How to Register a Startup in India: Step-by-Step Guide for First-Time Founders

It's great to start a business, until you begin the paperwork.

You have an idea. You've talked to friends.You've talked to friends. Perhaps you have even developed your first product or found your first customer!

However, there's a question –

What are the steps to registering a startup in India?

Here's where many first-time founders get stumped.

Would it be advisable to form a Private Limited Company? Is an LLP better? Are you required to register a business for the Goods and Services Tax (GST)? What is DPIIT Recognition? What documents do you need? How much it costs?

Let's learn what happens as a first time entrepreneur is trying to turn his idea into a business, Rohan's story.

Rohan has a business idea.

It had been a long time since Rohan had been working on a simple idea.

He wanted to develop a website that can help local small businesses establish their online presence in order to gain greater access to customers.

What it started out as was only an idea.

He made a very simple site.

There were some interest from few shop owners.

One of these asked:

“Is there an invoice that I can get for your work?”

Only a moment's thought was enough for Rohan to realize something.

His concept had become a project.

He was working on his business.

Then Rohan began his quest:

How to register a startup in India?

That's when he realised there is an important difference between starting a business, and being recognised as a startup under the Startup India initiative.

What is Registration for Startups?

However, before embarking on the process, Rohan had to get one thing clear in his head.

The term "startup registration" doesn't represent one and only one form that automatically transforms a business into a startup.

Typically, there are two stages to the process.

Stage 1: Register your entity of business.

Depending on the situation, you could set up your business as one of the three:

• Private Limited Company
• Limited Liability Partnership (LLP)
• Partnership Firm
• Other suitable legal framework should be there.

The incorporation process of a company is done by the Ministry of Corporate Affairs (MCA). The MCA's SPICe+ integrates a few incorporation related services such as DIN and PAN/TAN applications. 

Stage 2: Apply for DPIIT Startup Recognition

After the eligible entity has been incorporated or registered it can apply for DPIIT Startup Recognition under Startup India initiative.

DPIIT - Department for Promotion of Industry and Internal Trade.

This recognition can provide eligible startups access to various benefits, including certain tax-related benefits, easier compliance, intellectual-property support and public-procurement-related benefits.

Therefore, Rohan knew that being a company registrar and getting the startup recognised was connected but different things.

Step 1 involves determining what you wish to build.

Rohan wrote the following three things before visiting any government website:

What are the activities I am involved in for my business?

Who will it serve?

What is the income from it going to be?

This is an easy thing to do, but it's important.

If you make an application for startup recognition, you might need to provide details of how your startup is contributing to an innovation, development or improvement of product, process or service, or how your startup holds the prospect of employment or wealth creation.

So, don't simply consider registration to be a form-filling exercise.

The first thing you must do is to know your business.

Step 2: Choose the Right Business Structure

You can only pick the most suitable company formation if you have some insight into the various business structures.

So, this was another major decision for Rohan.

He found that there are various ways in which a business can be set up legally.

Private Limited Company

A Private Limited Company is a popular company type for startups as they are planning to seek investment, look for shareholders or plan to expand their business.

It gives them a legal framework for ownership and management and a separate legal identity.

LLP

A Limited Liability Partnership is suitable for situations where the founders wish to have a partnership structure with limited liability.

Some professional services and businesses may be okay with it as the first step to external investment.

Partnership Firm

However, for some small businesses, a traditional partnership might be appropriate depending on their needs and situation.

Before choosing a structure, founders need to make a careful comparison of liability, compliance, taxation and ownership and future funding needs, however.

Whereas, a first-time founder, what should he or she choose?

It depends and there's no one right or wrong.

A Private Limited Company is a suitable structure for a technology startup that plans to raise investments, have employees in the future and have multiple shareholders.

If you are a smaller founder-led business, it may be more appropriate to use an LLP or other type of arrangement.

Before choosing the final option, it is recommended to consult with a qualified professional.

Step 3: Select and book the name of your business

Rohan was already given a name of his startup.

However, selecting a name is not just about having a name that sounds good.

You should consider:

• Determining whether or not the name is available
• If it clashes with the name of another business.If it clashes with an already available business name
• If there is a similar trademark, it needs to be determined to see if it is identical to the one being applied for.
• Determine whether the desired domain name is available or not.

I'm looking at the name of the game, and how it fits into my long-term business plans? Is the name of the game appropriate for my future plans?

In the case of companies, MCA's SPICe+ system comprises of a name-reservation process via SPICe+ Part A. 

Rohan didn't get too attached to just one name he shortlisted three names.

It proved to be a good idea.

Step 4: Set up Your Documentation

It was time when Rohan feared.

Documents.

This can vary depending on the entity structure and specific situation, but the founders are often in need of information and documents about the intended business and its founders/directors or business partners.

These may include:

1. Identity proof
2. Address proof
3. PAN details
4. Photographs, where applicable
5. Registered office address proof required.
6. Written Evidence in relation to the registered office
7. Digital Signature Certificate (DSC) (as per requirement)
8. MOA/AOA or LLP related documents in the case of a structure (Constitutional document)

This is the stage, by no means to be rushed.

Name, addresses or supporting documents can cause delays if they are not correct.

Step 5: Incorporate the Company through MCA

Rohan decided to incorporate a Private Limited Company.

Then, he went to the MCA portal.

The MCA incorporates the companies with the help of SPICe+.

SPICe+ Part A covers name reservation and Part B incorporates and provides a few integrated services. The MCA says that it can include services like company registration, DIN allotment and PAN/TAN application in the SpiCe+.

Rohan needed to:

1. Set up / Log in his MCA account.
2. Complete the SPICe+ incorporation process.
3. Give details of the company and directors.
4. Turn in the necessary paperwork.
5. Fill in forms that are linked, if applicable.
6. Attach digital signatures as needed.
7. Pay applicable government fees and stamp duty.
8. Be patient for the application to be processed.

Upon successful incorporation of the company Rohan got incorporation information of his company.

Now his idea had a legal structure of a business behind it.

Step 6 – Obtain PAN, TAN and other necessary requirements of registration.

There are still duties to be fulfilled after incorporation.

The company's tax related activities are important and PAN/TAN is important with SPICe+ incorporation process. 

Depending on the type of business, premises, staff, turnover and activities you may need additional registrations or licences including:

• GST registration
• Shops and Establishments registration
• Professional tax register (if applicable)
• EPFO/ESIC related registrations (if applicable)
• Sector-specific licences
• Import Export Code (IEC) – if applicable

Not all startups require all of the registrations.

Here's why you should not simply copy the checklist of another company.

The needs will vary according to the nature of your business and the location.

Step 7: Set up a business bank account

Rohan was now a true businessman.

But he did not want to bring his personal funds into his business.

So he opened a current account for the business.

Separating business and personal finances will make your accounting and tracking of expenses, as well as tax compliance and financial management much easier.

Additionally, Rohan developed a simple solution to monitor:

• Sales
• Expenses
• Invoices
• Payments
• Employee costs
• Business subscriptions
• Taxes
• Bank transactions

It wasn't exciting.

It was very important, however.

Step 8: Apply for DPIIT Startup Recognition

This was what Rohan had originally believed to be the process for company registration.

He set up his eligible business entity, and then he studied DPIIT Startup Recognition.

As per the latest definition by Startup India, it may be defined as a Private Limited Company, LLP, Partnership Firm and Cooperative Society (as the case may be) provided the requirements are met. The general turnover benchmark is less than ₹200 crore in any financial year and in case of DeepTech startups, it is ₹300 crore. In general, the recognition period is limited to 10 years from the incorporation of the company, or up to 20 years for recognised DeepTech startups, depending on the rules that apply. 

The start-up should also be seeking to innovate or improve in product, service or process or be capable of providing jobs or creating wealth.

Step 9: Apply Through the National Single Window System

Rohan found another update.

According to Startup India website, the applications for DPIIT Startup Recognition are invited through National Single Window System (NSWS).

The simple way to work it out is:

1. If you don't have an NSWS login, please register for one.
2. Log in to the website dashboard.
3. Select “Add Approvals.”
4. Go to Central Approvals.
5. Look for Registration as a Startup.
6. Add the application to your Dashboard.
7. Fill in the required information.
8. Upload supporting documents.
9. Submit the application.

At present the Startup India portal is referring applicants to NSWS for DPIIT recognition. 

Step 10: Explain What Makes Your Startup Different

This is a particularly significant part.

Rohan, however, cannot just write:

“It's a website, and we would like to make a few bucks.”

He had to make his business very clear to him.

For example:

• What is the problem that the startup solves?
• Who has this issue?
• What is the solution for the start-up?
• So what's the difference of the solution?
• How does technology or innovation help?
• Can the business grow?
• Does it generate jobs or economic value?

The Startup India indicates that the required documents that the applicant must submit are incorporation/registration certificate and the explanation on how the startup contributes towards the innovation, development, or improvement of products, processes or services, or scalability in terms of employment generation or wealth creation. 

For Rohan, it was about sharing the importance of his platform to small businesses to establish a digital identity and engage with customers.

Step 11: Receive DPIIT Recognition

Once Rohan had filed the application, he waited for the processing of the application.

Upon approval, he can be able to use his DPIIT Startup Recognition certificate.

The Startup India portal also offers a feature to check/retrieve recognition certificates. 

There was this other thing that Rohan learned.

It is important to understand that only if a startup is recognized by DPIIT, is every tax benefit automatically extended to it.

Eligibility conditions and requirements for applying to different benefits may vary.

For instance, Startup India indicates that under Section 80-IAC of the income-tax law, certain allowances may be availed by eligible recognised startups separately, on fulfillment of the conditions applicable to the same. 

What are the benefits that a DPIIT recognised start-up can avail?

Recognition for Rohan wasn't just a certificate to add to a folder.

There are various facilities and supports that can be availed by the recognised startups, if they are eligible.

These can include:

1. Intellectual Property Support

Startup India supports the patent and IP aspect, and has laid down mechanisms to increase the ease of access for eligible startups.

2. Easier Compliance

Some self-certification/ compliance benefits under applicable labour/ environmental legislation may be obtained for eligible startups. 

3. Tax-Related Benefits

Some start-ups are eligible for tax exemptions, although this isn't something that automatically happens when a company is registered.

For instance, there are different eligibility requirements for Section 80-IAC. 

4. Public Procurement Benefits

Under certain relaxed requirements of public procurement, subject to the rules and tender conditions, DPIIT recognised startups can be provided with access.

5. Startup Ecosystem Opportunities

Startup India also facilitates linking of the Startup Founders to initiatives, networks, funding related programmes and other ecosystem resources. 

What is the cost to Register Startup in India?

This is among the initial questions that nearly all new founders ask.

The answer is:

There is no one set cost per startup.

This cost may vary by:

• Business structure
• State
• Stamp duty
• Government filing fees
• Professional fees
• DSC requirements
• Number of founders/directors
• Additional registrations
• Licences required for the business

Also, an important difference between the cost of company incorporation and the recognition by DPIIT.

The Startup India portal states that the Ministry of Commerce and Industry does not charge a fee for the DPIIT Certificate of Recognition or Certificate of Eligibility. 

However, that does not mean forming and operating a company has zero cost.

Founders should budget separately for incorporation, professional assistance where used, statutory compliance and other registrations applicable to their business.

The Following Mistakes First-time Founders Must Avoid:

There were some pitfalls along the way in Rohan's journey.

Here are some to steer clear of other founders.

The first mistake is to select a building that is not considered for the future.

Beware of companies that say they are "easy" to use.

Consider funding and ownership, partners and liability, future expansion.

Mistake 2: Assuming that company registration is equivalent to DPIIT recognition.

It doesn't.

entrepreneurs should note that there are two aspects to consider, company incorporation and recognition as a startup by DPIIT.

Mistake 3: Providing incomplete details in an application

Your business description should clearly describe what your startup is and why your startup would be innovative, improved or scalable.

Mistake 4: Ignoring intellectual property!

If you have an innovative product, such as a brand, invention, design, software or other intellectual property, your protection options should be understood early on in the life of your startup.

Mistake 5: Using personal and business funds together.

When your business begins to make money, keep proper records and keep business and personal transactions separate.

Mistake 6: Not recognizing that not all startups qualify for tax benefits right away.

The conditions of the benefits differ.

Please note the requirements of eligibility are always subject to change and should be looked at before any financial decisions are made.

Final Note for New Founders

Eligibility requirements, forms and fees may vary from year to year based on government regulations.

Always check the latest requirements on the official MCA, Startup India and other relevant government portals before applying for an application.

If you are making tax, legal or accounting decisions, it may be best to seek the advice of a professional who can evaluate your business needs and structure.

The first-time entrepreneur shouldn't be trying to finish up paperwork as fast as they can.

It should aim towards establishing the proper groundwork for the business you desire to mature.

Sources & Disclaimer

Sources: This article has been prepared using information available from official government sources, including Startup India/DPIIT and the Ministry of Corporate Affairs (MCA). Readers should always verify the latest eligibility criteria, registration process, fees, forms and applicable rules before taking any action.
Official Sources:

• Startup India / DPIIT: https://www.startupindia.gov.in
• DPIIT Startup Recognition: https://www.startupindia.gov.in/content/sih/en/startupgov/startup_recognition_page.html 
• Ministry of Corporate Affairs (MCA): https://www.mca.gov.in/ 
• National Single Window System (NSWS): https://www.nsws.gov.in/ 

Disclaimer: The information provided in this article is for general educational and informational purposes only. It should not be considered legal, tax, financial or professional advice. Government rules, eligibility requirements, fees and procedures may change from time to time. Digital Startup India makes reasonable efforts to keep its content informative and up to date but does not guarantee that the information is complete, current or applicable to every business. Readers should verify information with the relevant official government authority or consult a qualified professional before making business, legal or financial decisions.