How to register a startup in India

In recent times, India has experienced a remarkable increase in the number of registered startups. While many businesses remain unregistered, formal registration is essential for securing funding and accessing various legal benefits. Additionally, banks are reluctant to provide loans to businesses that are not incorporated. On a positive note, India is on the verge of becoming a hub for startups, with efforts underway to simplify the registration process. The procedure has become much quicker and less paperwork-intensive.

If you’re an aspiring entrepreneur seeking guidance on how to register a startup in India, this guide will be a valuable resource.

Startup eligibility criteria for any business?

To begin the Startup India registration process, your small business must fulfill certain eligibility criteria. Essentially, a startup refers to a small company, typically run by a small team, that addresses existing issues within current systems. Under the Companies Act of 2016, businesses that meet the following conditions are eligible to register as startups and benefit from tax incentives, reduced compliance burdens, and other advantages:

Your company must be registered and not older than 10 years from the registration date.
The business’s annual turnover must not exceed Rs. 100 crores in any of its 10 years of operation, making it eligible for startup status.
Your business should not be a part of an existing company or a spin-off from an established organization.
The company must focus on improving or developing an existing product or service, with a scalable business model that can generate revenue and create job opportunities.
It should be registered as a private limited company, partnership, or limited liability partnership (LLP).
Your company must have received funding from an investment body (such as angel investors, incubators, or equity funds) and possess a recommendation letter from them.
Approval from the Department of Industrial Policy and Promotion (DIPP) is required.

Once these conditions are met, your company qualifies as a startup and is eligible for DPIIT (Department for Promotion of Industry and Internal Trade) recognition.

Legal requirements to register a startup in India

Name Registration

Before moving forward with the registration process, it’s essential to choose and reserve a unique name for your business. A well-chosen name is crucial for building your brand and legally registering your company. To check if your desired name is available and secure it, you can use the RUN (Reserve Unique Name) service provided by the Ministry of Corporate Affairs (MCA). The name must comply with the naming rules set by MCA. Once reserved, the name will be held for 20 days, within which you must complete the other registration steps.

Here’s how to get your company name approved and qualify for startup registration in India:

The name you choose must be unique, and no other registered government or private company should already be using it.
It should not be offensive or suggest any affiliation with the government.
You must provide the names of at least two directors of your company.
You can propose up to two name options, with one acting as a backup, and finalize the name during the registration process.

Obtain Digital Signature Certificate

After successfully registering your business name and receiving approval from the MCA, the next step is to obtain a digital certificate. This certificate serves as official proof of your registered company, containing details such as the business name, address, pin code, contact information, issuance date, and the signature of the authorized certifying authority. A digital certificate is essential for e-filing, enabling you to submit incorporation documents and sign them electronically. It will also be required later for GST registration and tax filings. Therefore, obtaining this certificate is crucial for digital authentication and compliance with the statutory requirements set by the MCA.

To get the digital certificate, you will need to submit proof of identity (with a photo), proof of address, and the digital certificate application form.

Various government agencies provide digital certificates, and you can apply through platforms like E-Mudra, IDRBT, or the National Informatics Centre.

Director Identification Number (DIN)

A Director Identification Number (DIN) is a unique 8-digit number assigned to each director of a registered company. This number is required to access and file incorporation documents. Once approved, the DIN remains valid for a lifetime, and a director can only have one DIN, regardless of how many companies they are involved with.

The forms you need to fill out and submit depend on the specific scenario:

SPICE Form: Used to request a new DIN for assigning new directors to a company that is about to be registered.
DIR-3 Form: Used when a company, already registered, is requesting a DIN for a newly appointed director.
DIR-6 Form: Used to update or change the information related to a director.

These forms must be submitted online via the MCA portal, after digitally signing them. Along with the form, you need to provide the director’s ID proof, address proof, and a recent photograph.

Memorandum of Association (MOA)

The Memorandum of Association (MOA) outlines the fundamental structure of a company, including its constitution, leadership framework, and the roles and responsibilities of its directors. It also specifies the relationship between the company and its stakeholders, along with the processes for internal management. To ensure smooth operations, these details must be carefully defined by the company’s founding members from the outset.

Articles of Association (AOA)

Both the Memorandum of Association (MOA) and the Articles of Association (AOA) are essential constitutional documents for a company. While the MOA sets the fundamental structure, the AOA serves as a subordinate document that outlines the internal rules, rights (such as those of employees and workers), duties, and share capital regulations.

The AOA should also include:

Rules governing the distribution of dividends.
Guidelines on how meetings should be conducted and the procedure for recording meeting minutes.
Qualifications required to become a director, along with their powers, responsibilities, rights, and salary range.
Procedures for documenting accounting records and conducting audits.
The process for winding up the company, should it be necessary.