Entrepreneurship: Its Types, Government Policy, Benefits, Subsidies and Facilitations By CS Ravi Periwal


Entrepreneurship is the process of designing, launching and running a new business, which is often initially a small business. The people who create these businesses are called entrepreneurs.

The activity of setting up a business or businesses, taking on financial risks in the hope of profit.

The best example of entrepreneurship is the starting of a new business venture. The entrepreneurs are often known as a source of new ideas or innovator, and bring new ideas in the market by replacing old with a new invention.
 
Types of Entrepreneurs:

1.    Based on the type of Business;
2.    Based on the Use of Technology;
3.    Based on Ownership;
4.    Based on Gender;
5.    Based on the Size of Enterprise.

Types of Business:
            
a. Trading Entrepreneur       
b. Manufacturing Entrepreneur       
c. Agricultural Entrepreneur

Use of Technology:

a. Technical Entrepreneur     
b. Non-technical Entrepreneur

Based on Ownership
 
a. Private Entrepreneur
b. State Entrepreneur
c. Joint Entrepreneur
 
Based on Gender
 
a. Men Entrepreneur
b. Women Entrepreneur
 
Based on the Size of Enterprise

1.    Small-Scale Entrepreneur:

An entrepreneur who has made investment in plant and machinery up to Rs. 1.00 cr. is called ‘small-scale entrepreneur.

2.    Medium-Scale Entrepreneur:

The  entrepreneur  who  has  made  investment  in  plant  and  machinery above  Rs.  1.00  cr.  but  below  Rs.  5.00  cr.  is  called  ‘medium-scale entrepreneur.

3.    Large-Scale entrepreneur:

The entrepreneur who has made investment in plant and machinery more than Rs. 5.00 cr. is called ‘large-scale entrepreneur.
 
CHARACTERISTICS OF AN ENTREPRENEURSHIP

Not all entrepreneurs are successful, there are definite characteristics that make entrepreneurship successful. Few of them are mentioned below:

1.    Ability to take risks
2.    Innovation
3.    Visionary and Leadership quality
4.    Open-Minded
5.    Flexible
6.    Know your Product
 
IMPORTANCE OF ENTREPRENEURSHIP

•    Creation of Employment
•    Innovation
•    Impact on Society and Community Development
•    Increase Standard of Living
•    Supports research and development
 
GOVERNMENT POLICY

• The main objective of entrepreneurship policy is to stimulate higher levels of entrepreneurial activity by influencing a greater supply of new entrepreneurs.

• Entrepreneurship development is the process of improving the skills and knowledge of entrepreneurs through various training     and     classroom     programs.      The      whole      point   of entrepreneurship development is to increase  the  number  of entrepreneurs.

• Central and State Government are actively participating in Self- employment opportunities by Providing Assistance in respect of Infrastructure, Finance, Technology, Training, Raw Materials, and Marketing. The Various Policies insist on the utilization of local resources and Raw Materials and locally available manpower and further these are translated into action through various agencies, departments, corporations etc.
 
Some important Government schemes and Incentives for Promotion of Entrepreneurship:

1.    Multiplier Grants Scheme (MGS) for IT Research and Development
2.    Modified Special Incentive Package Scheme (M-SIPS)
3.    The Venture Capital Assistance Scheme
4.    Credit Guarantee
5.    Raw Material Assistance
6.    Infrastructure Development Scheme
7.    MSME Market Development Assistance
8.    Credit Linked Capital Subsidy for Technology Upgradation
9.    Atal Incubation Centres (AIC)
10.  Bridge Loan Against MNRE Capital Subsidy
11.  MUDRA
 
1.    Multiplier Grants Scheme (MGS) for IT Research and Development:

• Launched by Department of Electronics and Information Technology (Deity), MGS has been launched to ‘encourage collaborative R&D between industry and academics/ R&D institutions for development of products and packages.

• This start-up scheme is valid till March 31st, 2020, and have a corpus of Rs. 36 cr. for Start-ups, incubator/academia/accelerators engaged in  electronics and information technology domain.

• Applicable Industries: Artificial Intelligence, Technology, Hardware, Internet of Things, IT Services, Enterprise Software, Analytics.

2.    Modified Special Incentive Package Scheme (M-SIPS):

• Launched by Department of Electronics and Information Technology (DeitY) and supported by Centre for Development of Advanced Computing or CDAC, M-SIPS aims to ‘promote large-scale manufacturing in the Electronic System Design and Manufacturing (ESDM) sector.

• Besides infusing the start-ups with funds for expansion, M-SIPS will also provide subsidy up to 25% in establishing offices, research centres in SEZs, all over the nation.

• Applicable Industries: IT Hardware, Medical-tech, Solar Power, Automobiles, Healthcare, Semiconductors, Processors/Electronica, LEDs, LCDs, Avionics, Industrial Electronics, Nano-Electronics, Biotech, Strategic Electronics, Telecom and more.
 
3. The Venture Capital Assistance Scheme:

• Launched in 2012 by Small Farmers’ Agri-Business Consortium (SFAC), this special scheme aims to assist agriculture based entrepreneurs to kick start their agri-business.

• SFAC has tied up with 42 banks, which help them to disperse interest-free loans to farmers (individuals/groups), partnership firms, self-help groups, agriculture pass out/graduates, agri- preneurs, producer groups, and companies.

• Applicable Industry: Agriculture

4. Credit Guarantee:

• Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) has launched this unique Government scheme to help assist retailers, educational institutes, self-help groups, farmers and SMEs.

• Basically, the Credit Guarantee scheme has been launched to smoothen credit delivery system, as guarantee cover up to 85% is provided to the SMEs for loans up to Rs 5 lakh.

• Applicable Industry: SMEs
 
5. Raw Material Assistance:

• National Small Industries Corporation or NSIC has launched Raw Material Assistance scheme, which aims to assist manufacturers and MSMEs with procuring raw materials, both indigenous & imported.

• As per the Government Schemes helps the manufacturer’s to focus on the quality of their products, as they can avail low-interest loans and financial help to get raw materials.

• Applicable Industries: Manufacturing, MSMEs

6. Infrastructure Development Scheme:

• National Small Industries Corporation (NSIC) has launched this unique scheme to help start-ups establish their own offices and infrastructure.

• However, only those companies which fall under the official definition of start-ups, as highlighted by the Ministry of Micro, Small and Medium Enterprises can avail this grant.

• Start-ups which are not registered with Software Technology Parks Of India

Scheme can now get office space ranging from 467 sq.ft. to 8,657 sq.ft.

• There is no lock-in period, and it is applicable to all industries.
 
7. MSME Market Development Assistance:

• Office of the Development Commissioner (MSME) has launched this scheme to help SMEs and small retailers get more attention at international trade fairs and exhibitions.

• Companies registered with Directorate of Industries/District Industries Centre can get up to 100% reimbursement on air-fares and cost of placing their stalls in such fairs/exhibitions, all over the world.

• This scheme is not specific to any industry and applicable to SMEs, retailers, and start-ups.

8. Credit Linked Capital Subsidy for Technology Up-gradation:

• Office of the Development Commissioner (MSME) has launched this Government scheme to help manufacturers, SMEs, and agri-start-ups to upgrade their existing machines and technologies.

• In case any SMEs registered with State Directorate of Industries have upgraded their machines, plants with state of the art technology, then they can apply for this grant, and receive funds to compensate their expenses.

• Applicable Industries: Khadi, Village or Coir industry, Manufacturing, Small Scale Industry, SMEs
 
9. Atal Incubation Centres (AIC):

• Headed by Atal Innovation Mission, AIC aims to promote innovation and entrepreneurship in India. Approved start-ups can get funding up to Rs. 10 cr. for a maximum period of 5 years, to cover capital and operational expenses.

• Industries Applicable: AI, AR/VR, Automobiles, Telecom, Healthcare, Aeronautics, Aviation, Chemicals, Nano-Tech, Pets, Animals, IT, Computers, Design, Non-Renewable Energy, Social Impact, Food and  more.

10. Bridge Loan Against MNRE Capital Subsidy:

• Launched by Indian Renewable Energy Development Agency (IREDA), Bridge Loan Against MNRE (Ministry of New and Renewable Energy) Capital Subsidy aims to promote start-ups engaged in renewable energy ideas such as biomass power and small hydropower projects. Up to 80% of the project cost will be funded by IREDA, and the minimum funding allocated shall be Rs 20 lakh.
 
SELECTION OF THE RIGHT BUSINESS ENTITY

TYPES OF BUSINESS ENTITIES:

a.    Sole Proprietorship
b.    Partnership Firm
c.    Limited Liabilities Partnership
d.    One Person Company
e.    Public And Private Limited
 
EMPLOYEE AGREEMENT

•    Rights, Liabilities and Duties Employee
•    Remuneration and Incentives
•    Leaves and Leave Encashment
•    Designation and Responsibilities
•    Confidentiality and Non-disclosures
•    Intellectual Property Assignment
•    Resolution of disputes through Arbitration
•    Covenant reserving the Companies rights to formulate
internal policies from time to time
•    Covenants restricting employees on accepting further employment during the existence of current employment agreement
•    Termination of Employment, Retirement and Resignation
 
REGULATORY FRAMEWORK

Process for Incorporation

SOLE PROPRIETORSHIP

Required Documentations and follow some bye-laws:

1.    Individual Person Pan Card
2.    GST Registration (If Applicable)
3.    SMC Registration
4.    Bank Current Account (As per Firm Name)
5.    Office for Suitable Place
6.    Any Other (As per Requirement of Business)
 
PARTNERSHIP FIRM

Required Documentations and follow some bye-Laws:

1.    Minimum 02 Persons (Any Gender)
2.    Partnership Deed (Agreement)
3.    Pan Card of Partnership Firm
4.    TAN Registration (If Applicable)
5.    GST Registration (If Applicable)
6.    SMC Registration
7.    Partnership Act, 1932 under Registration (ROF)-optional
8.    Firm Bank Current Account
9.    Any Other (As per Requirement Of Business)
 
LIMITED LIABILITY PARTNERSHIP

• The Limited Liability Partnership Act, 2008
• A corporate business vehicle that enables professional expertise and entrepreneurial initiative to combine and operate in flexible, innovative and efficient manner, providing benefits of limited liability while allowing its members the flexibility for organizing their internal structure as a partnership.

Requirements:

1.    Minimum    02    Designated    Partners    and    01    Designated    Partner    &    01 Partner
2.    Registration all Process Via MCA (Ministry of Corporate Affairs)
3.    Process of LLP Incorporation in Short:
a.    Name Reservation
b.    Incorporation Documents
c.    LLP Agreement
d.    Example
 
THE COMPANIES ACT, 2013

• The Companies Act, 2013 passed by the Parliament has received the assent of the President of India on 29th August, 2013. The Act consolidates and amends the law relating to companies. The Companies Act, 2013 has been notified in the Official Gazette on 30th August, 2013. Some of the provisions of the Act have been implemented by a notification published on 12th September, 2013. The provisions of Companies Act, 1956 is still in force.

Types of company may be:

1.    Statutory Company, or
2.    Registered Company
 
Statutory Company:

• The first type of company in India is a company formed by a special Act passed either by the central or the state legislature is called a statutory company. These types of companies are governed by the provisions of their special Acts. These companies are usually formed to carry out some special public undertakings. The object such companies are not to as such earn profits but to serve people. The audit of such companies is conducted under the supervision, control and guidance of the Comptroller and Auditor General of India.

• Some important statutory companies are Reserve Bank of India, State Bank of India, Life Insurance Corporation of India, industrial Finance Corporation etc.

Registered Company:

• Company registered under the Indian Companies Act is known as Registered Company. These types of companies are governed and regulated by the provisions of the Companies Act, 2013. They may be limited by shares or limited by guarantee or unlimited companies.
 
KINDS OF COMPANIES ON THE BASIS OF LIABILITY OF MEMBERS

1. Company limited by shares: This is a type of firm in India having the liability of its members limited by the memorandum to the amount unpaid on the shares respectively held by them. A large majority of the companies registered in India belong to this category. The last word of the name of such companies should be “Limited”. For example, if AB Ltd. has a share capital of 10,000 shares of Rs. 10 each, and A has purchased 100 shares on which he has paid so far Rs. 10 per share, the maximum liability of A is only Rs. 10 per share.

2. Company limited by Guarantee: This is a type of firm in India in which the liability of each member is limited to such amount as the members may voluntarily undertake under the memorandum to contribute to meet out the deficiency of the assets of the company in the event of its being wound up. Such types of firms in India may or may not have share capital. If it has share capital, the liability of the members becomes two-fold; firstly, the amount unpaid on the shares held by them and secondly, amount payable under the guarantee.

3.    Unlimited companies: a company not having any limit towards the liability of its members is an unlimited company. The liability extends to the whole amount of the company’s debts and liabilities. The registered companies (whether limited or unlimited) may be either private or public companies.
 
PRIVATE LIMITED COMPANY

Private limited company is held by few individuals privately having separate legal entity. In this the shareholders cannot trade shares publicly. Shareholders cannot sell their shares without the approval of other shareholders. It is a company which restricts the right of its members to transfer its shares and it doesn’t send invitation to the public for subscription of its shares.

Characteristics of the private limited company:

1.    Members– To start a company, a minimum number of 2 members are required and a maximum number of 200 members as per the provisions of the Companies Act 2013.

2.    Index of members– A private company has a privilege over the public company as they don’t have to keep an index of its members whereas the public company is required to maintain an index of its members.

3.    Exemptions regarding directors– When it comes to directors, a private company needs to have only two directors. With the existence of 2 directors, a private company can come into operations. Also, private company need not appoint independent directors. The maximum number of companies of which a person may be appointed as a director is 20 in case of private company.

4.    Paid up capital– It must have a minimum paid-up capital of Rs 1 lakh or such higher amount which may be prescribed from time to time.

5.    Prospectus– Prospectus is a detailed statement of the company affairs which is issued by a company for its public. However in case of private limited company there is no such need to issue a prospectus because in this public is not invited to subscribe for the shares of the company.

6.    Name– It is mandatory for all the private companies to use the word private limited after its name.

NOTE: In the case if any private limited company doesn’t follow any of the above mentioned features, it ceases to be private company.
 
PUBLIC COMPANY

A public limited company is a form of business organization that operates as a separate legal entity from its owners. It is formed and owned by shareholders. Shares of a public limited company are listed and traded at a stock exchange market freely.

Characteristics of a public company:

1. It must have a minimum of 7 members and no limit with regards to the maximum number of members.
2. The shares of a public company are freely transferable.
3. It    can    invite    the    public    to    subscribe    to    its    shares    or purchase its shares.
4. It must constitute an Audit Committee of the Board.
 
ONE PERSON COMPANY (OPC)

This is a type of company that has only one member. OPC provides the benefits of both forms of business- Proprietorship and Company. With formation of an OPC business can be run in the same way as a proprietorship by complying  with law and keeping the liability of the member limited by shares or  guarantee.

Provisions of OPC under Companies Act 2013:

1.    All the provisions of the Act applicable to private companies shall also be applicable to OPC unless otherwise excluded from compliance.

2.    It should be treated as a private company for all legal purposes.

3.    The name of the company shall include the words ‘One Person Company.

within brackets below the name of the company.

4.    The person forming an OPC has to nominate a person with that person’s written consent as a nominee of the OPC.

5.    It should have a maximum of 15 directors, and they aren’t required to retire by rotation.
 
MANY OTHER TYPES OF COMPANIES UNDER COMPANIES ACT, 2013

1.    Holding and Subsidiary Company;
2.    Associates Company;
3.    Small Company;
4.    Government Company;
5.    Foreign Company;
6.    Producer Company;
7.    Nidhi Company;
8.    Dormant Company,
9.    Section-8 Company, etc.

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