Startup

Registrations & Licenses required for Setting up Start-up

Before you start a legally organised unit or establishment, there are certain important registrations and licenses that you must obtain. Functioning without these is illegal and can invoke penal actions. Thus, in this article, we bring to you some of the most crucial registrations and licenses that are required for setting up start-up.

What do you mean by a start up?

A start-up refers to a company that is in the early stages of its business. It refers to a young company that has just commenced its operations. Start-ups are generally small and are funded initially and managed by a host of founders or a single person. These companies offer products and/or services that are presently not offered anywhere else in the market or that the start-up feels is being offered in a bad manner.

As per Forbes, Start-ups are rooted in innovation and address the deficiencies of the existing products or creating wholly new categories of goods and services, thus disrupting typical ways of thinking and doing business for entire industries. This is the reason why many start-ups are known within their respective industries as “disruptors.”

Various Registrations required for setting up Start-up

Let’s start from basic registrations for a start up:

• Business registration-

Firstly you should register your company. There are different structures of company from which you can choose the one which suits you. In India, the following types of business structures can be seen:

1. Private Company;
2. Public Company;
3. One Person Company (OPC);
4. Limited Liability Partnership (LLP);
5. Partnership Firm;
6. Sole Proprietorship;
7. Non Governmental Organizations/ Trust;
8. Nidhi Company.

From the following, one can opt for company structures as per the size of the business, the invested capital, the number of members and the risks associated with the company. The features, benefits and disadvantages of each corporate structure differ from each other, and the entrepreneur must consult a professional to find out which structure is best for him.

• Enrolment in start-ups in India-

If a company comes under the definition of incorporation according to the DIPP notice, it can apply to Start-up India. A company which is registered as a Private limited company under the Companies Act, 2013^[1], or a partnership firm under Section 59 of Partnerships Act 1932, or a limited liability company (LLP) under Limited Liability Partnership Act 2008, can obtain Start-up India registration if it satisfies the following criteria-

1. Not more than 10 years have passed since the business registration date.
2. The company’s annual revenue for the fiscal year since its registration does not exceed 100 crore rupees.
3. Company should work to innovate, develop or improve products or processes/services, or a scalable business model with a high potential to create jobs or wealth.

• MSME Registration-

MSME registrations should be obtained by the micro, small and medium-sized enterprises in India. It will help them to benefit from various subsidies and benefits associated with loans, taxes and other programs. The MSME Law has many benefits for micro, small and medium enterprises (MSMEs) for their machinery and raw materials, purchased at subsidized prices.

• GST Registration-

All manufacturers, sellers, service providers, exporters, etc., must apply for the GST registration in India. All types of business formations should be GST registered if you fulfil the eligibility criteria. For detailed information on GST Registration, you are advised to go through a plethora of articles available on our website.

• Udyog Aadhaar Registration-

Udyog Aadhaar Registration refers to the government initiative to support small businesses. The registration process came from Udyog Aadhaar as a substitute for MSME registration.

Various Licenses required for setting up Start-up

Apart from the registrations stated above, there are many types of start-ups like shops and restaurants, grocery stores, import-export businesses, financial institutions, etc. that are required to get certain permits/licenses, such as:

• Purchase and Manufacture License for Start-up Registration-

Every state has an independent Shop and Establishment Act, which lays down rules that every business and establishment operating in that state are required to follow. The law also regulates business licenses/business permits.

• Import Export Code Registration-

All businesses that look forward to import or export goods/services from India should have a valid IEC. The IEC must be mentioned in all relevant customs documents. Bankers also require a valid IEC registration in case of overseas payments. To obtain an import-export code, it is necessary to have a PAN and bank account.

Conclusion

If you are willing to set up a start-up, then you should be aware about the various registrations and licenses required for setting up Start-up. To avoid facing any legal complications and consequences, you may seek the advice of a professional in this regard who shall guide you through the legal and regulatory requirements.

Read our article:Legal compliances for an Indian Start-Up