A practical guide to launching a startup in India — choosing between a private limited company and an LLP, DPIIT recognition and what it does and does not give you, the funding path, IP protection, and the compliance roadmap for the first three years.
The order in which you do things at the start of a business determines how expensive the next three years are. Structure before funding, intellectual property before launch, and a founders' agreement before any of it. This guide follows that order.
Choosing a Structure
| Private limited company | LLP | One person company | |
|---|---|---|---|
| Suits | Anything intended to raise external equity | Services businesses with no outside investors | A single founder wanting limited liability |
| Minimum people | 2 directors, 2 shareholders | 2 designated partners | 1, plus a nominee |
| External equity | Straightforward — shares, ESOPs, preference instruments | Difficult; investors generally will not invest in an LLP | Not practical |
| Compliance load | Highest — board meetings, AGM, AOC-4, MGT-7 | Lower — Form 11 and Form 8 | Reduced; MGT-7A, relaxed meetings |
| Audit | Always, regardless of turnover | Only above prescribed thresholds | Always |
If you intend to raise venture funding, incorporate as a private limited company. Converting an LLP later is possible but costly and disruptive, and it usually happens under time pressure during a funding round. The extra compliance of a company is a known, budgetable cost; a conversion mid-round is not.
Before You Incorporate
- Agree the equity split and put it in writing, with vesting over time and a cliff. Unvested equity leaving with a departing founder is the most common early-stage failure.
- Search the name against both the company register and the trade mark register. A name available at the Registrar may still infringe a registered mark.
- Decide who holds intellectual property. It should be the company, assigned by the founders on incorporation.
Incorporation and the First 180 Days
- Obtain digital signatures for the subscribers and directors.
- Reserve the name and file the incorporation application.
- Appoint the first auditor within 30 days.
- Hold the first board meeting within 30 days.
- Open a current account and bring in the subscription money.
- File INC-20A within 180 days — until it is filed the company cannot commence business or borrow.
- Register for GST, and for provident fund and state insurance once headcount requires it.
- Execute founders' and employment agreements, with IP assignment.
DPIIT Recognition
Apply on the Startup India portal if you are within ten years of incorporation, have never exceeded ₹100 crore of turnover, and are working on something genuinely innovative or scalable. Recognition brings intellectual property fee rebates — 80% on patents and 50% on trade marks — with facilitator costs borne by the government, self-certification under specified labour and environmental laws, relaxed public procurement norms, and eligibility to apply for further benefits.
Recognition is not the tax holiday. The three-year deduction out of the first ten years requires a separate certificate from the inter-ministerial board, applied for on its own merits. Founders routinely assume the two come together and discover otherwise at their first profitable assessment.
Protecting Intellectual Property Early
- Trade mark the brand before you spend on building it. Search first, then file in the classes that match what you do.
- File patents before disclosure. Novelty is destroyed by publication, demonstration or an open pitch. If you may want a patent, file before you present.
- Copyright arises automatically in code, content and design, but registration is useful evidence.
- Take written assignments from every contractor and agency. Without one, they may own what they made for you.
The Funding Path
- Bootstrapping and revenue, which keeps ownership intact.
- Friends and family, which should still be documented properly.
- Angel investment, typically for a minority stake, often through convertible instruments.
- Institutional rounds, with a term sheet, due diligence, and a shareholders' agreement carrying reserved matters and liquidation preferences.
- Venture debt, as a complement to equity where there is revenue to service it.
- The Fund of Funds supports startups indirectly, by investing in alternative investment funds which then invest — it is not a direct source of capital for a company.
Diligence at every round looks at the same things: cap table and vesting, IP ownership and assignments, statutory filings, tax positions, and employment documentation. Businesses that kept these tidy close rounds faster and at better terms.
Compliance Roadmap
- Year one: incorporation, first auditor, INC-20A, GST, founders' and employment agreements, trade mark filing, and the first ROC annual filings.
- Year two: the full annual cycle — four board meetings, AGM, AOC-4, MGT-7, DIR-3 KYC, income tax return, GST annual return, TDS quarterly statements.
- Year three and beyond: the same cycle, plus threshold reviews as you cross into tax audit, e-invoicing, provident fund and internal complaints committee territory. Plan the tax holiday years if you hold the board certificate.
What Goes Wrong Most Often
- No founders' agreement, and no vesting.
- Intellectual property left in a founder's or contractor's name.
- INC-20A missed within 180 days.
- Personal and company accounts mixed.
- ESOPs promised verbally and never documented in a scheme.
- Statutory filings deferred until a funding round forces a clean-up at speed.