Introduction:
Starting a business is an exciting endeavor, but it’s important to ensure that all legal obligations are met to protect your company and ensure its success. Registering your startup is a critical step in establishing your business in India. The cost of registering a startup in India can vary depending on several factors, such as the type of entity you wish to establish, the state where you plan to register your business, and the fees charged by professionals assisting with the registration process. The expenses associated with registering a startup may include government fees, stamp duty fees, notary fees, and other miscellaneous expenses. For instance, the fees for registering a private limited company in Delhi can range from INR 6,000 to INR 12,000 based on authorized capital. Additionally, if you plan to hire professionals like lawyers or chartered accountants for assistance during the registration process, their professional fees would be added to the overall cost. It’s worth noting that registering your startup has many benefits beyond compliance with legal requirements. It can help build credibility with potential investors and customers while providing protection against legal issues that may arise in the future. Therefore, it’s essential to understand the costs associated with company incorporation, the complexity of the task, and professional charges before embarking on this journey.
Types of Companies in India:
India offers a range of company registration options, including sole proprietorship, partnership firm, limited liability partnership (LLP), private limited company, and public limited company as per the companies act 2013. Each type of company has its own set of advantages and disadvantages, making it essential to choose the most suitable option for your business needs. Sole proprietorship is the simplest type and ideal for small businesses while partnership firms are useful for businesses with multiple partners. LLPs offer limited liability protection to their partners and are suitable for businesses that require flexibility in management. Private limited companies, as per the companies act 2013, have more legal formalities but offer better credibility and access to funding options. Public limited companies are ideal for large-scale businesses looking to raise capital from the general public. It’s important to consider your business requirements and consult with a legal professional before finalizing your company registration choice. Additionally, it is worth noting that the Company or Entity should have been formed initially by the promoters and not by splitting up or reconstructing an existing business. A Private Limited Company is a type of company that has an employee population between 2 and 200 members. As the name says, thus the private limited company cannot be raised with the aid of public funds; the company can never publicly solidities its shares & there is no mandatory capital paid up required to set up a Limited Liability Company.
Process of Company Registration in India
Forming a company in India may seem like a daunting task, but it can be broken down into several manageable steps. These include obtaining a Digital Signature Certificate (DSC), Director Identification Number (DIN), getting name approval, drafting the Memorandum of Association (MOA) and Articles of Association (AOA), and filing for incorporation. The required documents for business registration include identity and address proof, proof of ownership or tenancy of the registered office, and MOA and AOA. The first step towards setting up a company in India is to obtain a Digital Signature Certificate, which can be done by submitting an application online. This certificate is necessary for signing electronic documents during the registration process. After obtaining the DSC, you need to apply for the Director Identification Number (DIN) for all proposed directors of the company, such as providing documents like PAN card, Aadhaar card, bank statement, phone and electricity bill. Next, you have to get your proposed company name approved by submitting an application with at least three potential names to the Ministry of Corporate Affairs. Once your desired name is approved, you need to draft the Memorandum of Association (MOA) and Articles of Association (AOA) which outline the objectives and rules governing your business. Finally, you need to file an application for incorporation with the Registrar of Companies along with all necessary documents mentioned above. Upon successful verification of documents and compliance with regulations, the Registrar will issue a Certificate of Incorporation which marks the official formation of your company. Obtaining DPIIT recognition through the startup India portal can provide additional benefits to the business owner, such as intellectual property services and access to resources for the promotion of industry. Additionally, it is important to reach out to an appropriate Facilitator for up-to-date information about the process and required documents for a patent or trademark application.
Cost of Registering a Business in India
The expenses associated with registering a business in India vary based on factors including the company type, authorized capital, and legal and government fees. Below is an estimated cost breakdown for various startup types:
Type of Company | Government Fees | Legal Fees | Other Expenses | Approximate Total Cost
Sole Proprietorship | INR 50 – INR 1,000 | INR 1,500 – INR 3,500 | PAN/TAN Application, Stationery, etc. | INR 2,000 – INR 5,000
Partnership Firm | INR 2,000 – INR 3,500 | INR 2,500 – INR 4,500 | Stamp Duty, Notary, etc. | INR 5,000 – INR 10,000
Limited Liability Partnership (LLP) | INR 8,000 – INR 10,000 | INR 2,000 – INR 3,000 | Digital Signature, LLP Agreement, etc. | INR 10,000 – INR 15,000
Private Limited Company | INR 10,000 – INR 15,000 | INR 5,000 – INR 10,000 | MOA, AOA, DIN, Name Approval, etc. | INR 15,000 – INR 25,000
Public Limited Company | INR 15,000 – INR 20,000 | INR 10,000 – INR 15,000 | SEBI Fees, Stamp Duty, etc. | INR 25,000 – INR 35,000
It is important to note that the costs provided are just approximate estimates and may vary depending on several factors such as the company’s state of registration, authorized capital, as well as legal and government charges. It is highly recommended to seek advice from a professional before registering your startup to obtain an accurate cost estimate. This will help ensure that you have a thorough understanding of the expenses involved in starting your business and can plan accordingly. Professional advice can also assist in identifying potential cost-saving opportunities and guiding you through the registration process smoothly. Additionally, seeking professional help can help you avoid any legal or financial issues that may arise down the line.
Government Fees for Startup Registration in India
The government fees for startup registration in India vary based on the type of company being registered. Here are some of the fees involved in the process:
- Digital Signature Certificate (DSC) Fees: INR 1,500 to INR 3,000
- Director Identification Number (DIN) Fees: INR 500
- Name Reservation Fees: INR 1,000
- Incorporation Fees: INR 2,000 to INR 10,000 (depending on the authorized capital)
- Goods and Services Tax (GST) Registration Fees: INR 5,000 (for turnover up to INR 20 lakhs)
- Professional Tax Registration Fees: INR 2,500
It’s important to note that the above fees are subject to change and can vary based on the state where the company is registered. Additionally, the fees may vary depending on the company’s authorized capital, turnover, and other factors.
Legal Fees for Registering a Startup in India
The legal fees involved in registering a startup in India can vary widely. Here are some of the factors that can affect the legal fees:
- Type of company: Different types of companies require different legal documentation, which can impact the legal fees.
- Nature of business: Some businesses require more complex legal documentation, which can increase the legal fees.
- Size of the company: Larger companies may require more legal documentation and may need to pay higher legal fees.
- Choice of legal professional: The fees charged by legal professionals can vary based on their experience and reputation.
Online Company Registration in India
Online company registration in India has become increasingly popular due to its ease and convenience. Here are some of the benefits of registering a company online:
- Quick and easy process: Online registration can be completed in a matter of days, compared to weeks or months for offline registration.
- Lower costs: Online registration is often cheaper than offline registration, as there are fewer overheads involved.
- Less paperwork: Online registration requires less paperwork, making the process simpler and more efficient.
To register a company online, the applicant must first create a Digital Signature Certificate (DSC) and Director Identification Number (DIN). The next step is to fill out the application for company registration and submit it online along with the required documents. Once the application is approved, the authorities will issue a registration or incorporation certificate, confirming the successful registration of the company.
Conclusion
Registering a startup in Mumbai, India is an important step towards establishing a business in the country. While the costs involved in the startup India registration process may seem daunting, it’s important to understand that the fees vary based on several factors, such as the type of company, nature of business, and size of the company. The affordable registration fees encourage young entrepreneurs to establish their upcoming startups very smoothly. By understanding the costs involved and the steps required, entrepreneurs can make informed decisions and successfully register their startups in India. Online registration can be a great option for those looking for a simpler and more cost-effective way to register their companies. The government of India has also launched the “Startup India Initiative” to ensure that the growing number of Startups in the country have the right resources and support to grow. Under the Startup India program, eligible companies can get recognised as Startups by DPIIT to get tax benefits, easier compliance, IPR fast-tracking, special benefits & more. The government of India has made it easier for new startups to start their operations within 90 days of registration under the startup India registration process upon payment of the startup India registration fee. To register, entrepreneurs need to fill in the application form with their company particulars, name, and registration details, as well as the particulars of the director/partner/accredited representative. The decided startup India registration fees for business models are nominal at a fixed rate of Rs. 7,499 (Including all professional charges). The government of India has issued 10000 crore rupees as capital for start-up businesses. The process is a smooth and hassle-free experience consisting of 15 to 20 days of processing time.
FAQ
What is the Startup India Scheme? What is the eligibility criteria for it?
The Startup India Scheme is an initiative launched by the government of India to promote and support startups in the country. It aims to provide various benefits to eligible startups, including tax benefits, easier compliance processes, fast-tracking of intellectual property rights, access to funding, and more.
To be eligible for the Startup India Scheme, a company must meet certain criteria:
- Age: The startup should be incorporated as a private limited company or registered as a partnership firm or limited liability partnership (LLP). It should not be more than 10 years old from the date of incorporation.
- Turnover: The startup should have an annual turnover of less than Rs. 100 crore for any of the financial years since its incorporation.
- Innovation: The startup should work towards innovation, development, deployment, or commercialization of new products, processes, or services driven by technology or intellectual property.
- Certification: The startup should obtain a recommendation (innovation-based) from an incubator established in a post-graduate college in India or from a recognized incubation centre.
- Registration: The startup should be registered under the Startup India Scheme and should submit the required documents to avail of the benefits.
Can we take advantage of tax exemptions in any way?
Yes, under the Startup India Scheme, eligible startups can certainly take advantage of tax exemptions. Startups that are recognized and registered under the scheme can enjoy various tax benefits. These include:
- Income Tax Exemption: Startups are eligible for income tax exemption for 3 consecutive years out of their first 10 years since incorporation, provided they meet the criteria mentioned earlier.
- Capital Gains Tax Exemption: Startups can avail of capital gains tax exemption if they invest the capital gains in the specified funds within a specified time frame.
- Tax Exemption on Investments above Fair Market Value : Startups can receive tax exemption on investments that are made at a premium above the fair market value. However, certain conditions and criteria need to be met for this exemption.
- Tax Holiday: Startups can also enjoy a tax holiday period of 3 years from the year in which they start making profits. This means that they will not be liable to pay income tax on their profits during this period, allowing them to reinvest and grow their business.
- Tax Deductions for Investments: Investors who fund eligible startups can avail of tax deductions for their investments under Section 56(2)( viib) of the Income Tax Act. This encourages more investors to support startups and provides an incentive for them to contribute towards the growth of the startup ecosystem in India.
➤ It is important to note that while these tax exemptions are beneficial for startups, there are certain conditions and criteria that must be met. Startups need to comply with the requirements set by the government and submit all the necessary documents to avail of these benefits.
➤ By taking advantage of these tax exemptions, startups can reduce their financial burden in the initial years and allocate more resources towards innovation, expansion, and hiring talented individuals. This not only fost ers the growth of startups but also contributes to the overall development of the startup ecosystem in India.
➤ The capital gains tax exemption is a significant advantage for startups. By investing their capital gains in specified funds within the stipulated time frame, startups can avoid paying taxes on those gains. This provides them with additional funds to reinvest in their business and fuel its growth.
➤ Furthermore, startups can also benefit from tax exemptions on investments made above the fair market value. This encourages investors to inject more capital into startups, as they can enjoy tax exemptions on these investments. However, it is essential for startups to meet certain valuation criteria and comply with the regulations set by the government in order to qualify for these exemptions.
➤ Apart from tax benefits, the cost of startup registration in Mumai, India is also a crucial aspect to consider. The government has made efforts to simplify the registration process and reduce the associated costs, making it more accessible for aspiring entrepreneurs.
➤ The registration process typically involves obtaining a certificate of incorporation, which establishes the legal existence of the startup as a separate entity. The cost for this varies based on factors such as authorized capital and stamp duty rates applicable in different states.
➤ In addition to the certificate of incorporation, startups may also need