Gaurav Srivastava


Raising capital is generally easier for a corporation, since a corporation can issue shares of stock. This may make it easier for your business to grow and develop. If you’re in the market for a bank loan, that’s another reason to incorporate. In most cases, banks would rather lend money to corporations than to unincorporated business ventures. Corporations generally have access to more alternative sources of capital through which they can pay off their debts.


Incorporating your business is one of the best ways you can protect your personal assets. A corporation can own property, carry on business, incur liabilities, and sue or be sued.

As a separate legal entity, a corporation is responsible for its own debts. That means creditors of a corporation generally can seek payment only from the assets of the corporation — and not from the personal assets of shareholders, directors and officers. In effect, that means business owners can conduct business without risking their homes, cars, savings, or other personal property. Owners of a sole proprietorship or partnership, on the other hand, face unlimited liability for both business and personal assets.


Corporations are the most enduring legal business structure. A corporation can continue indefinitely, regardless of what happens to its individual directors, officers, managers, or shareholders. This means that by incorporating your business, you may be able to avoid the legal entanglements that could result with other business structures.


The benefits of incorporating go beyond finances. Suppliers, customers and business associates often perceive corporations as being more stable than unincorporated businesses. In a sense, having “Inc.” or “Corp.” after your business name conveys permanence, credibility, and stability, and communicates your commitment to the ongoing success of your business venture.


A corporation can offer anonymity to its owners. If you want to open a small business and don’t want your involvement to be public knowledge, your best choice may be to incorporate.


Many countries grant tax concessions as a part to encourage business for the economy. Being an owner of existing company, if you choose to start up a new firm, you can easily elude double taxation by incorporating your business.


Startup initially demands you to work alone. Agreed! But what’s the use of doing business if you cannot hire people under you? Hiring of employees is easy and useful as soon as you are registered. Once you are open to customers your company loads with the number of people willing to work. Want to get them under your brand name? Get registered


As a separate legal entity, a corporation is taxed on its profits. Those taxable profits can be reduced by qualified business expenses, including operating expenses, marketing and advertising expenses, travel and entertainment expenses, and other costs of making a profit. An incorporated business may also deduct employee salaries, health benefits, and contributions to qualified pensions and retirement plans for employees. However, the taxation of corporations is complicated; different corporate structures have different tax advantages and disadvantages.

While incorporation comes with important benefits, it may not be the best form for all businesses. Startup scratch can help you to assess the tax and other implications of incorporating your business.


1: Introduction of compliance regime based on self-certification

Start-ups would be allowed to self-certify compliance with labour and environment laws. As far as labour laws are concerned, no inspection would be conducted for a period of three years. In case of environment laws, start-ups under ‘white’ category would be able to self-certify compliance.

2: Fast track mechanisms of start-up patent applications

The government would allow start-ups to realise the value of their intellectual property rights (IPR) at the earliest possible, patent applications of the start-ups will be fast tracked for examination and disposal

3: Faster exits for start-ups

Provisions for fast-tracking closure of businesses have been included in ‘The insolvency and Bankruptcy Bill, 2015’. Start-ups, who have simple debt structures, can be allowed to wind up within a period of 90 days after filing an application

4: Tax exemption to start-ups for 3 years

Start-ups set up after April 1, 2016, shall be exempted from income-tax for a period of three years

5: Tax exemption on investments above fair market value

Exemption would be available to venture capital funds to invest in start-ups above fair market value (FMV). It would also include investments made by incubators above FMV

6: Tax exemption on capital gains

Tax on long-term capital gains in unlisted entities would be cut from present rate up to 20 percent

7: Funding Support

The government shall also provide support in funding the startups in the following manner.

  • Credit guarantee fund for start-ups
  • A credit guarantee mechanism through National Credit Guarantee Trust Company and SIDBI to be rolled out with a budgetary corpus of Rs 500 crore per year for the next four years
  • Funding support through fund of funds with a corpus of Rs 10,000 crore
  • The government to set up a fund with an initial corpus of Rs 2500 crore and a total corpus of Rs 10000 crore over a period of four years
  • Institution of innovation awards: 3 per state/UT and 3 national level
  • Providing support to State Innovation councils for awareness creation and organising state-level workshops/conferences
  • Launch of Grand Innovation Challenge Awards for finding low-cost solution to intractable problems

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