How to Start a Startup Company in India

Setting up a startup company in India as a U.S. entrepreneur involves wading through a complex system of legal requirements, corporate regulations, and government programs. With 1.59 lakh startups, India is now the world's 3rd largest startup sector, making it a highly attractive destination for innovation and expansion. If you're expanding an existing U.S. business in India or launching something entirely new, knowing the essential steps, from company registration to compliance with Indian tax laws, is a must.

In this guide, we'll break down the process, highlight the key legal frameworks, and outline the resources available to U.S. entrepreneurs to ensure a smooth and successful market entry.

Key Takeaways

• Understand tax obligations like GST, corporate tax, and transfer pricing in India.
• FEMA compliance is essential for foreign investments and cross-border transactions.
• U.S. entrepreneurs can set up a public limited company, but it requires compliance with SEBI.
• After incorporation, U.S. startups must meet statutory reporting and labor law compliance.
• Funding options include angel investors, venture capital, and government-backed schemes like Startup India.

Eligibility Criteria for a Startup Company in India for U.S. Businesses

To start a startup company in India, U.S. entrepreneurs must meet certain eligibility criteria that are recognized by the Indian government and regulatory bodies. Here's a breakdown of the key requirements:

1. Incorporation Requirement

The startup must be a private limited company, partnership, or LLP. For U.S. entrepreneurs, setting up a subsidiary in India is often the best option for foreign entities.

2. Age Limit for Startups

The company must be less than 10 years old from the date of incorporation, following the Startup India Program guidelines, which promote young businesses for tax exemptions and funding.

3. Annual Revenue

To qualify as a startup in India, US entrepreneurs should have an annual revenue of less than INR 100 crores (<USD 13 million), which helps businesses access government schemes and benefits under Startup India.

4. Innovation and Scalability

The US-based startup in India must focus on innovative and scalable products or services, ideally in sectors like technology. This is key for businesses aiming for national and global impact.

5. Approval from DPIIT

U.S. businesses must seek DPIIT recognition to qualify for tax exemptions and benefits. This certification is essential for accessing government support and ensuring eligibility for funding schemes like Startup India.

As US entrepreneurs consider starting a startup company in India, VJM Global is here to assist with company registration, taxation advisory, and FEMA compliance. We ensure your US business is set up efficiently and remains compliant with Indian regulations, giving you the freedom to focus on growth and expansion.

Once you’ve met the eligibility criteria, the next step is to understand the registration process U.S. entrepreneurs must follow to start a business in India.

Process for Registering a Startup in India for U.S. Companies

When U.S. entrepreneurs decide to set up a startup company in India, the process involves several essential steps that align with Indian corporate laws. Below are the key steps for establishing a startup:

1. Incorporate Your Company

The first step for any U.S. entrepreneur looking to start a business in India is incorporating the company, which legally establishes it as a recognized entity in India.

1. Name Registration: Choose a unique name for your startup that aligns with the naming guidelines under the Companies Act, 2013, and register it with the Ministry of Corporate Affairs (MCA).
2. Obtain Your Digital Signature Certificate (DSC): A Digital Signature Certificate (DSC) is mandatory for signing documents and filing online forms with MCA.
3. Apply and Get the Director Identification Number (DIN): Each director must obtain a DIN to be listed as part of the company’s Board of Directors.
4. Writing Memorandum of Association (MOA): The MOA outlines the objectives, business activities, and goals of the company.
5. Writing Articles of Association (AOA): The AOA governs the internal operations of the company, detailing the rules regarding the directors’ powers, meetings, and shareholding rights.

Also Read: How to Register a Trademark in India: Step-By-Step Guide

2. Application for the Incorporation of the Company

Once the foundational documents are ready, U.S. entrepreneurs must apply for the incorporation of their startup with the appropriate authorities in India.

1. Gather the List of Documents Required for Startup Incorporation: Key documents include proof of identity and address of directors, proof of office address, and MOA/AOA.
2. Fee Waiver Policies for Registering Your Company: Under Startup India, certain fee waivers are available for private limited companies meeting specific criteria, including minimum capital requirements.
3. Post-Incorporation Tasks: Once registered, U.S. businesses must apply for a PAN and a TAN (Tax Deduction and Collection Account Number) from the Income Tax Department in India and open a bank account in the company’s name.

3. Startup India Program Registration

The Startup India Program is an initiative by the Indian government to encourage and support entrepreneurs, especially in the technology-driven sector.

Registration Process on Startup India

Register the startup on the Startup India portal for access to benefits, such as tax exemptions under Section 80-IAC and angel tax exemptions.

1. Choose Your Business Structure: U.S. entrepreneurs must choose a business structure in India: Private Limited Company, LLP, or Partnership, keeping in mind the legal implications for taxes, compliance, and shareholder requirements.
2. Register Your Business with the Ministry of Corporate Affairs: File your company incorporation application with MCA, ensuring it complies with Indian corporate law and secures a CIN (Corporate Identity Number).
3. Obtain a PAN and TAN: Obtain the Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for tax filings, as both are essential for Indian tax compliance.
4. Open a Current Bank Account: A current bank account is required for day-to-day operations and is mandatory for financial transparency and taxation purposes.
5. Apply for GST Registration: If your startup’s turnover exceeds the prescribed limit, you need to register for Goods and Services Tax (GST).
6. Register on the Startup India Website to Access Benefits: Registering under Startup India enables access to government benefits, tax exemptions, and funding assistance.

Also Read: How to Start an Oil Mill Business in India

Benefits of Registering Under the Startup India Program

For U.S. entrepreneurs looking to start a business in India, the Startup India program provides several advantages:

1. Tax Exemptions Under Section 80-IAC and Section 56: Section 80-IAC provides tax exemptions for the first three years of operation. Section 56 offers angel tax exemptions for investors in qualifying startups.
2. EPF Contribution from the Indian Government: The Indian government contributes to the Employee Provident Fund (EPF) for employees, reducing the employer’s burden and encouraging employee retention.
3. Presumptive Tax Scheme: Eligible US startups can avail of the presumptive tax scheme, which offers a simplified tax filing process and lower tax rates for their new businesses in India.
4. Loan Assistance and Bank Accounts: Startups benefit from government-backed loans and easier bank account opening procedures under government schemes.
5. Simplified Compliance and Self-Certification: Under Startup India, U.S. entrepreneurs benefit from self-certification for compliance with labor laws and environmental regulations, reducing regulatory burdens.

Other Government Initiatives Supporting Startups in India

The Indian government offers several programs to help entrepreneurs grow their startups, including:

1. Pradhan Mantri Mudra Yojana (PMMY): Provides collateral-free loans of up to INR 20 lakh to support startup capital, especially for small-scale ventures.
2. Standup India Scheme: Focuses on supporting women entrepreneurs and SC/ST individuals with loans between INR 10 lakh and INR 1 crore for starting businesses.
3. Fund of Funds for Startups (FFS): FFS is a government initiative that provides venture capital funding to eligible startups, allowing them to scale operations.

Also Read: How to Start a Perfume Business in India: Outsourcing Guide for US Entrepreneurs

4. Other Registrations for U.S. Entrepreneurs Starting a Startup in India

To maximize the benefits, U.S. entrepreneurs need to complete several essential registrations in India:

1. Get DPIIT Recognition: DPIIT (Department for Promotion of Industry and Internal Trade) recognition qualifies your US startup for tax exemptions and funding schemes under Startup India.
2. Tax Exemption Declaration: Ensure that your US startup company files for tax exemption declarations to benefit from Section 80-IAC and other tax exemptions available for new ventures in India.
3. Funding Assistance: Your DPIIT recognition makes your startup eligible for funding under the Startup India Seed Fund Scheme, providing early-stage financial support.
4. Startup India Seed Fund Scheme (SFS): The Seed Fund Scheme provides financial support to startups for product development, market testing, and expansion.

When planning your startup in India, VJM Global offers expert services in corporate tax planning, GST registration, and business incorporation. We help US businesses comply with Indian business laws and maximize the benefits available through Indian government schemes.

5. Create a Strong Business Plan

A solid business plan is essential for the success of your US-based startup in India. Here are the essential components:

1. Company Vision and Mission: Clearly articulate the purpose and long-term goals of your business, especially how it aligns with the Indian market.
2. Market Research: U.S. entrepreneurs need to conduct thorough market research to understand the demand, consumer behavior, and competition in India.
3. Revenue Model: Define the revenue model for your US startup, be it subscription-based, one-time purchases, or freemium.
4. Marketing Strategy: Plan your marketing efforts, considering local advertising, digital marketing, and influencer partnerships within India.
5. Financial Projections: Present clear financial projections, including cash flow, break-even points, and expected revenue for the first few years.

6. Secure Funding for Your Startup

Funding is a critical step in scaling your US-based startup in India. Explore these funding options:

1. Bootstrapping: U.S. entrepreneurs may fund their startup in India through personal savings or initial revenue until they become profitable.
2. Angel Investors: Seek angel investors who offer seed funding in exchange for equity, especially for early-stage technology startups.
3. Venture Capitalists (VCs): Venture capitalists provide significant funding for high-growth US startups in India with a clear scalability model, especially in technology sectors.

7. Build a Skilled and Passionate Team

A successful US startup in India requires a strong team. Key roles to consider hiring include:

1. Marketing & Sales Experts: U.S. entrepreneurs should hire professionals who understand the Indian market to drive customer acquisition and build brand awareness tailored to local preferences.
2. Product Developers: Assemble a team of local developers who can create products tailored to Indian consumer needs, ensuring your U.S. startup meets local market demands effectively.
3. Financial Managers: Hire financial managers to ensure tax compliance with Indian laws like GST and to handle regulatory filings with Indian authorities.
4. Customer Support Team: For U.S. entrepreneurs, setting up a local support team in India is crucial for addressing customer queries and maintaining strong relationships with Indian customers.

8. Launch and Market Your Startup

Marketing is key to getting your startup noticed in the Indian market. Here’s how to effectively promote your business:

1. Create a Website: U.S. businesses need a mobile-optimized website for customer engagement and brand credibility in India, where mobile-first users dominate.
2. Use Social Media: U.S. entrepreneurs can use platforms like Instagram, Facebook, and LinkedIn to build a strong brand presence and engage with the growing Indian audience.
3. Invest in SEO & Content Marketing: SEO strategies tailored for Indian search behavior and content marketing can help U.S. startups attract Indian customers and build online visibility.
4. Offer Discounts & Promotions: For U.S. startups in India, offering discounts and promotions is a great way to quickly build a loyal Indian customer base and boost initial sales.
5. Collaborate with Influencers: Partner with Indian influencers who resonate with your brand, allowing U.S. businesses to extend their reach and promote their startup effectively to the local market.

Also Read: How to Open a Pharma Company in India: A US Outsourcing Perspective

After establishing your startup in India, it’s crucial to explore the strategies for scaling operations and expanding your market reach efficiently in the Indian economy.

How Can You Scale Your Startup in India as a U.S. Entrepreneur?

Scaling your startup in India presents exciting growth opportunities, but it requires a strategic approach. For U.S. entrepreneurs looking to expand in this market, here’s how you can effectively scale:

1. Expand Through Digital Marketing: U.S. businesses should utilize SEO and social media platforms like Instagram and LinkedIn to boost visibility and drive traffic, specifically targeting the Indian market.
2. Partner with Influencers: Collaborating with Indian influencers allows U.S. entrepreneurs to enhance brand visibility and reach a wider audience, particularly in industries like e-commerce and technology.
3. Optimize Operations with Automation: U.S. startups in India can implement AI tools and automation for processes like inventory management and customer support to streamline operations and reduce costs.
4. Explore Global Markets: Once your Indian base is established, U.S. companies can scale internationally by entering other emerging markets like Asia, Europe, and the Middle East.
5. Build a Strong Brand: U.S. businesses should focus on creating a consistent brand presence on platforms like Instagram and YouTube, sharing engaging content that resonates with the Indian audience.

​​While scaling, U.S. entrepreneurs often face unique challenges; let’s look into the most common hurdles and solutions to overcome them when growing your startup in India.

Challenges Faced by U.S. Entrepreneurs in Establishing a Startup in India

Setting up a startup in India isn’t just about entering a new market; it’s about adjusting to a different business rhythm. U.S. founders often face hurdles not because the opportunity is lacking, but because the system functions differently; funding expectations, compliance processes, and hiring culture all operate on their own terms.

Here are some of the most common challenges U.S. entrepreneurs encounter, along with insights on how to navigate them effectively.

1. Access to Capital

Even in India’s vibrant funding ecosystem, foreign-led startups can face hesitation from domestic investors who prefer founders with local experience or networks. This makes early-stage fundraising harder than it might be in the U.S.

Pro Tip: Build visibility through Indian startup accelerators or incubators before seeking large investments. This helps bridge credibility gaps with local VCs.

2. Understanding India’s Compliance Landscape

India’s legal and tax landscape involves multiple authorities, MCA, RBI, SEBI, and state-level agencies, each with its own filing requirements. The bureaucracy can slow down setup and scaling if compliance is treated reactively.

Familiarity with FEMA and GST frameworks is essential, especially for cross-border funding and foreign shareholding structures.

3. Local Market Fit

What succeeds in the U.S. doesn’t always translate directly to India. Consumer expectations, pricing sensitivities, and digital behaviors vary across regions. Startups that overlook localization often struggle to gain traction beyond major metros.

Pro Tip: Localize early, adapt product design, pricing, and communication to regional audiences rather than replicating the U.S. playbook.

4. Recruiting and Retaining Talent

India has abundant talent, but turnover rates in startups are high. Many professionals prioritize job stability over startup risk, and bridging cultural differences between U.S. management styles and Indian work dynamics can take time.

Offering ESOPs and transparent career growth paths often helps attract people who think long-term.

5. Operational Scalability

India’s vast geography and fragmented logistics networks make scaling more complex than it appears on paper. Differences in infrastructure, language, and regulatory conditions across states add another layer of challenge.

Startups that succeed here tend to pilot regionally, document what works, and then scale in phases rather than expanding all at once.

Also Read: How to Start a Coffee Shop Business in India From The US

As you confront these challenges, VJM Global offers expert guidance to ensure your US startup journey in India is seamless and compliant with all Indian regulations.

Why US Entrepreneurs Should Choose VJM Global as Their Partner to Launch an Indian Startup

As a U.S. entrepreneur, expanding into India offers numerous opportunities, but understanding the legal, tax, and regulatory conditions is critical for success. VJM Global provides end-to-end solutions for setting up a startup company in India, helping you deal with the complexities of establishing a business, ensuring compliance with local laws, and optimizing operations from day one.

1. U.S. Business Setup in India

VJM Global offers comprehensive support for U.S. entrepreneurs looking to establish a startup in India. Be it a branch office, liaison office, or subsidiary, we will guide you through the business registration process and help you establish a strong presence in the Indian market.

2. Taxation Advisory for Startups

Learning Indian tax laws is essential when starting a business in India. VJM Global offers expert corporate tax advice, helping U.S. startups optimize their tax strategy and comply with GST regulations. Our transfer pricing services ensure that your inter-company transactions align with Indian tax laws and international standards.

3. Regulatory Compliance and FEMA Advisory

Setting up a US-based startup in India means adhering to foreign exchange regulations under FEMA. VJM Global ensures your business meets all necessary FEMA compliance requirements, facilitating seamless foreign investments and cross-border transactions. We assist with DTAA compliance and investment structuring to ensure your startup complies with Indian regulations.

4. Incorporation and Registration Assistance

For U.S. entrepreneurs planning to register a startup in India, VJM Global offers company incorporation services and guides you through the MCA registration process. We help you secure PAN, TAN, and GST registration, critical steps for business operations and tax compliance in India.

VJM Global makes it simple for US entrepreneurs to set up a startup in India by navigating legal registrations, tax obligations, and regulatory compliance.

Wrapping Up

To plan a startup company in India as a U.S. entrepreneur, knowing the legal requirements, funding options, and strategies for scaling, you’re one step closer to setting up a business that succeeds locally and can eventually expand globally.

As U.S. entrepreneurs move forward with setting up a startup in India, VJM Global provides cross-border transaction advisory, merger & acquisition strategies, and regulatory compliance to make sure your business is aligned with both U.S. and Indian laws.

Contact VJM Global to get personalized advice for your US-based startup in India.

FAQs

1. What are the key tax implications for a U.S. entrepreneur setting up a startup in India?

Setting up in India requires understanding GST, corporate tax rates, and transfer pricing rules to optimize tax liability and ensure compliance with Indian tax laws.

2. How does the FEMA (Foreign Exchange Management Act) affect U.S. businesses starting up in India?

FEMA governs foreign investment in Indian companies, requiring compliance with investment limits, cross-border transactions, and proper FDI filings to avoid penalties.

3. Can U.S. entrepreneurs register a public limited company in India, and what are the prerequisites?

Yes, a public limited company can be registered if the company meets capital requirements, obtains board approval, and adheres to SEBI guidelines for public listings.

4. What are the compliance obligations for U.S. startups after incorporation in India?

Post-incorporation, U.S. startups must file annual returns, maintain statutory audit records, comply with tax regulations, and follow Indian labor laws for employee benefits.

5. What are the funding options for U.S. entrepreneurs starting a business in India?

U.S. entrepreneurs can seek venture capital, angel investors, government funding schemes (like Startup India Seed Fund), or crowdfunding to raise capital for their startups.

‍