Which registration should be chosen by a startup?
Due to the emergence of start up businesses, companies across the globe can incorporate a legal entity. Start ups are careful about low maintenance and concentrate on investing in a business which does not demand a hefty maintenance cost. The following entities are eligible for registration as a startup: However, due to lack of experience, most startups are unaware of the legal entities and the legal status of such entities. As a result, it becomes difficult for such businesses to incorporate the entity suitable for their startup.
- As per The Companies Act, 2013, a Private Limited Company is eligible.
- As per The Indian Partnership Act, 1932, a Registered Partnership Firm is eligible.
- As per The Limited Liability Partnership Act, 2008, a Limited Liability Partnership is eligible.
According to some analysts, there has been a 26% escalation in the incorporation of Private limited companies. The rate of incorporation of One Person Company (OPC) formation is on the rise as well. More than Five Thousand businesses are incorporated in India and majority of that incorporation occurs in three states, Namely- Delhi, Uttar Pradesh, and Maharashtra.
Why do startups choose Private Ltd Company?
There are a few exclusive features of a Private Limited Company. It provides the shareholders with limited liability. Shareholders may increase equity funds from this liability. Moreover, due to its unique feature, its existence and status as a separate legal unit, minor, intermediate sized businesses and start ups decide on Private Limited Company. Private Limited Companies accepts foreign financial aid and investments. Over here a foreigner is eligible to be a shareholder and is able to transfer the money from abroad to India. Moreover, since most start up to suffer from funding problems, they hope of an ROI to solve this. Majority of the investors agree to the risks of funding and devote their money to Private Limited businesses. Private Limited companies also provide with an opportunity to operate publicly by conversion to a Public limited company. Under this type of company, it is possible to develop a legitimate contract with its members. A party may maneuver as a director, an employee or a shareholder, all at once.
In order to incorporate a Private Limited Company with GST registration, the following documents are to be submitted by Directors and Shareholders who are a resident in India:
- Scanned PAN Card copy.
- Scanned Voter’s ID, Passport or Driver’s License photocopy.
- All updated bank statement and/or Mobile Bill or Electricity Bill and other mentioned documents with the photocopy.
- A photograph that should be passport-sized and scanned.
- A blank document containing signature solely of the directors. Moreover, it is crucial for one of the directors to self-attest the documents as mentioned above.
Why should startups apply for SSI registration?
Small Scale Industry Registration (SSI) denotes the registration is done by the Ministry of Micro, Small and Medium Enterprises. Startup companies are well known for providing new products or services which are unique in nature. On successfully completing SSI registration, the businesses are eligible to many schemes to support young entrepreneurs by creating a procedure to get funding easily. This would further enable them to build their business by getting proper back up from the government. Moreover, a start-up business sometimes invests in enhancing an already developed product and/or service. MSME Registration is beneficial for all micro, undersized and medium scale enterprises. This registration procedure is classified into two segments, namely -provisional and permanent. Micro enterprises with investment limit in the manufacturing sector, not as much of as 25 Lakh can apply for registration. In case of the service sector, the limit is less than 10 Lakh. In case of small enterprises investment limit in manufacturing sector should range between 25 Lakh to 5 Crore. Medium sized enterprises investment limit for the manufacturing sector is between 5 Crore to 10 Crore and in the service sector, it ranges from 2 Crore to 5 Crore. In case of products that do not have need of industrial license together with products set aside for small scale sector is eligible to apply for Provisional Registration Certificate. It is possible for young entrepreneurs to obtain Provisional Registration Certificate while establishing their business. As a result, proprietors gain provisional validation needed to apply for loans and get proper funding. The PRC has 5 years of validity. However, on successful completion of operations, the proprietor can opt for a permanent registration certificate. Documents demanded by the authorities during registration are:
- The Proprietor’s PAN copy.
- The Proprietor’s Address proof.
- Rental contract of commercial space.
- Authorized clearance from.
- State Pollution Board.
- Electricity Board.
- Municipal Corporation.
- Affidavit affirming the position of plant and machinery established, power requirement and more.
Why do startups choose Startup India?
A recent proposal called Startup India Standup India was initiated by the existing government of India. The Prime Minister of India, Narendra Modi introduced this proposal in the year 2016.The primary target of this operation was to generate more job prospects for young entrepreneurs. Furthermore, the scheme will facilitate the youth of the country in launching their flourishing venture. Startup India allows the supply of their commodities all across the nation without any constraint faced at check posts. Moreover, no entry taxes are levied. GST was able to integrate all markets and turned India into one big market. This will enable supply of commodities and services from different States with no additional entry tax. Furthermore, GST enhanced logistics to gain more profits out of e-commerce. Similarly, promising start up companies benefited immensely by this new system of taxation. In this era technology, online ordering is quite popular among people. The swift delivery of products ordered from various websites further flourished the online market. The Standup India proposal supports entrepreneurship among women from the minority sections as well. In order to understand “which registration should be chosen by a startup”, a complete research is essential. In conclusion, to make a start up business grow proper funding is needed which is possible only with the proper incorporation of a company.