Amit Jain

Amit JainStart-up is a term which is quite in news from last few months. Let us look into quick analysis of the term.

1. Background:

So, is the term Start-up and Start-up concept new to the world? No, it is as old as history of the mankind itself. The feature was always prominent within the business family. Generally, successful businessman or their children started a new branch to the family business. It was well a start up, just the term to describe was not available.

Also, the feature was common, when a potential entrepreneur would start his business.

So, we may safely say that it is an old wine in a new bottle.

2. Definition : The plain meaning would to be – to start something. In today’s parlance, we would refer it to new business ideas.

The GOI has taken special interest interest and defined the satrup as follows:

An entity will be identified as a startup.

  1. Till up to five years from the date of incorporation.
  2. If its turnover does not exceed 25 crores in the last five financial years.
  3. It is working towards innovation, development, deployment, and commercialisation of new products, processes, or services driven by technology or intellectual property.

Now, point number 3 requires attention. GOI has added as new and interesting angle to it. The term includes innovation, development, deployment and commercialistion of NEW product, process or services driven by technology or Intellectual property.

So if I am already running a business and add a new branch to it or I start a new business say e-commerce, it will not be called start up.

Provided the mere act of developing :

  1. Products or Services or Processes which do not have potential for coomercialization
  2. Undifferentiated Products or Services or Processes.
  3. Products or services or Process with no or limited value for customers or workflow

Will not be covered under this definition.

The GOI has defined entity as :

Entity means a private limited company (as defined in the Companies Act, 2013), or a registered partnership firm (registered under section 59 the Partnership Act, 1932) or a Limited Liability Partnership (under the Limited Liability Partnership Act, 2008).

startup-india3. Recognition of the Start-ups:

The Process of the registration of the start up is through mobile app/portal of Department of the Industrial Policy and Promotion. Startup are also required to submit application with any of the following documents :

  1. A recommendation in a format specified by DIPP from an incubator established in a post-graduate college in the country.
  2. A letter of support from any central or state government funded incubator to promote innovation.
  3. A recommendation in a format specified by DIPP (with regard to innovative nature of business) from any incubator recognised by the Central Government.
  4. A letter of funding of not less than 20 per cent in equity by any incubation or angel fund/PE fund/accelerator or angel network duly registered with Securities and Exchange Board of India that endorses its innovative nature of business.
  5. A letter of funding by the Central or State government as part of any scheme to promote innovation.
  6. A patent filed and published in the Journal by the Indian Patent Office in areas affiliated with the nature of business being promoted.

Until such app or portal is launched, DIPP will make alternative arrangements to recognise a startup. Once the application is uploaded, a recognition number will be issued to the startup in real time. If the number is found to be obtained without uploading the documents, or uploading the forged documents, a fine on the applicant will be levied, which shall be 50 per cent of the paid-up capital of the startup and not less than Rs 25,000.

4. Funding:

The start-ups have the funding problem. However, unlike earlier periods there are loads of investors in the current scenario who are willing to invest; the only thing they look for is innovative idea and the commercial feasibility of the innovation.

5. When to start the star-up:

The answer is whenever you want. However it is always advisable to have a plan and strategy before starting the same. Today youngster as old as 20 years old is starting the entrepreneurship and are quite successful.

6. Taxability of the Profit:

The GOI has realized the importance of startups. It realized that startups is the platform, wherein innovation becomes reality – a job which government was supposed to do is carried out by young blood. So, it has given the benefits in form of taxation.

Initial three years 100% of the profit is exempt but MAT continues to apply. MAT is calculated on book profit after disallowing certain expenses. Book profit is profit as per the profit and loss account.

Since during initial years, it is tough for the start ups to establish themselves and the tax liability would create extra burden on them, it is decided to boost them and help them grow.

7. What if I fail :

We start the initative with hope and hardwork. The failure to successfully launch the startup does not mean it’s the end of world. It only means its time to go through the plan again. Success always bow to hard work, but smart hard work.

Hope you find the article useful and innovate. The author can be reached at ajainco02@gmail.com for any information or clarification as may be required.

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