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Do I need to register start up before receiving funding


01-Apr-2023 (In Startup Law)

I have a online entertainment and news website for indians(not yet incorporated) and a investor wants to invest in my startup for 10% equity stake so i want to whats the producedure means after getting funded then do i need to register my startup under private limited company and if yes then how i can allot 10% stake to investor name, is this a work of a lawyer, and how much shares is associated with that 10% equity stake who will decide that

Answers (3)

Answer #1
815 votes
At first, congratulations for clearing the hardest and most required step fr a start-up i.e. Funding. Now, in relation to your query, you need to register the start-up before raising funding because you can allot the equity when you have it. Also proper documentation in regard to funding transaction needs to be in place. Shareholder agreement, co-founder agreement (if you have co-founder) and other documents needs to be drafted.
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Advocate Kanishk Agarwal

Adv. Kanishk Agarwal

LawRato Delhi | 5+ Answers
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Answer #2
622 votes
Any funding is a subject matter of scrutiny by the Finance department of the Government of India. Further to this, in the current budget the Government has given a special focus over the start-ups and their investment procedure asking the concerned authority and department to have a look over the same. This is being done to insure that no such money is being flushed in to the market which has been earned by someone illegally. So you need to register your start up be it a LLP, Pvt Ltd Company or Public Limited Company and then a separate Contract of Equity will be signed in between you and your funding organisation to execute this funding process. Further procedure can be detailed out only if I have full papers on my table.
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Advocate Pulkit Prakash

Adv. Pulkit Prakash

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Answer #3
644 votes
Hi! Yes you must have an entity registered- it may be a Pvt. Ltd. company or a partnerships or a LLP...my experience says that start ups prefer Pvt. Ltd. company mostly. There are pros and cons for each of these business models though. Coming to your second question, yes that is indeed a lawyer's job and no one else's. I did not understand ten last bit of your question - "how much share is associated with 10per cent share" It appears that ur little clueless with co pant law aspects. I will advise you to touch base with some lawyer, understand stuff n then go ahead with investment rounds. All the best!
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Advocate Mansi Airi Gambhir

Adv. Mansi Airi Gambhir

LawRatoDelhi | 5+ Answers
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