Home > Income Tax > Help Center > Startup vs MSME Last Updated: Oct 20th 2023
Startup vs MSME: What's the difference ?
While both the Startups and MSMEs are defined for a specific purpose, Govt. of India promotes both such organisations to promote budding businesses.
Many times its quite confusing to understand what they really are ? Get to know the difference, legal definition, how to start, getting recognition, purpose of getting loans to kick start such organisations.
This document covers
1. Startup
A startup is defined as an organisation to develop a repeatable and scalable business model. Startups typically pursue novel ideas that has the potential to generate larger employment, productivity improvements, transformational technologies to drive economy, lifestyles.
Legal definition from The Ministry of Commerce and Industry, Government of India, a Startup is
- The Startup should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership
- Turnover should be less than Rs. 100 Crores in any of the previous financial years
- An entity shall be considered as a startup up to 10 years from the date of its incorporation
- The Startup should be working towards innovation / improvement of existing products, services and processes and should have the potential to generate employment and / or wealth creation. An entity formed by splitting up or reconstruction of an existing business shall not be considered a 'Startup'
2. MSME
An MSME (Micro, Small and Medium Enterprises) is an " independently owned and operated enterprise, designed for profit and sells known products to known customers in local markets ".
The MSMEs are further sub-divided into a Manufacturing and Service Enterprises. For manufacturing, the investment ranges from Rs. 0 to Rs. 10 crores, and in the case of Service enterprise, the investment varies from Rs. 0 to Rs. 5 crores.
Check more on upcoming new definition of MSME @ new definition
A business needs to register as MSME to get the benefits provided by the Ministry of Commerce in availing skill development and training, long and medium term loans, working capital loans, seed loans, and bridge loans.
- HOW ? Start Udyam Aadhaar registration @ Register Udyam Aadhaar (earlier Udyog Aadhaar) for MSME Registration
- Get help from experts to register, refer MSME Registration Service from EZTax.in
- Who is MSME ? refer Who is MSME ? Proposed changes to the MSME definition
3. Frequently Asked Questions (FAQs)
Startup is a business first, if it meets the definition of a "Startup", follow below steps
- Incorporate the organisation as a private limited company or registered as a partnership firm or a limited liability partnership
- Get it registered using Udyam Aadhaar to get identified as MSME.
- Get Startup Recognition & Tax Exemption
Refer a detailed document in explaining Step-by-Step process on how to start a business in India ?
Submit your application for the Startup recognition at Startup India Portal
For example, MYD Labs Private Limited (brand EZTax.in Parent Organisation) incorporated on Mar 10th Mar 2016 is recognised as a Startup and received a certificate on Jun 12th 2017.
Download and Check the Startup recognition certificate @ Govt. of India, Startup recognition certificate from DIPP
It is important to have an Organisation registered as a Startup / MSME for the intended benefits. Top reasons to get a Loan under the MSME / Startup schemes in India are
- To start the business using Seed Funding
- To fund the Business Expansion
- To invest in new tools, technology, equipment
- To cover Working Capital requirements
- To procure raw material
- To stock up new inventory
- To spend on marketing and promotion
Visit Govt of India Portal udyamregistration.gov.in/ to register and maintain.