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What are the Legal Procedures Required for a Startup in India?


Startup India

India is the third-largest startup ecosystem in the globe. There has been an increase in startup projects over the past ten years from entrepreneurs, businesspeople, and students all over the nation. When pursuing such initiatives, it is important to concentrate on the industry and the customers. However, it is also essential to have a basic understanding of the laws, government assistance programs, and legal requirements that must be followed for the start-up to run effectively.

Though you have a well-managed solid team, good investors, and a distinct business plan, if you haven’t registered your startup legally in India, then a huge storm of legal notices can sink the start-up in a day without a prior alarm. In India, several numbers of start-ups either forget or avoid the process of legal structure & face lump-sum issues in mere time. So, it is vital to know all the documents legal documents required to begin a start-up.

Every type of business has its own financing needs, experts have some tips to help you figure out how much cash you’ll require. The startup should not be more than 7 years old (or 10 years for biotech) from the date of incorporation. Is incorporated as a Registered Partnership, Limited Liability Company, or Private Limited Company. Turnover in any year should not have exceeded 25 crores.

Key Takeaways

  • It is vital to know all the legal documents required to begin a start-up.
  • To encourage and motivate start-ups and their growth, the government of India has come up with a tax exemption scheme.
  • For the patents registered and developed in India, a discount of nearly 10%  of the income it generates worldwide is available.
  • If the development or creation of a property (intellectual) is a component of a third-party agreement then it should state clearly that all rights to the property (rights) must vest and be owned/claimed by the start-up.
  • Reach kanakkupillai to Register Your Startup Business at a Low Cost!

Government’s Eligibility Criteria for Startup Recognition

  • The startup must be registered as a private limited company, partnership, or limited liability partnership (LLP).
  • Less than Rs. 100 crores in turnover must have been made in any of the prior fiscal years.
  • A company will be considered a Startup for ten years following the date of its incorporation.
  • The startup should be focusing on innovation and improving current goods, services, and procedures, and it should have the potential to produce wealth and jobs.
  • It must be certified by the Inter-Ministerial Board established for that reason.
  • No “Startups” shall be deemed to be an entity created through the division or reconstruction of an existing firm.

Important Documents Required for Startup Business in India

  • Director Identification Number (DIN)
  • Certificate of incorporation
  • Digital signature certificate
  • Shop and establishments license
  • GST registration certificate
  • Commencement of business certificate
  • Registration on the MCA portal

Legal Procedures Required for Startup Registration in India

Here, we have provided the list of primary legal procedures for startup registration in India that you should follow.

  • Create an LLC or Corporation
  • Register Your Business Name
  • Apply for a Federal Tax ID Number
  • Determine If You Need a State Tax ID Number
  • Obtain Business Permits and Licenses
  • Protect Your Business with Insurance
  • Open a Business Bank Account
  • Consult the Professionals

1) IPR (Intellectual Property Right) Certificate

This legal procedure in India aids all kinds of startups to have complete ownership of their assets in a legal document. The major use of this document is that it can protect from any other companies trying to produce the same service and product as your business model. So, IPR gives you the power to guard your inventions and product designs. In addition to this, the IPR procedure can be availed across countries; as it provides the original product availability and credit to the investors of the firm.

Along with these documents, you will also need documents that officially represent your business company’s office address, PAN number, GST registration, ROC registration, Professional Tax registration, Provident Fund registration, and ESIC registration.

2) Trademark Certificate Online India

A trademark is one of the effective ways to refer to a brand or start-up internationally. It helps to have the monopoly towards a mark that you use to represent a business or start-up & also it is a pivotal asset, an effective communication link between customers and owners of the start-up. According to central government policies, trademark licensing is compulsory for all start-ups to avoid duplication. Despite that, this trademark certificate can be used as a property asset by the owners of the start-ups.

3) Bylaws

Bylaws are mandatory to formulate the working rules of startups. Bylaws help you to establish a good, strong working culture internally and to have lesser complications. In addition to this, New CEOs or Directors can be added to a start-up with the help of by-laws. So, Bylaws overall can sort out every issue between employees, stakeholders, and team leaders.

4) Patent Registration Certificate Online in India

With the help of a Patent certificate, you can have authority over the ideas and products of your startup business. To apply for a patent, you are supposed to follow the guidelines allocated by the respective departments. But, in India, this process is faster than in other countries after initiating a scheme known as StartUp India Action Plan. To motivate and empower the younger to start a business, the Indian government formulated this scheme and for the first patent registration by a start-up, above 75% provision would be given on the fees.

5) Registration & Business License

While incorporating a startup in India, there are some mandatory registrations required as per the law. Some such registrations are PAN, TAN (Tax Deduction and Collection Account Number), and GST registrations.

The business license provided by government authority allows the start-ups to start, stop or continue to operate a start-up within its territorial (jurisdiction) as per law. The nature of start-up activity determines most of the license requirements. Some other prominent factor includes the location of the business, the number of employees, and business ownership forms.  A few examples of such licenses are Health licenses, Trade licenses, Establishment licenses, Shop licenses, and Safety licenses. 

6) Tax Exemption

To encourage and motivate start-ups and their growth, the government of India has come up with a tax exemption scheme. According to this scheme, a start-up founder can avail 100 % profit without paying tax & also there is an exemption for consecutive three years out of five initial years. Yet, the Minimum Alternate Tax is applicable.

The Capital gain from the sale of long-term assets is exempted from income tax if the gain is invested in business funds that are used to purchase computers, hardware, software, and other requirements. In addition to this, for the investments made by resident investors, there are enormous tax exemptions. For the patents registered and developed in India, a discount of nearly 10 %  of the income it generates worldwide is available.

7) Third-Party (Or) Non- Disclosure Certificate

It is advisable to have a non-disclosure agreement before negotiating the terms of Startup India and third-party agreements. If the development or creation of a property (intellectual) is a component of a third-party agreement then it should state clearly that all rights to the property (rights) must vest and be owned/claimed by the start-up and the third party in the start-up shall not ask for any claim on the same and should possess all acts to ensure saving the intellectual property. Issues related to termination, breach, or dispute resolution should be negotiated properly and portrayed in every third-party agreement.

Kanakkupillai is an online company registration and compliance service provider in India. They provide a wide range of services to help startups and entrepreneurs with their business registration and compliance needs.

FAQs on Startup Registration

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Kanakkupillai is your reliable partner for every step of your business journey in India. We offer reasonable and expert assistance to ensure legal compliance, covering business registration, tax compliance, accounting and bookkeeping, and intellectual property protection. Let us help you navigate the complex legal and regulatory requirements so you can focus on growing your business. Contact us today to learn more.