the application form with the required information and upload the necessary supporting documentation.
What are the required Documents for company registration online?
- Board Resolution for Pvt. Ltd./LLP Memorandum of Association (If Any)
- the startup’s annual financial statements for the last three fiscal years
- For the last three fiscal years, IT returns electronic process following application
- To find out the status of your application, visit your dashboard on the Startup India Portal. After logging in, you may find this in the upper right corner of the website.
Section 56 Exemption
Exemption under Section 56(2)(VIIB) of Income Tax Act
- According to Section 56(2) VIIB of the Income Tax Act, investments made by listed firms with a net worth of more than INR 100 crore or a revenue of more than INR 250 crore into qualifying startups are exempt.
- According to Section 56(2)(VIIB) of the Income Tax Act, investments into eligible startups by accredited investors, non-residents, AIFs (Category I), and listed companies with a net worth of more than 100 crores or a turnover of more than INR 250 crores are exempt.
- Consideration of shares received by eligible startups is also exempt, up to a total limit of INR 25 crore.
Eligibility to avail tax exemption under Section 56
- It ought to be a private limited corporation.
- DPIIT status needs to have been acknowledged. Click “Get Recognised” below to receive DPIIT recognition.
- Not making investments in certain asset types
- Except in the regular course of business, startups should refrain from investing in real estate, motor vehicles costing more than INR 10 lakh, loans and advances, and capital contributions to other businesses.
Dpiit startup Registration Process
- To register, go to the Startup India Portal.
- Recognized by DPIIT
- Use this link to submit the updated Section 56 Exemption application form.
- The moment the registration is activated, the startup firm will receive an email.
Easy Winding up of Company
This is done to make the shutdown or wind-down of the startups easier. The entrepreneurs will be able to more quickly reallocate funds and resources to channels that are more fruitful as a result.
To motivate business owners to test out novel and creative concepts without having to deal with difficult departure procedures that would leave their cash trapped in the event of a failure.
Startups with straightforward debt arrangements can be wound up within 90 days of filing an insolvency application, according to the Insolvency and Bankruptcy Code of 2016.
An insolvency specialist may be hired by the startup to oversee the company’s operations, including the liquidation of its assets and the payment of its creditors within six months of the professional’s hiring.
The insolvency professional is accountable for the company’ liquidation, the sale of assets, and the reimbursement of creditors in line with the IBC’s distribution waterfall.
Patent Application and IPR Application
In order to make it financially feasible for startups to protect their discoveries and to be encouraged to create more, the goal is to decrease the cost and time required for obtaining a patent.
- Startup patent applications will be given priority treatment so that the value may be realised more quickly.
- Panel of facilitators to help with IP application filing – The facilitators will help with application filing.
- The Central Government will cover all facilitator fees for whatever number of patents, trademarks, or designs that a Startup files through this system, and Startups will only be responsible for paying the statutory fees that are due.
- Reduction on the filing of an application – Startups will receive an 80% reduction on the filing fee for patents compared to other businesses. They can reduce expenses in these important formative years as a result.
What are the Features of the Scheme?
The scheme stands out for the reasons listed below:
- Three years of tax holidays are given to newcomers.
- Along with a loan guarantee fund of Rs. 500 crore, the government has established a fund for startups of Rs. 2500 crore.
Eligibility For Startup Registration
- A limited liability partnership or a private limited company must be used to start the business.
- The company should be brand-new or no more than five years old, and its annual revenue should not exceed 25 crores.
- The companies were required to seek Department of Industrial Policy and Promotion permission (DIPP).
- The company must be backed by an incubation fund, an angel fund, or a private equity fund in order to receive DIPP clearance.
- The Indian Patent and Trademark Office should have provided a patron assurance to the company.
- It needs a letter of recommendation from an incubator.
- The Startup India programme does not impose income tax on capital gains.
- Innovative items or schemes must be offered by the company.
- Accelerators, Private Equity Funds, Angel Networks, and Angel Funds must all be registered with SEBI ( Securities and Exchange Board of India).
The Partnership Firm Act regulates partnership firms. The parties involved must create a partnership deed outlining the rules and conditions of the partnership business in order to begin a partnership firm. This partnership agreement has to be filed with the registrar of businesses. We can assist you in setting up a partnership company.
Limited Liability Partnership Firm
Under the LLP Act, a limited liability partnership firm must register. Although a partnership firm and an LLP are extremely similar, the latter has more features in common with a private limited company, such as transferability and limited liability protection.
Benefits of Company Incorporation
Helps to generate capital
The money required to generate products and services is known as capital. A firm can raise money in two ways: equity, which refers to crowdsourcing, and debt, which refers to bank loans or other types of credit. When a business is incorporated, it is seen as being more trustworthy and may thus easily raise money.
The establishment of the firm is required by the SEBI and other related legislation to enable the sourcing of money in the form of equity. In addition, the business must meet the requirements for a public corporation and be listed on a recognised stock market if the funds are raised from the public as opposed to a private group. As a result, it encourages the simple method of capital development and pooling.
The following parties are distinct legal entities in the eyes of a company:
- Promoters: Those who started the company’s formation
- Directors: Individuals in charge of a company’s operations.
- Shareholders: Individuals that own the business
These characteristics define this idea:
- The business is able to own, purchase, and sell property.
- The business has the right to file and defend lawsuits.
A new type of corporation known as a one person company may now be established according to the Companies Act of 2013. This structure has given a person the “separate entity” benefit that was not possible under the previous sole proprietorship business structure. The lone owner also benefits from restricted responsibility as a result of this development.
Members are only obligated to pay their undischarged liabilities in full. It is restricted to the outstanding balance on the shares of a corporation limited by shares. The only amount that may be held liable in a business limited by guarantee is the sum that the members have agreed to guarantee. As an illustration, a guy bought 10 shares for Rs 100 apiece. His maximum responsibility is limited to INR 1000.
Now, a member could not have dismissed his responsibility, as is typically the case with closely owned corporations (private companies). In this situation, he will be required to pay his debts at the time of the company’s dissolution. Since their responsibility is limited as opposed to a sole proprietorship or partnership, this provides an incentive to the members.
Transferability of shares
Since shares are regarded as moveable property, they may be easily transferred from one person to another. The owners benefit from the liquidity this feature offers. Members have the option to cash out their shares whenever they like. The shares of a public limited business are freely transferable. In contrast, because shares in a private limited business are held tightly, share transfers there are uncommon but not illegal.
The double E’s – Expertise and Efficiency
Since management and ownership are separate entities, each position inside the firm may be filled by subject-matter experts. Improved accountability results from this. The availability of resources makes it possible to offer competitive compensation packages and entice the top market talent.
What are the myths surrounding the incorporation of a company?
There is no personal liability after incorporation.
Even while the idea of a separate legal body exists, it does not totally exempt the owners from responsibility. For instance, the owner may have authorised a business transaction by signing in his own name, or he might have guaranteed a loan in his name or committed fraud. He will be held personally accountable in such circumstances.
Excessive paperwork required for compliance
Too many times, people are afraid of the amount of paperwork and documentation that comes with incorporating a business. However, the incorporation procedure has been shortened, and the job may be finished swiftly and accurately with the help of the appropriate professionals.
Companies pay higher rates of tax.
People frequently believe that if a firm is organised in another form, such as a partnership or limited liability company (LLP), the tax burden would be reduced. This is untrue since all entities, whether partnerships or corporations, are subject to a 30% tax rate. In reality, certain businesses that have a turnover below a set threshold must pay income tax at a reduced rate.
Several years ago, incorporation was expensive; today, it is not. Professionals no longer charge as much thanks to the competitive atmosphere that has emerged. For the clients, it is hassle-free and reasonably priced thanks to the different online registration options. The Income Tax Act of 1961 additionally offers the benefit of amortizing pre-incorporation costs by providing a deduction equivalent to one-fifth of the cost for each of the prior five years.
Low turnover standard
There is no minimum turnover needed to establish a firm as a corporation; instead, it may be founded from scratch just like any other type of business organization.
Entrepreneurship is currently a hot topic, and while deciding on a company model, an entrepreneur must take into account all of the benefits and hazards. The destiny of the firm is significantly influenced by the use of the proper business forms. Compared to alternative business structures, incorporating a corporation offers stability and much greater legitimacy.
Understanding the Indian Company Registration Online Process
India is reportedly the nation with the second-highest percentage of unregistered firms worldwide. However, according to data provided by the Ministry of Corporate Affairs, there are now 17.95 lakh registered firms, an increase in number that has remained steady over time.
The final step to realizing your entrepreneurial dream is company registration online. It all starts with the first baby step of narrowing down your list of potential business ideas, followed by extensive market research and trend analysis, product or service development, financial considerations, and a rough business plan.
Types of business entities
A corporation may be registered as a private limited company, a sole proprietorship, a partnership, a one-person company, etc., each with its own set of rules. For instance, the Corporations Act 2013 governs all private limited companies and LLPs, which are registered with the Ministry of Corporate Affairs. A long time ago, registering a business was a complicated, expensive, and time-consuming procedure. However, by getting expert help, it is now simple, inexpensive, and has a tonne of advantages.
Private limited company Registration
This kind of registration is one of the most popular and is frequently chosen because it provides more freedom, minimal liability, and excellent expansion potential. Under the 2013 Companies Act, a private limited company is formed.
One individual owns and manages business activities under this form of corporate entity, often known as a lone trader firm. It is easy to set up and doesn’t require any money. There are no advantages to limited liability, and there is no legal separation between the owner’s business and it.
A partnership corporation is run by two or more partners, as the name indicates. All of partners’ duties and obligations, as well as other conditions and goals, are initially laid out in partnership deed. This has a few advantages, including minimum regulatory requirements, ease of implementation, and affordability.
Limited liability partnership or micro finance company registration
According to the LLP Act 2008, limited liability partnerships, or LLPs, were first introduced. It offers owners a low level of responsibility and requires little upkeep. One of the problems with LLP is that it makes it difficult for employees to accept stock options and does not pull in investors.
Here are the top five reasons why registering a company is good
Opening a business bank account: A current bank account is a prerequisite and a crucial asset for every type of company, including sole proprietorships, partnerships, private limited companies, etc. It also acts as an evidence of existence in legal terms. Copies of the memorandum of association and certificate of incorporation must be presented when creating a business bank for a private limited company registration in the relevant state; these papers are not required for sole proprietorship and partnership businesses.
Easy ownership transfer: There may eventually be a need to transfer a business’ ownership, and in these situations it might be more difficult for unregistered business organizations. A sole proprietorship may only transfer asset ownership; it cannot be sold. However, for firms that are registered as private limited companies or LLP, the transfer of shares and business-related documentation is simple.
Limited protection against liability: Any firm is certain to have losses, and one of the major benefits of registering is that it provides limited liability protection, shielding the business promoters from any liabilities the company may have. It is impossible to lose personal property.
Secure funding: You must look for and secure financing if you want to advance your company. Debt or equity are two possible sources of funding. Incorporating a business makes the fundraising process easier and draws in more possible investors. Additionally, the majority of banks and financial organisations favour funding registered firms over unregistered entities.
The largest asset is a registered firm, which has the potential to be sold to subsequent generations of business owners or left as an inheritance. For sustainability, a firm must be registered.
Dpiit startup registration– DPIIT Registration Certificate for recognition of Startup India in Mumbai, Maharashtra
The material in the paragraphs that follow will be concentrated on the DPIIT Registration Certificate for Startups Issued by DPIIT in Mumbai, Maharashtra (full form of DPIIT is Department for Promotion of Industry and Internal Trade). The Department for Promotion of Industry and Internal Trade (DPIIT) previously went by the name Department of Industrial Policy and Promotion (DIPP), with the intention of focusing on issues linked to fostering the growth of start-ups and enabling ease of doing business. The articles discuss the advantages of registering with DPIIT, as well as the timeframes, requirements, and paperwork needed to obtain a DPIIT certificate in India.
In Mumbai, Maharashtra, startups have grown in prominence during the past ten years. A vibrant group of people, including employees and college students, have stepped up to launch their own startups. In Mumbai, Maharashtra, startups have generated many job prospects during the past ten years.
Describe a startup. A startup is a small firm that founded in Mumbai, with the intention of providing a specific service or item to address a need. As LLPs and small businesses backed by an individual or promoters, they are also startups.
15 Working Days
Muds start the process as soon as you provide some basic information about your company and the required paperwork. You may start conducting business as a private limited company without leaving your house in 20 working days.
9.7 Customer Score
We handle all the documentation so that your interactions with the government run as smoothly as possible. We will also be completely transparent with you about the procedure so that you may have reasonable expectations.
500+ Strong Team
You may reach our team of knowledgeable business consultants by phone if you have any questions concerning the procedure. However, we’ll make an effort to dispel any worries you may have in advance.