The early stages of setting up a new business will be time consuming for the founders – developing the product/service, building the team, structuring the company, attracting investments, key partnerships and marketing plans. Amid all this legal compliance related activities takes a back seat leading to legal and financial woes in the long run. Hence, it is equally important and critical that you understand the legal basics. The FIVE basic legal categories required for start-ups and small businesses.
Company Formation & Compliance
While starting up, first thing to be finalized is the legal format of your start-up. Will it be a Limited Liability Company or Private Limited Company or Partnership Firm? However, there are pros & cons in every format. Choose your format based on factors like the business objectives, nature of business, long term goals, etc. There are various incorporation requirements that you need to complete while setting up your business and also ensure periodical compliances, more specifically, with the Registrar of Companies (RoC).
Taxation & Accounting
Accounting and Taxation are another vital legal basics must for you as an entrepreneur. Taxation is both Direct and Indirect. With regard to indirect taxation, a lot has changed with the rollout of Goods and Services Tax (GST) a unified tax structure. You have to make periodical online filings along with payments. On the direct tax side, Income Tax returns, Tax Deduction at Source (TDS) and payment of the same are your annual tasks.
Dispute Resolution & Contract Laws
As you start, you are to have various form of relationships with multiple businesses and individuals – co-founders, employees, customers, vendors, investors, etc. You need to formalize these relationships to ensure clarity and reduced uncertainties. When you are signing an agreement or contract both parties are agreeing to certain conditions and at times the same can quickly turn into disagreements and result into a dispute. You have to have some knowledge on the contract laws that will help you in dispute resolution.
First and foremost, owning Intellectual Property Right will be the USP of your products or services and it will help creating a high entry barrier for your business. This will have a positive and substantial impact in your marketing. In fact, owning an Intellectual Property is an asset and carries commercial value. It will also help you a lot while fund raising. You should remember that assessing IP is not just about protecting the work you are doing, but it also to check if someone else has an IP for similar work.
When you are established as a company and have hired people to work for your organization, you are subject to several labour laws regardless of the size of the organization or number of employees. However, with regards to labour laws, start-ups registered under the Start-up India initiative can complete a self-declaration (for nine labour laws) within one year from the date of incorporation in order and get an exemption from labour inspection.
The existing dynamic statutory environ has made knowledge and compliance to applicable laws a challenge for entrepreneurs particularly those at the nurturing stages. It is best to outsource a legal counsel to advice and oversee your legal compliance tasks to ensure impeccable compliance in an economical way.