“Small is beautiful.” Who knew that this saying could have relevance for your small company or startup too?
Being a small company or a start-up has its own advantages.
Even the Government of India recognises and offers several benefits to entrepreneurs and start-ups.
The concept of a Small Company and One Person Company (OPC) was introduced in the Companies Act, 2013. The small companies are given benefits with respect to costs and compliance.
In 2016, the Government of India introduced the Startup India Initiative where Startups working towards innovation and development of new products and services are recognised. The Startups recognised under Start-up India Initiative are given several benefits.
Then in 2017, the Trade Mark Rules were revised and the definition of Small enterprise and Start-up was introduced in the rules along with revision in the trademark application fees. However, the application fees for individuals, small enterprise and start-up is less than the other category of applicants.
But, before we look at the benefits, let’s understand the concepts of Small Company, Small Enterprise and Start-up.
What is a Small Company?
As per the Companies Act, 2013, a “Small Company” is a private company, which has a paid up capital of less than Rs. 50 lakhs as well as turnover of less than Rs. 2 crores.
What is a Small Enterprise?
As per the Trade Mark Rules, 2017, a small enterprise means an industrial undertaking or a business concern or an establishment which is into manufacture or production of goods and whose investment in plant and machinery is more than Rs. 5 crores but less than Rs. 10 crores.
If the industrial undertaking or a business concern or an establishment is into providing or rendering services, it will be considered as a small enterprise if its investment in equipment is more than Rs. 2 crores but does not exceed Rs. 5 crores.
So, the definition of a small enterprise is based on its investment in plant and machinery or equipment.
To know which business concerns or establishment qualify for the definition of small enterprise, you need to refer to first schedule to the Industries (Development and Regulation) Act, 1951.
What is a Startup?
As per Trade Mark Rules, “Startup” means a company (including OPC) or a registered partnership firm or an LLP registered in India and recognised as a Startup under Startup India Initiative.
However, the Rules have also included foreign entity under the definition of Start-up.
What is a start-up under the Startup India Initiative?
An entity is considered as a Startup if it is:
- Working towards innovation, development, deployment or; commercialization of new products, processes or services, or
- If it is a scalable business model with high potential of employment generation or wealth creation;
- Has not completed 7 years from the date of incorporation / registration. For biotechnology sector, the period is 10 years.
- Turnover in any financial year is not exceed Rs. 25 crores.
- Has not been formed by splitting up or reconstruction of business already in existence.
“Turnover”, as defined in section 2 (91) of the Companies Act, 2013, means the aggregate value of the realisation of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year.
THE BENEFITS OF BEING A STARTUP
The benefit for a small company or a small enterprise is reduced setup costs and other exemptions. Let’s look at them.
In case of Companies Act, 2013
The biggest advantage for a Small Company and an OPC is that the cost of incorporation and fees for filing various forms is less as compared to other private or public companies. Also there are fewer compliance for OPC and Small Companies.
Click here to read the advantages of being a small company.
In case of Trade Marks
The fee for registration of Trade Mark for small enterprise and start-ups is half the fees for other entities.
The following are the details of fees for a Trade Mark application.
If your company is a Small Company or an OPC, check whether it fulfills the definition of small enterprise to get the benefit.
In case of Start-up India Initiative
The benefits are as follows:
- Income Tax benefits,upto 3 year.
- Simpler Winding up Process – Within 90 days under the Insolvency and Bankruptcy Code.
- Tax exemptions to investors on capital gains
- Lower fees for filing trademarks and patent applications and fast-track approvals
One point to note here is that not all start-ups are small companies and not all small companies are start-ups due to the limits for turnover and paid up capital.
Here’s the difference:
So, if you are planning to float your own startup, do not forget to take these benefits.
Read more – Is One Person Company an option for Startups?
Do you want to incorporate a startup? Do you want to register your startup under Startup India Initiative? You can write to me at kruti@cskruti.com