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“Start up” Defined under “Start up India” initiation

The Government of India has defined a “startup” under the ‘Startup India’ initiative as-

a) Up to five years from the date of its incorporation/registration,

b) If its turnover for any of the financial years has not exceeded Rupees 25 crore, and

c) It is working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

Any entity formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘startup’.

ELIGIBILITY CERTIFICATE

In order to obtain tax benefits a “startup” shall be required to obtain a certificate of an eligible business from the Inter-Ministerial Board of Certification consisting of:

a) Joint Secretary, Department of Industrial Policy and Promotion,

b) Representative of Department of Science and Technology, and

c) Representative of Department of Biotechnology.

NEW PRODUCT/SERVICE

An entity is considered to be working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property if it aims to develop and commercialize:

a. A new product or service or process, or

b. A significantly improved existing product or service or process, that will create or add value for customers or workflow.

Following would not be covered under this definition:

a. products or services or processes which do not have the potential for commercialization or

b. undifferentiated products or services or processes, or

c. products or services or processes with no or limited incremental value for customers or workflow.

APPLICATION

The process of recognition as a ‘startup’ shall be through a mobile app/portal of the Department of Industrial Policy and Promotion. Startups will be required to submit a simple application with any of the following documents:

a) a recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator established in a postgraduate college in India; or

b) a letter of support by any incubator which is funded (in relation to the project) from the Government of India or any State Government as part of any specified scheme to promote innovation; or

c) a recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator recognized by Government of India; or

d) a letter of funding of not less than 20 per cent in equity by any Incubation Fund/Angel Fund/Private Equity Fund/Accelerator/Angel Network duly registered with Securities and Exchange Board of India that endorses innovative nature of the business. Department of Industrial Policy and Promotion may include any such fund in a negative list for such reasons as it may deem fit; or

e) a letter of funding by the Government of India or any State Government as part of any specified scheme to promote innovation; or

f) a patent filed and published in the Journal by the Indian Patent Office in areas affiliated with the nature of the business being promoted.

Government Notification in Official Gazette

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Entrepreneurship and Women

Entrepreneurship is the act of setting up a business or businesses, taking on financial risks in the hope of profit. Approximately 1/3rd of the entrepreneurs in the world are women entrepreneurs. Some decide to take up entrepreneurship as a choice while others inherit it from their family.

Before you decide to take this road, there are a number of factors which you need to consider.

Business Aspects

When you start a business it is with one of the two end results:

  • Either you are able to solve a problem which had no solution till now
  • Or you have a better way to solve an existing problem (with their existing solutions)

If you know exactly what your new service or product will do, it will give a lot of clarity on how to target your end customers and grow your business.

If you are not sure of your business idea or how to go about implementing your business plan, it would be a good idea to become a part of some of the Women Entrepreneur Associations around you. Some popular ones include TiE Stree Shakti (TSS)Sheroes and Federation of Indian Women Entrepreneurs (FIWE) among others.

Finances – All the Number Crunching

Before you start any venture, you need to get the Finances right.
How much money do I need for my business?

This would consist of the amount required to start the business which includes entity set up costs, regulatory registration costs, cost of Plant, Machinery & Equipment among others. The second part, generally not factored in by many entrepreneurs, would be the running costs or the Working Capital requirements of the business.

Once you have figured out how much money you need, the next question is from where you are going to get the money. The money can come from your past savings, from family & friends or you can decide to approach the formal banking channels to extend you a loan. If your business idea/product is scalable and has a mass application you can approach the formal equity channels like Angel Investors or Venture Capital funds.

You may want to check your eligibility under some of the schemes of the government for Women Entrepreneurs like Trade-related entrepreneurship assistance and development (TREAD) scheme for womenSupport to Training and Employment Programme for Women (STEP) and Swayam Siddha. There are a number of schemes launched by the State Governments as well to support the Women Entrepreneurs.

Regulatory overhang

Each business attracts a number of regulators depending on the nature of the business, the location of the business, the entity structure in which the business is being run etc. Apart from filing your Income Tax Return against the profits made, some of the common laws applicable to most businesses are:

  • Service Tax, if you provide services (to be replaced with GST from July 1, 2017)
  • Value Added Tax (VAT) or Central Sales Tax (CST), if you sell goods (to be replaced with GST from July 1, 2017)
  • Deducting tax at source (TDS) on payments to service providers
  • Profession Tax (PTRC) levied on all professions, trades, callings and employment
  • Profession Tax (PTEC), if you have employees
  • Shop Act Registration, if you have moved your business out of your home
  • FSSAI registration, if you are dealing with food products

It would augur well for you to have a partner/advisor to help you navigate through the various non-core parameters so that you can focus on the business.

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8 factors to consider before you start a business

While there are a million factors to consider before you start a business, below are the really important ones to help you get rolling.

What am I trying to achieve through the Business?

Your business venture may either provide a better solution vis-a-vis existing solutions faced by customers or it may provide a solution that never existed before.

If your business falls in the second category, you can expect to charge a premium for your service/products. But at the same time, you need to put in efforts to create a market for your goods/services.

How much money do I need?

This would consist of Initial Setup costs – the amount required to start the business which includes entity set up costs, regulatory registration costs, cost of Plant, Machinery & Equipment etc and the Running Costs or the Working Capital requirements of the business.

Sources of Funding

The initial sources of funding are generally either your savings or contributions from friends and family. It’s when you have a proven idea and business plan in place that you approach third-party equity investors like the High Networth Individuals or Angels or Venture Funds. In the initial stages of the business, its best to stay clear of any kind of Debt funding.

Keep a backup corpus

When you start a new business, expect to be cash flow negative in the beginning. Apart from having to put money into the business, you would need money for your day to day survival. A corpus equivalent to six months of your expenses is the minimum you must keep aside when you decide to start your business.

What is the structure of my Business?

Proprietorship? Partnership Firm? LLP? OPC? Pvt Ltd Company?

There is no right or wrong answer here. If you are starting a business to try out some ideas, it would be good to keep it simple in the beginning and stick to a proprietorship or a partnership firm if you are doing a business jointly.

Once you have clarity on your business and expect to raise funds from equity investors that is when you explore using the more formal Company Incorporation route.

Be Complaint from Day One

A number of regulatory compliances falling under the domain of Central government, State government and local Municipal bodies apply to each business.

Given the extensive use of technology by regulators today, non-compliance is easily detected and the cost of being non-compliant is forbiddingly high these days with penalties being charged on a daily basis with no recourse to their waiver.

Be prepared to be patient

Results are not easy to come by and one needs the patience to taste success in the Entrepreneurial journey. There is a local saying which says that one must persist for 1,000 days before giving up on a venture. That’s the average time it takes for a business to establish itself. Depending on which business you are in, you may taste success earlier.

Do you need a Plan B?

Although there are varied opinions on this, it is best not have or think of a Plan B when you start out. That means you are all-in in your current venture and have no alternatives but to give your best.

You never lose from a failed entrepreneurial venture, if you lose the money you learn the lessons!

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