Legal guide on setting up an Ed-tech Start-up in India
Updated: Jul 28
COVID-19 has brought about schools closing all over the world. Thus, education has changed significantly, with the particular ascent of e-learning, whereby education is embraced distantly and in advanced stages. The EdTech area is taking electronic education to a higher level in India and it is going on at an exceptionally fast speed.
Beginning another undertaking in India isn't just about as simple as it would appear. A few legitimate conventions are to be consented to, for both new just as set up organizations and new businesses. A portion of these conventions incorporates monetary guidelines, and charge commitments just as work law guidelines, which are vital to the working of each business association in India.
Legal Obligations for Edu-Tech Start-up in India: -
1. Registration as an Entity - Only after registering as a legal entity does the government approve the existence of such a legal entity.
2. Protection of Intellectual Property (IP) - Intellectual property is/is at the heart of technology-driven businesses, so protecting intellectual property rights is critical (IPR).
3. Consideration of different legal structures for an EdTech institution - This includes the formation and consolidation of a corporate legal entity, which can be a Limited Company or a Limited Liability Partnership L.L.P. firm.
4. Register for GST Compliance - The Ed Tech Company must obtain GST registration.
5. Creation of Domain name and websites - Websites and internet domains play an important role in establishing a good reputation in the market. Having a distinct domain name establishes credibility for the conduct of business.
6. Compliance with Information Technology (IT) Act, 2000 - Specific to the needs of the business model, an Ed-Tech platform may be recognized as an intermediary (for example, an Ed-Tech marketplace) under the IT Act. An intermediary is required by Indian law to follow the provisions of the Act and the Information Technology (Intermediaries Guidelines) Rules, 2011.
7. Registration of Intellectual Property (IP) - When you register your intellectual property, you gain exclusive rights to it. Intellectual property is the foundation of an Ed-Tech structure; it is critical that the rights are vested with the appropriate entity.
8. Registration of essential Agreements - Such contracts include preparing Non-Disclosure Agreements (NDA), Intellectual Property (IP) Agreements, Website Policies & Agreements, and Confidentiality Agreements.
9. Get a Payment Gateway - The Payment and Settlement Systems Act of 2007 governs payment systems in India. PayPal, PayUMoney, and other payment gateways are used by businesses.
10. Get data protection In India - Data protection provisions are covered by the Information Technology Act of 2000, as well as the “Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011.
The registration process of Edu Tech Start-up in India –
1. Incorporate your Business - To begin, you must incorporate your company as a Private Limited Company, a Partnership firm, or a Limited Liability Partnership. You must fulfil all of the standard procedures for registering a business, such as obtaining a Certificate of Incorporation/Partnership registration, a PAN, and other necessary compliance requirements.
2. Register with Start-up India - The Company must therefore be registered as a start-up. The entire procedure is simple and can be completed online. All you have to do is go to the Start-up India website and fill out the form with information about the company. Next, enter the OTP that was sent to your e-mail address, as well as other information such as start-up as the type of user, start-up name and stage, and so on. The Start-up India profile is created after these details are entered.
After creating a profile on the website, start-ups can apply for various acceleration, incubator/mentorship projects, and other challenges, as well as gain access to resources such as the Learning and Development Program, Government Schemes, and State Policies for Start-ups, and pro-bono services.
3. Get DPIIT Recognition - Following the creation of a profile on the Start-up India website, the next step is to obtain Department for Promotion of Industry and Internal Trade (DPIIT) recognition. This recognition enables start-ups to benefit from advantages such as access to high-quality intellectual property services and resources, relaxation of public procurement norms, self-certification under labour and environmental laws, easy company winding, and access to Fund of Funds, tax exemption for three consecutive years, and tax exemption on investment above fair market value.
If you are a new user, click the ‘Get Recognised' button to obtain DPIIT Recognition. If you are an existing user, go to the ‘Dashboard' tab and then ‘DPIIT Recognize'.
4. Recognition Application - The page titled ‘Recognition Application Detail' appears. On this page, under the Registration Details section, click on ‘View Details.' Fill out the ‘Start-up Recognition Form' and press the ‘Submit' button.
5. Documents for Registration –
i.) Incorporation/Registration Certificate of your start-up
ii.) Details of the Directors
iii.) Proof of concept like pitch deck/website link/video (in case of a validation/ early traction/scaling stage startup)
iv.) Patent and trademark details (Optional)
v.) PAN Number
6. Recognition Number - When you apply, you will be given a recognition number for your start-up. The certificate of recognition will be issued following the examination of all your documents, which is usually completed within two days of submitting the information online.
7. Other Areas –
i.) Patents, trademarks, and/or design registration - If you require a patent for your invention or a trademark for your business, you can easily approach any of the government-issued facilitators. You will only have to pay the statutory fees, resulting in a fee reduction of 80%.
ii.) Funding - Access to finance has been one of the most difficult challenges for many start-ups. Entrepreneurs fail to attract investors due to a lack of experience, security, or existing cash flows. Furthermore, many investors are put off by the high-risk nature of start-ups, as a significant percentage fail to take off.
iii.) Self-Certification Under Employment and Labour Laws - Start-ups can self-certify under labour laws to reduce compliance costs. Self-certification is available to reduce the regulatory burden, allowing them to concentrate on their core business. Start-ups have three to five years from the date of incorporation to self-certify their compliance with six labour laws.
iv.) Tax Exemption - Start-ups are exempt from paying income taxes for three years. However, in order to receive these benefits, they must be certified by the Inter-Ministerial Board (IMB). Start-ups formed on or after April 1, 2016, are eligible to apply for income tax exemption.
The article first published on Lexology.com and the same can be accessed here.
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