Pvt. Ltd., LLP or OPC? Find out the best way to launch your big idea!
Seven months into the pandemic and arrival of vaccines not in the close vicinity but, we are teeming with hope and enthusiasm. The AtmaNirbhar Bharat Abhiyan has transformed a brooding nation into a resurgent one.
It is the thrust on creating habitat for the MSMEs and Startups that has whetted the entrepreneuring appetite in the millions of Indians. In this article, we will restrict our attention to how Startups are redefined and incentivized in new-age India.
Many of us mix up Startups with MSMEs, but the two are not exactly the same. While the Government of India promotes both as budding businesses the fundamental difference between them is that an MSME is a micro, small, or medium-sized enterprise that can deal in any product or service but a Startup is essentially built around a novel idea or innovation. The concepts are further expanded as given below.
An MSME can be a manufacturing or a service business, usually of known products or services with limited employees, assets, and turnover (permissible as per its classification such as micro, small, or medium).
A Startup starts as a micro or small business based on a new idea or innovation that may grow into a giant company over the years to impact the economy by generating large employment and contributing to society in many ways.
Going by the last few years’ record growth in the number of Startup companies, this sector itself is expected to contribute $1Tn to India’s grand target of $5Tn economy by 2025. The Startup India initiative and similar organisations deserve big appreciations for creating this momentum.
However, as the economy slid into a deep gorge due to the pandemic, one of the most affected segments has been the fledgeling Startup community. Sensing this red alert, the Government of India has come up with financial and other assistance for the Startups.
The new policy says that despite the thin difference in the definition, a Startup is now allowed to be registered as an MSME to receive financial assistance through the AtmaNirbhar Bharat package.
Startups are enjoying special heed, due to the Make in India initiative by the government, which has created a special cell called Startup India initiative with a goal to make India the Startup capital of the world.
There are many types of help and guidance required by an aspiring entrepreneur. The Startup India initiative addresses them all, in an inclusive, professional and caring manner.
What is the role of the Startup India initiative?
In simple terms, it is responsible for building a strong ecosystem that is conducive for the growth of Startup businesses in the country. It’s much like an institution that works to empower the Startups and facilitates all that is needed for this cause.
How to start your Startup business
Any business needs to have a profitable business idea and a stable support system that takes care of the financial, accounting, and legal requirements.
Young Startup entrepreneurs are found to be focused more on using new technologies in their business but lacking exposure on other aspects to sustain their business.
If you have a good business idea but need funds and mentoring to implement that, then follow the below steps. These steps entail all that is required to start a Startup as an MSME and also enjoy the benefits under the Startup India scheme.
- Incorporate your business as one of the below types:
- a private limited company,
- a partnership firm,
- sole proprietorship,
- a limited liability partnership firm(LLP),
- a One Person Company(OPC).
- Get your business registered using Udyog Aadhaar to get identified as an MSME.
- Get your business registered through Startup India registration process to avail of the benefits meant for the Startups.
Startup India scheme eligibility criteria to avail financial assistance as an MSME.
|Revenue upper limit||Up to INR 100 Cr.|
|Investment in plant and machinery||Not applicable|
|Tenure of existence||Up to 10 years|
|Corporate structure||Pvt. Ltd. Company, LLP, General Partnership|
|Original Entity Test||1. Should not be formed from the split or reconstruction of an existing business.
2. Should apply technological innovation to develop/enhance new/existing products or services and generate employment.
How to utilize Startup India finance
Business loans help to realize your business project in a number of ways. Some of the common requirements are:
- Starting the business using Seed Funding
- Funding the business expansion
- Investing in new tools, technology, equipment
- Using for Working Capital requirements
- Procuring raw material
- Stocking up new inventory
- Spending on marketing and promotion.
Startup India Registration benefits
New entrepreneurs need grooming and assistance that may be both financial and non-financial types. The Startup India registration benefits are available in two grades. The first grade will provide you with mainly non-financial benefits such as:
- Various accelerator programmes,
- Incubator/mentorship programmes,
- Access to learning and development programmes
- Information on Government schemes, State policies, and pro-bono services.
Benefits in the 2nd grade will be available to you if your business is also recognised by DIPP ( Department of Industrial Policy and Promotion). These are the ways and means to minimise your financial risk and burden, help in quick patenting and copyright protection, and provide easy winding up option. Some of these benefits are:
- Self-Certification: Self-certify and comply under 3 Environmental & 6 Labour Laws
- Tax Exemption: Income Tax exemption for a period of 3 consecutive years and exemption on capital and investments above Fair Market Value
- Exemption from Angel Tax: Up to the total amount of paid-up share capital and share premium does not exceed Rs. 25 Crore after the proposed issue of share.
- Easy Winding of Company: In 90 days under Insolvency & Bankruptcy Code, 2016
- Startup Patent Application & IPR Protection: Fast track patent application with up to 80% rebate in filing patents
- Easier Public Procurement Norms: Exemption from requirement of an earnest money deposit, prior turnover and experience requirements in government tenders
- SIDBI Fund of Funds: Funds for investment into startups through Alternate Investment Funds
- Directly register and sell on Government e-marketplace: With no requirement of turnover and experience criteria.
- Preferential treatment at all Public Sector Undertakings.
Tax benefits for Startups in India
Here is how you can reduce your financial burden through the various Startup India Tax benefits.
- Tax exemption under section 80 IAC: Tax holiday for three consecutive financial years out of the first ten years since incorporation.
- Relief from Angel Tax under section 56(2) (VIIb)
- Relief from Capital gains Tax under section 54EE
- Relief for set off and carry forward of losses under section 79
Documents required for Startup India registration process
This is basic yet most important. Keep them ready before you opt for the registration.
- Certificate of Incorporation or registration certificate
- PAN card
- MOA & AOA in case of company and Partnership deed for LLP & Partnership firm
- List of all directors/members/partners along with their email id and photograph
- URL link of a website and social profile of the entity
- URL link of the social profile of directors/members/partners
- Information related to IPR in the name of the entity If it has registered any IPR or it is in the process of registration
- Information related to funds if the entity has availed any fund from investors
- If the entity has received an award or certificate or recognition then such information needs to be provided
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