What Is a Runway? How do Startups Calculate and Extend It?

Eligibility

• Must be registered under the Government of India's MSME Development Act of 2006.
• Must be a company registered under the Companies Act of the Government of India and must meet the investment restrictions in plant and machinery or equipment set forth in the Government of India's MSME Development Act 2006.
• Must be a technology incubation enterprise or a startup registered as a company and located in an incubation center or park (in this case, a certification from the incubation center or park is required).
• Must be an STP Unit that has been approved.
• The invention must be in the field of electronics or information and communication technologies.

List Of Important Documents Required

1. Scanned copy of MSME Registration Certificate (For MSME Units)
2. Scanned copy of Company Registration Certificate (For Companies)
3. Scanned copy of STP Registration (For STP Units)
4. Scanned copy of the Registration Certificate issued by a competent authority and a certification from the incubation Centre/Park (For Technology Incubation Enterprise/Startup)
5. Scanned copy of the last audited Balance Sheet
6. Copy of product brochure, if any
7. Copy of latest Annual Report, if any
8. Copy of official filing receipt (OFR) with the Indian Patent Office
9. Copy of waiver under section 39 of the Indian Patent Act (Outside India)
10. Copy of proof of the application under PCT/ Paris Convention or Direct International Filing
11. Copy of technical writeup of invention as per the format of technical writeup
12. Patent search report
13. Scanned copy of Details for transfer of e-payments as per the format
14. Scanned copy of the Declaration form duly signed and sealed as per the format
15. A statement by the auditor of the enterprise that they fulfill the criteria of investment in plant and machinery or investment in capital equipment (as the case may be) as stipulated in the MSMED Act 2006.

Application procedure for Startups

• Visit the official website http://www.ict-ipr.in/sipeit/login.
• Create a User account by logging in after filling out all the details.
• Once “Login” is created, one can apply online for the scheme by submitting the required documents.

Selection OR Acceptance of Startups

The acceptance of startups under this scheme depends on the following criteria:

• For a particular invention, there can be one application for foreign filling.
• An Indian patent attorney firm with at least five years of experience in handling international patent applications handles and processes patent applications.
• Only five applications per financial year will be considered for reimbursement from a single applicant.
• The applicant should have already filed a patent application with the complete specification for the said invention with the Indian Patent Office.
• International patent filing options include the PCT route, the Paris Convention route, or filing directly in a foreign country of the innovator's choice.

Benefits

• This scheme provides financial support for the International filing of patents at different stages, including expenses in filing and processing.
• The maximum amount reimbursed per innovation shall be Rs 15 lakhs or 50% of the total expenditures paid in filing and processing a patent application up to grant, whichever is less.
• Under the scheme, financial support is also provided to Education Institutes, Meity societies, etc., for organizing seminars & workshops on IPR awareness.

Frequently Asked Questions

What is an LLP Agreement?

An LLP Agreement is a written contract between the partners of a Limited Liability Partnership. It defines the mutual rights, duties, and responsibilities of the partners and outlines how the LLP will be managed.

This agreement acts as a rulebook for the internal functioning of the LLP, covering areas such as profit-sharing ratios, decision-making processes, roles of individual partners, dispute resolution mechanisms, and procedures for adding or removing partners.

In short, LLP Agreement is the foundational legal document that governs the relationship between the partners and ensures smooth day-to-day operations.

Need and Purpose of LLP Agreement

The LLP Agreement is more than just a formality—it's a critical document that provides clarity and structure to the partnership. Here’s why it’s necessary:

• Defines roles and responsibilities: Each partner's role, contribution, and authority are clearly outlined.
  
• Avoids disputes: A well-drafted agreement helps prevent conflicts by setting expectations early.
  
• Facilitates smooth operations: It streamlines internal decision-making and operational protocols.
  
• Profit-sharing clarity: Partners know exactly how profits and losses will be distributed.
  
• Legal safeguard: In case of disputes, courts consider the agreement as a key legal reference.
  

The partnership may face operational confusion and legal complications without a properly executed and stamped LLP Agreement.

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Stamp Duty on LLP Agreement

Stamp duty is a mandatory legal tax imposed on certain documents, including LLP Agreements, to make them legally enforceable. In India, the stamp duty applicable to LLP Agreements is governed by the State Stamp Act of the respective state where the LLP is registered.

The stamp duty amount is typically based on the total capital contribution mentioned in the agreement. While some states impose a fixed fee, others may levy a percentage-based duty. It’s essential for LLPs to pay the correct stamp duty to avoid future legal or financial penalties.

Here’s a quick reference table showing the stamp duty applicable to LLP Agreements based on capital contributions across different states in India.

In New Delhi, the stamp duty on an LLP Agreement is charged at 1% of the total capital contribution.

Factors Affecting Stamp Duty on LLP Agreement in India

The 2013 Act introduced more stringent rules, bringing private companies with share capital under the same requirements to enhance transparency and accountability.

• State of Registration: Each state in India has its own Stamp Act and may prescribe different rates for LLP Agreements.
  
• Capital Contribution: The total contribution by all partners significantly impacts the stamp duty amount- higher contributions often mean higher duty.
  
• Fixed vs. Percentage-Based Fee: Some states charge a fixed amount (e.g., ₹1,000), while others impose a percentage of the capital contribution.
  
• Regulatory Changes: Amendments in central or state laws can lead to changes in the applicable stamp duty rates.
  

Conclusion

Stamp duty on an LLP Agreement is a foundational compliance step that validates your business arrangement. With rates varying from one Indian state to another and being influenced by capital contributions and regulatory changes, it's important to understand the specific requirements applicable to your LLP.

Ignoring or underpaying stamp duty might seem like a small risk at first, but it can lead to legal complications, penalties, and delays if your agreement is ever scrutinised. On the other hand, taking the time to understand and comply with stamp duty requirements ensures your LLP starts on solid legal ground.

Frequently Asked Questions

What is a Section 8 Company?

A Section 8 Company is a special category of non-profit organisation registered under Section 8 of the Companies Act, 2013. These companies are formed for charitable or social purposes such as:

• Education
• Promotion of arts and culture
• Social welfare
• Research
• Environmental protection
• Sports development

Key Characteristics:

• No profit distribution: Profits, if any, are reinvested in promoting the organisation's objectives.
• Name exemption: They do not use “Limited” or “Private Limited” in their names.
• Regulatory advantages: Enjoy exemptions on stamp duty, income tax (if 12A/80G registered), and some ROC compliances.

Related Read: What is ROC Filing & Why It's Necessary?

Section 8 Companies differ from regular for-profit businesses in that their core purpose is impact, not income, which doesn’t make compliance any less important.

Section 8 Company Compliance

Maintaining compliance is not just about ticking legal boxes—it’s essential to retain the company’s non-profit status, ensure transparency, and stay eligible for grants, tax benefits, and government support.

Types of Compliance:

1. Time-Based Compliance
   Based on fixed deadlines (e.g., annual returns, AGMs)
   
   
2. Event-Based Compliance
   Triggered by corporate actions (e.g., change of directors, share allotment)
   
   
3. Criteria-Based Compliance
   Based on financial thresholds or specific business conditions (e.g., GST annual returns if turnover exceeds ₹2 crore)

A. Compliance Requirements Under the Companies Act, 2013 (and Related Rules)

Here's a breakdown of key compliances that every Section 8 Company must fulfil:

Planning to start a non-profit? Begin your Section 8 Company registration with expert assistance today.

B. Compliance Obligations Under FEMA Regulations

If your Section 8 Company receives foreign investments or donations, FEMA compliance becomes mandatory.

C. GST Compliance as per the Goods and Services Tax Act, 2017

Section 8 Companies may need GST registration if their annual turnover exceeds the prescribed limits or if they engage in taxable activities.

Thresholds:

₹20 lakh (services) or ₹40 lakh (goods) for most states

Monthly/Quarterly Returns:

Annual Returns (If applicable based on turnover):

D. Income Tax Compliance Under the Income Tax Act, 1961

While many Section 8 companies register under 12A and 80G to claim income tax exemptions, they must still follow standard tax compliances.

E. Statutory Compliance Under Applicable Labour Laws

Section 8 Companies employing staff are also required to comply with applicable labour laws, such as EPF, ESI, and state-specific welfare fund contributions.

Frequently Asked Questions