Many individuals lack a clear understanding of the difference between new business venture and a startup. While the term startup is often associated with new ventures, it doesn’t exclusively apply to them. For example, traditional businesses like restaurants, dry cleaners, or professional services firms typically aren’t categorized as startups.

The concept of startups gained prominence in the 1990s amid the proliferation of technology and internet-related enterprises.

Startups are different from small businesses. A startup is distinguishable from another one based on technology or idea. All new ventures are not startups. Startups are typically focus on developing innovative products or services that can rapidly scale and address significant market opportunities. These ventures play a pivotal role in generating wealth, fostering employment, and offering novel solutions to existing challenges.

As per Income Tax Act , an entity qualifies as a startup if it meets certain criteria outlined by the Income Tax regulations: (1.) It must be within ten years of its incorporation or registration, either as a private limited company, partnership firm, or limited liability partnership in India. (2.) Its turnover should not have exceeded one hundred crore rupees for any financial year since its establishment. (3.) The entity must be engaged in activities related to innovation, product/process development, or service improvement, or demonstrate a scalable business model with high potential for employment generation or wealth creation.

However, entities formed through the division or restructuring of existing businesses do not qualify as startups.

hence before planning for a startup registration, the entrepreneur shall consider the type of entity, business model and its potential to generate revenue and employment.