The latest buzzword in the country is Startup. The promising world of startups are being explored by new age entrepreneurs who dare to think differently. We have witnessed many a success story of startups raking in billions in profit while operating with minimal costs and manpower. The government of India has launched an action plan called Startup India to promote entrepreneurship and sustainable development. This initiative makes registering and funding of startups easier along with significant tax benefits. The regulatory burden on startups is reduced by the government. This makes it all the more easier to register a startup.
For the purpose of availing schemes of the Government of India, a startup is a business entity which is not older than five years and does not exceed an annual turnover of 25 crores. The entity loses the title of startup on completion of five years and also when its turnover exceeds 25 crores in a financial year. Further, a startup may be a Private Limited Company incorporated under the Companies Act, 2013, a Partnership Firm registered under the Indian Partnership Act, 1932, or a Limited Liability Partnership incorporated under the Limited Liability Partnership Act, 2008.
Private Limited Company
Incorporating a startup as a private limited company is considered to be a great option available for entrepreneurs. The reasons being less number of directors required, i.e 2; easy setup and expansion, limited liability for shareholders, high degree of credibility which allows easier funding and financing. An entrepreneur may incorporate a private limited company in the following manner:
- Get Digital Signature (DSC) Approved. It is to be attached in all further forms to be submitted online.
- Apply for unique Director Identification Number (DIN) in form DIR-3.
- Fill integrated form INC-29 or follow the traditional way of submitting multiple forms each for name allocation (INC-1), Application for Incorporation, Appointment of new Directors (DIR-12) and situation of registered office (INC-22).
The newly introduced integrated form INC-29 also allows for payment of e-stamp duty online.
- Draft the of Memorandum of Association (MoA) and the Articles of Association (AoA). This will be submitted along with form INC-29.
- Requisite fees shall be paid for all the above forms and declarations and other documents submitted wherever necessary. All forms mentioned above has to be submitted online to the Ministry of Corporate Affairs. Certain documents need attestation by Company Secretaries.
- Your documents shall be verified by the Registrar of Companies.
- Certificate of incorporation is issued by the Registrar of Companies.
Limited Liability Partnership
Incorporating a startup as a Limited Liability Partnership is a relatively simpler way. A limited liability partnership contains good features of both traditional partnerships and companies. In India, LLPs are registered under the Limited Liability Partnership Act, 2008. LLPs are favoured over traditional partnership firms because of limited liability of partners to the extent of capital invested. The partners are also exempted from joint liability in case of unauthorised actions by any partner.
A Limited Liability Partnership can be registered in the following manner.
- Get your DPIN. A Designated Partner Identification number is a unique number used to identify a designated partner in an LLP. This can be applied for at the LLP portal of the Ministry of Corporate Affairs by submitting necessary documents.
- Apply for Digital Signatures (DSC) of partners for official purposes. There are various certifying agencies appointed by the government for that purpose.
- Apply for reservation of name at the LLP portal by filling Form-1. Up to 6 names can be proposed.
- Fill incorporation document under Form-2 after name has been approved.
- Get your Partnership Agreement drafted professionally and submit it under Form-3.
- Submit notice for appointment of partners under Form-4.
Registering a Partnership does not involve complicated procedures like DPIN or DSC. All it takes is a well drafted Partnership Deed which covers the details of the partners along with their investments made, the method in which profits shall be divided and how losses shall be dealt with. The Deed also mentions about interest in capital, salary of partners, if any and also the procedures for admitting and removing partners. The Partnership Deed should be made in stamp paper. Though registration is optional, it would be ideal to register the same with the Registrar of Firms. It must be ensured that the name chosen for the firm is not identical or deceptively similar to other businesses that may confuse the public.
LegalDesk.com Can Get You Started
Do you believe you have it in you to succeed as an entrepreneur? There could not have been a better time to register a startup. As we observed, there are a number of forms and documents which need to be submitted during the registration process. There is also a requirement of well drafted documents, be it a Partnership Deed, Partnership Agreement or the Memorandum/Articles of Association. These documents need to be drafted in a foolproof manner because changes cannot be made in certain documents without making future declarations on affidavits. LegalDesk.com is a one stop solution for all your incorporation and registration needs. We have a dedicated startup team specialised in handling incorporation and documentation needs for startups. Our startup package is all it takes to have access to all essential legal documents required by startups. We also provide services of Chartered Accountants and Company Secretaries so that you will never need to go to multiple places to get your incorporation done. Visit LegalDesk.com today!