Startup India Scheme

Features Of the Scheme

 New-entrants are granted a tax-holiday for three years.

 The government has provided a fund of Rs.2500 crore/ year for startups, as well as a
credit guarantee fund of Rs.500 crore rupees./ per year
 Compliance Regime based on Self-Certification, with 9 labour and environment laws .
In case of the labour laws, no inspections will be conducted for a period of 3 years
 Startup India Hub will be their friend, mentor and guide to hold their hand and walk
with them through this journey.
 Rolling-out of Mobile App and Portal- for Registering Startups with relevant agencies
of the Government. Tracking the status of the registration application and anytime
downloading of the registration certificate, Filing for compliances and obtaining
information on various clearances/ approvals/ registrations required, Collaborating with
various Startup ecosystem partners, Applying for various schemes being undertaken
under the Startup India Action Plan
 Legal Support and Fast-tracking Patent Examination at Lower Costs
 Relaxed Norms of Public Procurement for Startups- In order to promote Startups,
Government shall exempt Startups (in the manufacturing sector) from the criteria of
“prior experience/ turnover”
 Faster Exit for Startups. Startups with simple debt structures or those meeting such
criteria as may be specified may be wound up within a period of 90 days from making
of an application for winding up on a fast track basis.
 Tax Exemption on Capital Gains
 Tax Exemption on Investments above Fair Market Value

Eligibility For Startup Registration

 Private Limited Company (under The Companies Act, 2013) or a Registered

Partnership Firm (under The Indian Partnership Act, 1932) or Limited Liability
Partnership (under The Limited Liability Partnership Act, 2008), One Person Company
(OPC)
 It should be a new firm or not older than five years, and the total turnover of the
company should be not exceeding 25 crores.
 The firms should have obtained the approval from the Department of Industrial Policy
and Promotion (DIPP).
 To get approval from DIPP, the firm should be funded by an Incubation fund, Angel
Fund or Private Equity Fund.
 The firm should have obtained a patron guarantee from the Indian patent and Trademark
Office.
 It must have a recommendation letter by an incubation.
 Capital gain is exempted from income tax under the startup India campaign.
 The firm must provide innovative schemes or products.
 Angel fund, Incubation fund, Accelerators, Private Equity Fund, Angel network must
be registered with SEBI ( Securities and Exchange Board of India).
 Stand Up India Scheme

The Stand up India scheme aims at promoting entrepreneurship among women and
scheduled castes and tribes. The scheme is anchored by Department of Financial Services
(DFS), Ministry of Finance, Government of India.
Stand-Up India Scheme facilitates bank loans between Rs 10 lakh and Rs 1 Crore to at
least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman
borrower per bank branch for setting up a greenfield enterprise. This enterprise may be in
manufacturing, services or the trading sector. In case of non-individual enterprises at least 51%
of the shareholding and controlling stake should be held by either an SC/ST or woman
entrepreneur.

Eligibility
 SC/ST and/or woman entrepreneurs, above 18 years of age.
 Loans under the scheme is available for only green field project. Green field signifies, in this
context, the first time venture of the beneficiary in the manufacturing or services or trading
sector.
 In case of non-individual enterprises, 51% of the shareholding and controlling stake should be
held by either SC/ST and/or Women Entrepreneur.
 Borrower should not be in default to any bank/financial institution.

Loan details
 Nature of Loan - Composite loan (inclusive of term loan and working capital) between 10
lakh and upto 100 lakh.
 Purpose of Loan - For setting up a new enterprise in manufacturing, trading or services sector
by SC/ST/Women entrepreneur.
 Size of Loan - Composite loan of 75% of the project cost inclusive of term loan and working
capital. The stipulation of the loan being expected to cover 75% of the project cost would not
apply if the borrower’s contribution along with convergence support from any other schemes
exceeds 25% of the project cost.
 Interest Rate - The rate of interest would be lowest applicable rate of the bank for that category
(rating category) not to exceed (base rate (MCLR) + 3%+ tenor premium).
 Security - Besides primary security, the loan may be secured by collateral security or guarantee
of Credit Guarantee Fund Scheme for Stand-Up India Loans (CGFSIL) as decided by the
banks.
 Repayment - The loan is repayable in 7 years with a maximum moratorium period of 18
months.
 Working Capital - For drawal of Working capital upto 10 lakh, the same may be sanctioned
by way of overdraft. Rupay debit card to be issued for convenience of the borrower. Working
capital limit above 10 lakh to be sanctioned by way of Cash Credit limit.
 Margin Money - The Scheme envisages 25% margin money which can be provided in
convergence with eligible Central / State schemes. While such schemes can be drawn upon for
availing admissible subsidies or for meeting margin money requirements, in all cases, the
borrower shall be required to bring in minimum of 10% of the project cost as own contribution.
Types of Company registration in india,
Proprietorship
A sole proprietorship is a type of unregistered business entity that is owned, managed and
controlled by one person. Sole proprietorship's are one of the most common forms of business
in India, used by most micro and small businesses operating in the unorganised sectors.
Proprietorships are very easy to start and have very minimal regulatory compliance
requirement for started and operating. However, after the startup phase, proprietorship's do not
offer the promoter a host of benefits such as limited liability proprietorship, corporate status,
separate legal entity, independent existence, transferability, perpetual existence - which are
desirable features for any business. Therefore, proprietorship registration is suited only for
unorganised, small businesses that will remain small and/or have a limited period of existence.

Advantages of Proprietorship
Easy to Establish
A sole proprietorship business does not have any specific registration requirements and the
proprietor’s legal identity is used by the business. Hence, a proprietorship can be started
without any registration. Using the PAN and Aadhaar of the promoter, Udyog Aadhaar
registration and Trademark Registration can be obtained optionally to create and protect the
identity of the business.
Easier to Operate
As a single person is at the helm of affairs, it is easier to operate as the particular person will
be the sole decision maker and he need not consider a plethora of opinions. There is no concept
of a board meeting or approval from other persons in a proprietorship firm.
Sole Beneficiary of Profits
No other business, other than that of a sole proprietorship and one person company, entitles the
owner as the sole beneficiary of profits. In all other types of an entity like a partnership, LLP
or company, a minimum of atleast two persons are involved.
Easy Compliance & Taxation
Since a proprietorship firm is not registered with any Government authority like the Ministry
of Corporate Affairs, the compliance requirements are minimal. Further, the proprietor would
only have to file income tax returns if the firm has taxable income of more than Rs.2.5 lakhs
per annum
Privacy
Since sole proprietorships are an unregistered form of entity, there is no database maintained
by the Government with a list of all proprietorships. Hence, proprietorship firms are more
private when compared to a company or LLP whose details are published on the MCA website.
Disadvantages of Proprietorship
Unlimited Liability
This is one of the most disturbing aspects of a sole proprietorship firm. On the occurrence of a
loss, the proprietor must meet the liabilities at any cost, which implies that if the need occurs,
his/her personal assets may have to be used for discharging the liabilities.

Difficulty in Obtaining Funds

A sole proprietor cannot indulge in sale of business interest or shares, which deprives the entity
from the receipt of any type of equity funding.
Higher Tax Incidence
Proprietorship firms are taxed similarly to an individual. Hence, income tax rate for a
proprietorship firm is based on slabs. Though the income tax rate for income of upto Rs.10
lakhs is lower when compared to a company, proprietorship firms cannot enjoy various benefits
enjoyed by an LLP or Company. Further, for taxable income of more than Rs.10 lakhs, the
income tax rate for a proprietorship firm is higher than the income tax rate of a company.
Hence, in the long-run, it would be more prudent to register a company to reduce income tax
liability.

Partnership
A Partnership Firm is a popular form of business constitution for businesses that are owned,
managed and controlled by an Association of People for profit. Partnership firms are relatively
easy to start are is prevalent amongst small and medium sized businesses in the unorganized
sectors. With the introduction of Limited Liability Partnerships in India, Partnership Firms are
fast losing their prevalence due to the added advantages offered by a Limited Liability
Partnership.
There are two types of Partnership firms, registered and un-registered Partnership firm.
It is not compulsory to register a Partnership firm; however, it is advisable to register a
Partnership firm due to the added advantages

Advantages of Partnership Firm

Easy to Start
Partnership firms are one of the easiest to start. The only requirement for starting a partnership
firm in most cases is a partnership deed. Hence, a partnership can be started on the same day.
On the other hand, an LLP registration would take about 5 to 10 working days, as the digital
signatures, DIN, Name Approval and Incorporation must be obtained from the MCA.

Decision Making
Decision making is the crux of any organization. Decision making in a partnership firm could
be faster as there is no concept of the passing of resolutions. The partners in a partnership firm
enjoy a wide range of powers and in most cases can undertake any transaction on behalf of the
partnership firm without the consent of other partners.

Raising of Funds

When compared to a proprietorship firm, a partnership firm can easily raise funds. Multiple
partners make for more feasible contribution among the partners. Moreover, banks also view a
partnership more favourably while sanctioning credit facilities instead of a proprietorship firm.

Sense of Ownership
Every partner owns and manages the activities of their firm. Their tasks might be varied in
nature but people in a partnership firm are united for a common cause. Ownership creates a
higher sense of accountability, which paves the way for a diligent workforce.

Disadvantages of Partnership Firm

Unlimited Liability
Every partner is liable personally for the losses of a partnership firm. The liability created by a
partner in the partnership firm will also make each of the partner personally liable. To limit the
liability of partners in a partnership firm, the LLP structure was created by the Government.

Number of Members
The maximum number of members a partnership firm can have is restricted to 20. In case of
an LLP, there is no restriction on the maximum number of partners.

Lack of a Central Figure

Leadership can both uplift and derail a firm. Combined ownership takes away the possibility
of leadership and lack of leadership leads to directionless operations. On the other hand, in a
partnership firm, certain partners can be given the position of designated partner with more
powers and responsibilities.

Trust of the General Public

A partnership firm is easy to start and does require any registration. A partnership firm can also
operates without much of a structure or regulations. Hence, it often leads to distrust amongst
the general public.

Abrupt Dissolution

A partnership firm would be dissolved due to the death or insolvency of a partner. Such an
abrupt dissolution will hamper a business. On the other hand, the death of a partner will not
automatically dissolve an LLP. Hence, continuity of business is maintained in a LLP.
One Person Company (OPC)
The concept of One Person Company in India was introduced through the Companies Act,
2013 to support entrepreneurs who on their own are capable of starting a venture by allowing
them to create a single person economic entity. One of the biggest advantages of a One Person
Company (OPC) is that there can be only one member in a OPC, while a minimum of two
members are required for incorporating and maintaining a Private Limited Company or a
Limited Liability Partnership (LLP). Similar to a Company, a One Person Company is a
separate legal entity from its promoter, offering limited liability protection to its sole
shareholder, while having continuity of business and being easy to incorporate.
Though a One Person Company allows a lone Entrepreneur to operate a corporate entity with
limited liability protection, a OPC does have a few limitations. For instance, every One Person
Company (OPC) must nominate a nominee Director in the MOA and AOA of the company -
who will become the owner of the OPC in case the sole Director is disabled. Also, a One Person
Company must be converted into a Private Limited Company if it crosses an annual turnover
of Rs.2 crores and must file audited financial statements with the Ministry of Corporate Affairs
at the end of each Financial Year like all types of Companies. Therefore, it is important for the
Entrepreneur to carefully consider the features of a One Person Company prior to
incorporation.

Advantages of OPC Firm

We can take benefit of Start up India for OPC Also

Separate Legal Entity

One Person Company holds a separate legal entity where an entrepreneur is capable of
implementing any plan of action regarding a company without awarding any owner, or C level
person. One Person company is specifically known for an individual business.

Easy Funding
One Person Company has been accounted on the category of a private company. OPC can
easily raise funds through angel investors, venture capital and financial institutes. Graduating
to a private limited company; OPC can raise funds and continue business.

More Opportunities, Limited Liability

One Person Company holds a lot of efficient opportunities, limited liability since the liability
of the OPC is limited to the extent of the value of the share you hold, the individual could take
more risk in business without affecting or suffering the loss of personal assets. This leads to an
encouragement to initiate more start-ups and see skilled innovative minds.

Minimum Requirements

 Minimum 1 Shareholder
 Minimum 1 Director
 The director and shareholder can be the same person.
 Minimum 1 Nominee
 Letters ‘OPC’ to be suffixed with the name of OPCs to distinguish it from other
companies
Benefits of being a Small Scale Industries (SSI)
OPC can experience various benefits as provided to Small Scale Industries such as easy funding
from bank minus to deposit transaction and any security to a certain limit, a lower rate of
interest on loans, and can also manifold benefits under Foreign Trade policy and others.

Single Owner
Single ownership is beneficial than having one or more owner. It is highly beneficial in making
a quick decision, managing the business without following any suggestions and methodologies,
and controlling. It is an individual mind business. The sense of belonging inspires to grow the
business further.

Credit Rating
One Person Company with a bad credit score can even apply for the loan. The credit score of
OPC will not be material if the score of OPC is as per the norms.

Benefits under Income Tax Law

Unlike proprietorship, any remuneration paid to the director is highly applicable as a deduction
as per income tax.

Receive Interest on any late Payment

OPC avails all the benefits under Enterprises Development Act, 2006. The newly start-up OPC
is micro, small, or medium; hence they are covered under this act. As per the Act, if the buyer
or receiver receives any late payment (receives payment after a specified period), then he is
entitled to receive interest which is three times the bank rate.

Increased Trust and Prestige

Any business entity that runs in the form of the company always enjoys an increased trust and
prestige.

Advantages of OPC Firm

Compliance Burden
As OPC has more focus on various functional and core areas, OPC have to face a little burden
as compared to private limited companies.

Annual Return Filing

One Person Company’s annual return is compulsorily signed by a director. OPC is generally
not allowed to receive mandatory requirement of company secretary signature.

High Tax Rate

In the case of One Person Company, you are directly charged 30% income tax. The high tax
rate is a big disadvantage of one Person Company.
OPC included in Name
One Person Company is compulsorily mentioned after the company name in brackets. When
you initiate the business with a few shareholders, the administration is not dedicated and you
end offering impression to the customers.

Not Suitable for Turnover

Experts mostly suggest going for a private limited company than one Person Company when
the turnover is a bit high and effective. Setting up OPC, conversion of one Person Company
into a private limited company is not believed to be a good decision.

Limited Liability Partnership (LLP)

Limited Liability Partnership (LLP) was introduced in India by way of the Limited
Liability Partnership Act, 2008. The basic premise behind the introduction of Limited Liability
Partnership (LLP) is to provide a form of business entity that is simple to maintain while
providing limited liability to the owners. The main advantage of a Limited Liability
Partnership over a traditional partnership firm is that in a LLP, one partner is not responsible
or liable for another partner's misconduct or negligence. A LLP also provides limited liability
protection for the owners from the debts of the LLP. Therefore, all partners in a LLP enjoy a
form of limited liability protection for each individual's protection within the partnership,
similar to that of the shareholders of a private limited company. However, unlike private
limited company shareholder, the partners of a LLP have the right to manage the business
directly.
LLP is one of the easiest form of business to incorporate and manage in India. With an
easy incorporation process and simple compliance formalities, LLP is preferred by
Professionals, Micro and Small businesses that are family owned or closely-held. Since, LLPs
are not capable of issuing equity shares, LLP should be used for any business that has plans for
raising equity funds during its lifecycle.

Private Limited Company

Private Limited Company is the most prevalent and popular type of corporate legal entity
in India. Private limited company registration is governed by the Ministry of Corporate Affairs,
Companies Act, 2013 and the Companies Incorporation Rules, 2014. To register a private
limited company, a minimum of two shareholders and two directors are required. A natural
person can be both a director and shareholder, while a corporate legal entity can only be a
shareholder. Further, foreign nationals, foreign corporate entities or NRIs are allowed to be
Directors and/or Shareholders of a Company with Foreign Direct Investment, making it the
preferred choice of entity for foreign promoters.
Unique features of a private limited company like limited liability protection to
shareholders, ability to raise equity funds, separate legal entity status and perpetual existence
make it the most recommended type of business entity for millions of small and medium sized
businesses that are family owned or professionally managed.