Startups and its Registration: formula sheet

Key formulas

Features of a startup

Innovation + Scalability + High growth potential + Funding need + Uncertainty

Use this as a memory list when asked for features or meaning.

Life cycle stages

Ideation → Validation → Early traction → Scaling → Maturity/Exit

Stage names differ across books. Keep the sequence and explain each in a line.

Entity comparison test

Liability + Legal identity + Compliance + Funding + Control + Transferability

Compare every entity on these six heads.

Separate legal entity

Proprietorship, Partnership: No | LLP, OPC, Company: Yes

A separate legal person can own property and sue or be sued in its own name.

Liability of owners

Proprietorship, Partnership: unlimited | LLP: limited to agreed contribution | OPC, Company limited by shares: limited to unpaid share value

Fraud or wrongful acts can still create personal liability in LLP and companies.

Three pillars of the Action Plan

Simplification and Handholding + Funding Support and Incentives + Industry-Academia Partnership and Incubation

Write all three in this order. Examiners expect the pillar names first, then the measures under each.

Fund of Funds route

Government → SIDBI (manages the fund) → SEBI-registered AIFs → Startups

Money reaches startups only through AIFs, not directly from the Fund of Funds.

Gateway rule

DPIIT recognition → eligibility for startup benefits

Most incentives depend on recognition and the conditions set in the notification.

Launch

Startup India Action Plan: announced January 2016

Launched by the Government of India; DPIIT is the nodal department.

Eligible entity types

Private limited company OR registered partnership firm OR LLP

Sole proprietorships, public companies and OPCs are outside the listed types.

Age limit (general)

Age ≤ 10 years from date of incorporation or registration

Deep-tech startups have a longer period under later notifications. Check the current notification.

Turnover limit (general)

Turnover ≤ ₹100 crore in every financial year since incorporation

Crossing the limit in even one year disqualifies the entity.

Purpose test

Innovation, development or improvement of products, processes or services OR scalable model with high potential for jobs or wealth creation

Only one limb needs to be satisfied.

Exclusion

Not formed by splitting up or reconstruction of an existing business

This applies to all entity types.

Recognition authority

DPIIT (Ministry of Commerce and Industry) through the Startup India portal

The certificate is separate from tax-exemption approval.

Stage-to-source match

Idea stage → bootstrapping, grants, incubators, SISFS; Early stage → angel investors, crowdfunding; Growth stage → venture capital, venture debt, bank finance

A guide for matching, not a rigid rule. Sources often overlap.

Incubator vs accelerator

Incubator = early idea, flexible and longer support; Accelerator = existing product, fixed short cohort, rapid growth

Use this contrast in any 'distinguish' question.

Equity vs debt funding

Equity: investor gets ownership, no repayment obligation; Debt: no ownership, repayment with interest is compulsory

Always state the effect on founder control.

SISFS route

Government → selected incubators → eligible DPIIT-recognised startups

Startups apply to the incubator, not directly to the government. Confirm current eligibility from official guidelines.

PAN

PAN = identity for income tax; issued by the Income Tax Department

Needed for tax filing, opening bank accounts and most registrations. A 10-character alphanumeric number.

TAN

TAN = needed by a person who deducts or collects tax at source

Not for every taxpayer. Quote TAN in TDS and TCS returns and challans.

GST registration trigger

Register if aggregate turnover > prescribed threshold OR if compulsory registration applies

Thresholds differ for goods and services and for special category States. Quote the limit only as given in your study material.

Udyam Registration

Online registration on the Udyam portal; based on self-declaration, with PAN and GSTIN linked

Classification depends on investment in plant and machinery or equipment, and turnover, as prescribed under the MSMED Act, 2006.

IEC

IEC issued by DGFT; one IEC per PAN

A PAN-based 10-character code. It is valid for life, but the holder must confirm or update the details on the DGFT portal every year in April-June. An IEC that is not updated can be deactivated.

Trademark

Application to the Registrar of Trade Marks under the Trade Marks Act, 1999

Registration gives exclusive right to use the mark for the goods or services covered.

Fast track time limit

Fast track CIRP to be completed within 90 days from the insolvency commencement date

Section 56. This is the '90 days' that students search for.

Extension of fast track period

Extension: once only, up to 45 days, on resolution professional's application, with committee of creditors approval by 75% of voting share

Section 56. So the outer limit is 90 + 45 = 135 days.

Who can use fast track

Corporate debtors of a notified class: small companies, startups (other than those with a partnership firm or LLP as promoter or member) and unlisted companies with total assets of ₹1 crore or less

Section 55, read with Rule 4 of the Insolvency (Fast Track) Rules. Section 55 also covers debtors with assets and income below a notified level and notified classes of creditors or debt. A creditor or the corporate debtor may apply. Sections 57 and 58 cover how the process is initiated and conducted.

Failure of fast track

No resolution plan approved within time → NCLT orders liquidation under Section 33(2) of the Code (Chapter III), as Section 56(4) requires

Section 56(4) gives the liquidation consequence, and the order is passed under Section 33(2). The company then moves to liquidation.

Voluntary liquidation conditions

Company has no debt, or can pay its debts in full from the proceeds of its assets + declaration of solvency by directors + special resolution of members (ordinary resolution where the event stated in the Articles has occurred, Section 59(3)(b)) + approval of creditors representing two-thirds in value where the company has debts (Section 59(3)(c))

Section 59 of the Code. Applies when the company is not insolvent and can pay its debts in full.

Striking off by Registrar

Application under Section 248 of the Companies Act, 2013 with special resolution or consent of 75% of members by paid-up share capital

For companies not carrying on business or operations. Check the conditions before choosing this route.

Quick revision

• A startup is judged on conditions such as age of the entity, turnover limit and innovation focus, as in the current DPIIT notification.
• Check the latest DPIIT notification for exact figures before the exam.
• Recognition by DPIIT is the gateway to startup benefits.
• An entity formed by splitting up or reconstructing an existing business is not eligible for recognition.
• Entity choice depends on liability, compliance, funding needs and ease of formation.
• Startup India has an action plan built around simplification, funding support and industry-academia partnership.
• Tax benefits apply only when the stated conditions are met, so always cite the conditions.
• Funding sources include founders, angel investors, venture capital, government schemes and incubators.
• Incubators give mentoring, workspace and networking to early-stage startups.
• Registrations vary by business: entity registration, PAN, GST, and sector licences as applicable.
• Easy exit for startups is a faster route than normal winding up.
• In answers, state the provision, apply it, and conclude.

Common mistakes

• Calling every small business a startup. Fix: Stress innovation, scalability and growth potential in your definition. A new local shop with no innovation is not a startup in the concept sense.
• Saying an LLP partner has no liability at all. Fix: Say liability is limited to the agreed contribution, but a partner remains liable for their own wrongful acts and for fraud.
• Naming the pillars wrongly, such as adding 'tax relief' as a separate fourth pillar. Fix: Keep three pillars. Tax benefits sit inside the funding support and incentives pillar.
• Saying the Fund of Funds invests directly in startups. Fix: Write that the money goes through SIDBI to SEBI-registered AIFs, which invest in startups.
• Treating any new business as a startup. Fix: Always apply the DPIIT definition. State the four conditions before you conclude.
• Including sole proprietorships or public companies as eligible entities. Fix: Remember the three forms only: private limited company, registered partnership firm, LLP.
• Treating incubators and accelerators as the same thing. Fix: Remember stage and duration: incubators suit very early ideas with longer flexible support; accelerators run short cohort programmes for startups with a product.
• Saying SISFS gives funds directly to every startup. Fix: Write that funds flow through selected incubators to eligible startups, and that the startup should be DPIIT-recognised.
• Saying GST registration is always compulsory for every startup. Fix: Write that registration is needed above the threshold or in compulsory cases, then check the facts for either.
• Treating Udyam registration as mandatory for all small businesses. Fix: Say it is generally a voluntary registration that opens credit and scheme benefits, unless another law or scheme requires it.

Exam tips

• For 'distinguish between LLP and company', draw a point-wise comparison on liability, identity, compliance, funding and ownership transfer.
• Start advice questions with the final recommendation, then give reasons. Examiners then see your conclusion quickly.
• Link the life cycle to funding: seed money early, venture capital at scaling, exit options later.
• Quote the Companies Act, 2013 or the LLP Act, 2008 only for provisions you know well. A wrong section costs more than a missing one.
• Keep each point to a line or two. Short, clear points score better than long paragraphs.
• Learn the three pillar names word for word. Marks are often given for correct headings.
• In a short note, give each pillar three or four measures. Do not write long paragraphs.
• For funding questions, always draw the Government to SIDBI to AIF to startup chain.