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A Start-up is emerging, and new company founded by one or more than one business in order to develop and create a product or service in demand to bring and present in the market. Such a Start-up in the initial stages have capital and resources of the owner’s personal assets and funding from the relatives and friends. The major task and challenge of a start-up is to generate and collect funding and capital to expand and set up a name in the market for the products and services provided. Any business that is at the top of the market today has been in past a start-up with more or less capital.
A vast majority of people in the country which includes newly graduates, businessman and experienced marketman knows that a starting a successful business venture is a very difficult and challenging task. A Start-up requires a lot of hard work and knowledge of the market demands and supply in accordance with the legal aspect of every market operation. Survival in dynamic market is very tough if the revenue and profits coming in are little and not enough. Start-up is defined in the Companies Act, 2013 and recognised as a private company incorporated under the companies act. As start-ups are becoming admired by a lot of people in India.
The government of India in accordance with the increasing participation for self-owned business introduced and promoted the start-up India Scheme which not only help the public at large but the country’s economy as well.
Start-up in India
- Incorporation under Companies Act, 2013: A business or start-up should the may be formed for a lawful purpose and operation by a two or more members for a private company or by a single person as one-person company. Such a company must abide or follows the companies Act. The name of such companies is to be subscribed and enrolled into a memorandum and must comply with all registration requirement. The memorandum should state all necessary particulars. It should state the name of the company with private limited in the last. Such name provided for the company should be unique and not similar or identical to any of the existing companies enrolled or registered under the Act. The company should also provide for the article which describes for the regulations for its management and prescribed procedure. The business when incorporated as private limited company or a limited liability or a partnership firm. The business should collect all necessary compliances required for incorporation.
- Registration of the business under the start-up India Scheme: The incorporated company then have to registered to the website of start-up India and fill up necessary forms required for the process to complete. Document submission: The website requires some for completion of the application as a start-up being a letter of recommendation from established incubator in an post-graduate, a letter of support, a letter of recommendation from an incubator recognised by govt. of India, a letter of funding of not less than 20% in equity, by any incubation fund/ Private Equity Fund/ Angel Fund/ Angel Network duly registered with SEBI, a letter of funding by government of India or any state govt, a patient filed and published in the journal of Indian patent office and registration certificate of incorporation and descriptions of your business brief.
- Eligibility: A young business has to be eligible in order to participate in the Start-up India policy being
- It should be incorporated as defined the Companies Act, 2013
- In any of the previous year of operation of the company the turnover should be less than 100 crores rupees.
- Any entity from its date of incorporation shall be considered a start-up 10 years.
- Innovation and improvement of the existing products, services and processes should be focused upon by the start-ups to create a potential employment and wealth.
Recognition: A start-up recognition is prescribed under G.S.R Notification 127(E)
- Certification for Tax Benefit under Section 80 IAC: The Inter- Ministerial Board Setup by Development of Industrial Policy and Promotion validates start-ups for granting tax benefits. The Department of Industrial Policy and Promotion provides benefits to a private limited company or a limited liability partnership, incorporated on or after 1sy April of 2016 but is hold be before 1st April 2021. A start-up then after certification then can avail tax holiday for 3 consecutive financial years out of it 10 years of incorporation in the beginning.
- Tax Exemption under Section 56: An Angel Tax can be procured by the start-up after getting recognition. The Income Tax Act under its section 56 provides for Tax Exemption for a start-up with the requirement of if it has been recognised by DPIIT under para (iii)(a) or as per any earlier notification on the subject and if the paid-up capital and share premium does not exceed twenty-five crore rupees.
- Financial resources/ Seed capital: The Initial Funding required for the creation of a business or new product or service is seed capital. Obtaining seed capital is far most import financial decision in a new business. The financing options for business differs from each other on the basis of the products and services provided. Though some general option is available to every start-up business are
- Personal saving: The basic and most easy option for seed capital for new business is the personal savings in order to initiate the operation in the company and get a move on.
- Loans: There are various loan options available in the market for every small and young or expanding business to provide seed money to start the process of income. Loans are also divided into diff types- being secured loans and unsecured loans. Secured loans require asset of the company as security on the payments if there is default in the payment the amount can be settled. Alternatively, unsecured loans do not require the assets of as leverage for default in payments but may require a personal guarantee based on eligibility from your credit score.
- Venture capital: “A great Pitch, goes a long way”, Some firms know as venture capital firms provide capital to support the new business in a time of need. The new business has to satisfy such venture into their innovative ideas and methods for the investment in the company. If, the venture firms are satisfied they provide capital in return of shareholding in the debtor company.
- Angel Investors: These are the individuals who have high-net worth and are always in the search of opportunities to invest in business with risk and a promise of high returns. They also provide valuable insight towards the market and its environment dynamics.
- Corporate Investments: These are the large corporation looking to invest their funds into business with the view of satisfied returns on the investment. Such corporation can invest much more than an angel investor.
- Govt. Schemes: The Govt also promotes and provides seed capital to new business. The Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA) is one such method for sourcing capital foe new Businesses in India. It is public sector financial institution which provides loans at low rate to small and micro sized businesses in India. If you comply with the eligibility criteria, Government grants as a funding option could be one of the best. You just need to make yourself aware of the various Government initiatives.
Other than there is some Non-conventional method for seed capital and finance resourcing such as peer to peer, Crowdfunding, Purchase Order Financing.
- Conversion into Initial Public Offering (IPO): An Initial public Offer is the process of gaining capital by converting the private corporation into a public company. IPO allows the company to invite public investments through the issuance of debt, or equity (shares). For a Start-up to covert from a private corporation to public company requires utmost a stable and secured source of inflow of capital before the conversion and the start-up shows high and stable revenues because after the conversion the rules and regulation and margins for revenues and capital becomes strict and Tough. A huge process is performed step by step for the start-up to turn in for an IPO.
Indians state and start-up policies
- Andaman & Nicobar Innovation Policy 2018-2023
- Andhra Pradesh Innovation & Start-up Policy 2014-2020
- Assam Start-up Policy 2017-2022
- Bihar Start-up Policy 2017-2022
- Chhattisgarh Innovation and Entrepreneurship Development Policy 2019
- Goa Start-up Policy 2017-2025
- Electronics & IT/ITeS Start-up Policy (2016-21) (Gujarat)
- Haryana Entrepreneur & Start-up Policy-2017
- Chief Minister’s Start-up/Innovation/Projects/New Industries Scheme 2016 (Himachal)
- Jammu & Kashmir Start-up Policy 2018-2028
- Jharkhand Start-up Policy 2016-2021
- Karnataka Start-up Policy 2015-2020
- Kerala Start-up Policy 2017
- MP Incubation and Start-up Policy 2016-2021
- Maharashtra Start-up Policy 2018-2023
- Manipur Start-up Policy 2016-2021
- Nagaland Start-up Policy 2019-2023
- Odisha Start-up Policy 2016-2020
- Aspiring Puducherry – Innovations & Start-up Policy 2019-2024
- Industrial & Business Development Policy 2017-2022 (Punjab)
- Rajasthan Start-up Policy 2015-2020
- Chief Ministers Start-up Scheme (CMSS) (Sikkim)
- Tamil Nadu Start-up & Innovation Policy 2018 – 2023
- Telangana Innovation Policy 2017-2022
- Uttar Pradesh Information Technology and Start-up Policy 2016
- Uttarakhand State Start-up Policy-2018
- West Bengal Start-up Policy 2016-2021
In 2018 the Best Performer was Gujarat, and the Top Performers were Karnataka, Kerala, Odisha, and Rajasthan. The Leaders in the ranking were Andhra Pradesh, Bihar, Chhattisgarh, Madhya Pradesh, and Telangana. The Aspiring Leaders being the states of Haryana, Himachal Pradesh, Jharkhand, Uttar Pradesh, and West Bengal. The Emerging States for better participation being Assam, Delhi, Goa, Jammu & Kashmir, Maharashtra, Punjab, Tamil Nadu, and Uttarakhand and at last the states with a Beginners participation were Chandigarh, Manipur, Mizoram, Nagaland, Puducherry, Sikkim, and Tripura.
In India, the Govt. is encouraging and promoting to own a business and move forward by starting-up businesses. The start-up India schemes provides a strong base and sets the landmark for future development in the market for small and young business. The scheme protects and provides the new business with low-cost compliance management and opportunity to make to the high market with consistency and stability.