Company Registration Process

1. Idea Stage

   While at the idea point, there is no primary requirement to get a Private Limited Company. Try to verify your idea, do some market analysis and prepare a proper business plan. However, if you anticipate that an early investment is required, or if you plan to split equity with a founding team, a Private Limited Company is helpful in ensuring formalization and asset protection from the business risks associated with the undertaking.

2. Seed Stage

   At the seed level, as your concentration starts to move towards developing a base model or base product, you may contemplate the formation of a Private Limited Company. They try to look for angel investors or equity endorsements from their relatives and fidn their family to be seed money or sponsors. Formation of a Private Limited Company reduces the liability risks wicked out and builds a reputation level which makes attracting potential investors and signing contracts much easier.

3. Growth Stage

   When the startup starts picking and adding more clients and revenue, a Private Limited Company becomes important during the growth phase of the business. This structure makes it easy to go for larger series of funding from venture capitalists and institutional investors. Additionally, it enables the issuance of stock options for the intending employees which would help to recruit and retain employees which plays a very critical role when scaling operations and growing a team.

4. Expansion Stage

   Once the Venture is in its Expansion stage, it means that the business is growing very fast and in fact penetrating new markets and may be looking at global possibilities as well. Thus, An Indian Private Limited Company provides the necessary legal and financial structure to assist in such expansion. It provides certainty because it provides stability and continuity, and that there is change in ownership or management, the business will still be carried on in a proper manner. Moreover, it improves your chances of obtaining more suppliers or partners which will be required to bid for big projects on good terms.

1. Corporate Taxation Rates

Indian Companies: As per the Tax Rates for Assessment Year 2024-25, taxation will be as follows:

• 25 % to companies who have revenue of ₹400 crores or less.
• 30 % to companies who appear to have a revenue figure more than ₹400 crores.
• 22% for the entities which choose to avail this scheme under section 115BAA.
• 15% for new domestic manufacturing companies opting this scheme under section 115BAB.
• Surcharge: 7% for profits of income greater than Rs 1 Million but not exceeding Rs 10 Million; 12% for profits of income exceeding Rs 10 Million.
• The aforementioned taxes are levied as a specific charge for Indian tax purposes and are further segregated as Health and Education Cess: 4% on the total of income tax and surcharge.

Complying with all the post incorporation requirements is pivotal in order to retain the legal status of the Private Limited Company and avoid exposure of penal consequences. Some of the major compliance requirements include:

1. Venture Capital (VC)

   • What It Is: Venture capital firms invest in startup companies and small businesses that are believed to have long-term growth potential.
   • How It Works: Startups with strong growth potential might get backed by VCs but in traditional banks risk that company is deemed too offensive. Companies that are funded get an equity percentage of that company and most likely other strategic decisions are sought from the startup.
   • Example Firms: Sequoia Capital, Accel India, Matrix Partners.

2. Angel Investors

   • What It Is: Individual investors that seek out and invest in early-stage startups typically owned by high net worth individuals.
   • How It Works: Angel investors tend to invest at the seed or the early stage of a start-up. They do not have as much risk aversion like venture capitalists and may also provide advice and contacts.
   • Example Investors: Rajan Anandan, Kunal Shah, and Binny Bansal.

3. Government Schemes

   • What It Is: The Indian government has been actively implementing a variety of schemes to fund the start-ups. A few of them include tax incentives, funding, and developmental assistance.
   • How It Works: Start-Up India, MUDRA Loans and Atal Innovation Mission are programs which already assist in providing capital, tax incentives and lessening restrictions for start-ups. Government schemes are often designed to promote certain industries such as manufacturing, innovation and micro, small and medium enterprises (MSMEs).
   • Example Schemes: Startup India, MUDRA Loans, Stand-Up India.

4. Incubators and Accelerators

   • What It Is: Incubators and accelerators are groups that assist early-stage start-ups by providing them with funding, mentorship, etc.
   • How It Works: Incubators in general assist in the facilitation of office space, training and other resources in order to enable them to commence operations. Accelerators operate in bursts for a limited period and try to aid and expand the operations of the start-up in a short span of time by investing in it, guiding it, and connecting it with other investors.
   • Example Organizations: T-Hub (Hyderabad), NASSCOM 10,000 Startups, and Startup Village.

5. Bank Loans

   • What It Is: This is a form of finance that is offered by a wide range of financial institutions to a number of startups and corporations depending upon their credit scores and business proposals offered.
   • How It Works: Banks provide two categories of loans, namely, secured loans and unsecured loans. Some large loans would require startups to pledge an asset as security, however, microfinance for small businesses is made available through government initiatives such as the MUDRA program, which help such companies obtain loans without collateral.
   • Example Banks: SBI, HDFC, ICICI.

6. Crowdfunding

   • What It Is: The collective wealth from a great number of people is pooled via online platforms for the purpose of raising small amounts of funds in a process called crowdfunding.
   • How It Works: The concept of a start-up is more market driven than the concept of a business, which means that a start-up would continually sell its successes to the masses. Therefore, through crowdfunding platforms, a start-up can showcase its idea directly to the masses, and the individuals who like the concept can fund it in exchange for rewards, products or even a stake in a company. This model works well for a start-up where customer reach is not a problem.
   • Example Platforms: Ketto

7. Private Equity (PE)

   • What It Is: When it comes to funding, Private Equity firms take an approach where they would invest in already existing companies and would often invest in them in majority buyouts, which would result in enhanced company performance and increased market share.
   • How It Works: Private equity firms identify firms who have been around for some time, looking to make an expansion, diversification, or simply increase the operational efficiency. The firm in turn sells equity and hope to earn returns on their investment through exits such as initial public offers (IPO) or a sale of their business.
   • Example Firms: Blackstone, KKR India.

8. Partnership with Corporates

   • What It Is: Big corporations also have a tendency to invest in start up companies or work with them to enhance their innovation, gain new or existing technologies or assist them in boosting their business.
   • How It Works: Corporations can come in with capital, management advice, or customer base in return for a percentage of the equity in the startup, or a joint partnership. This is also common as Spans of Cooperate Partnerships.
   • Example Companies: Reliance, Tata, Mahindra.

9. Convertible Notes

   • What It Is: Convertible notes represent a source of short-term debt which may be take out in the funding round and are meant primarily for equity at a later date.
   • How It Works: At a relatively early stage, entrepreneurs might switch to convertible notes in order to raise funds on: an investor buys in with the stipulation that he will be able to switch the loan for stocks at a better rate or with further benefits in the upcoming round. It is also mostly used in early stage investments.
   • Example: These are common in seed funding rounds especially where the start up stands at a pre-money valuation, which is not known.

10. Family and Friends

    • What It Is: Family members, friends, and acquaintances pitch in their personal money in start up businesses by funding them.
    • How It Works: To cover the first costs of funds, a lot of the time, they depend on their family and friends. This can be looser in terms of compensation and shareholding, but on the other hand, it can endanger family relations when the business fails.

11. Corporate Social Responsibility (CSR) Funding

    • What It Is: There are certain corporations who sponsor certain projects that are in line with their corporate social responsibility (CSR) objectives, more so for businesses that are in the social or environmental space.
    • How It Works: Corporations may issue grants or sponsors businesses that are in line with their CSR programs. These funds may also have stipulations in the form of social impact that shall have to be met.
    • Example: CSR programs of Infosys, Tata Group, Reliance, etc. are focused on areas like education, healthcare and sustainability and are complementary to other areas like developing the startup ecosystem.

12. Debt Financing (Non-Banking Financial Companies - NBFCs)

    • What It Is: Debt financing is made available to new businesses and SMEs through Non-Banking Financial Companies (NBFCs) which are often unable to secure loans from mainstream banks.
    • How It Works: NBFCs advance sums of money and sometimes do not require guarantees and are less stringent than -traditional banks. Interest is usually charged at higher margins and is mostly convenient for those types of businesses that are cash accrued.
    • Example: Bajaj Finserv, L&T Finance, Shriram Transport Finance.