Explore about Legal Compliance for Startups in India
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When a person thinks of Startup, there are so many things to do. The first and foremost is that business idea, then the funding, associating with people who have the potential to help grow the startup, office space, resources, and the list goes on and on. Among all this, legal requirements fall like a bomb upon those who are far away from legal knowledge. There is a list of legal compliance for Startups in India, which, if not met, may land the Startup Business in serious trouble. This not only affects the Founders but everyone working for the Startup or associated with their business. That is the importance of legal compliance for Indian Startups.
Online Legal Query offers Legal solutions for startups in India. This helps the Startup Businesses to focus on increasing their profits, while legal experts at Online Legal Query Law Firm take care of the compliance work. Here in this blog, we are addressing all the possible pointers for Startup Businesses looking forward to take care of legal compliance.
Legal Compliance for Startups
Registration an an Entity- For a startup business to come into form, it has to have a legal identity. That may be done through Company incorporation - be it a one person company, private limited company, a Partnership Firm or an LLP (Limited Liability Partnership) as well. For that purpose, it has to be registered with the Ministry of Corporate Affairs (MCA). The legal recourse for each form of entity varies, thus, the Founding Partners need to be careful while choosing the form in which the startup will take up as a juristic person.
Registration as a Startup - The Startup India Initiative by the Government of India brings several incentives and economic perks for Indian Startups. In recent years, the Government has been pushing small and medium scale businesses to acquire wealth and generate employment.
Documentation - If the Founding Partners want it to be a company incorporated under the Companies Act, 2013, they will need a Memorandum of Association (MoA) or Article of Association (AoA). If it’s an LLP, then there has to be a written agreement among partners in that regard as well.
Company Law Compliance - The legal compliance for Startups in India, which are incorporated, starts with the requisites under the Companies Act, 2013. It includes Company meetings (AGM, EGM, Board meetings, etc.), Audits, Books of Accounts, etc. It may be noted that Directors of the company are personally liable for anything done beyond their authority. Thus, it may not always be the startup that will be found at fault, but those acting on its behalf may also be unveiled for legal actions.
Required Certifications/Licenses - Industry specific license requirements and certifications must be done as part of legal compliance for startups in India. The same may be obtained from the Municipal Corporations, Food Safety and Standards Authority of India (FSSAI), Industrial License under IDR Act, Wood Based Industries License, etc.
Intellectual Properties - For a startup, protecting its intellectual property rights is crucial against any kind of infringement. The nature of IPR may vary, and the foremost thing that comes to mind for a new business is registration of Trade mark. Apart from that, as the nature of startup business goes, it may be patents for innovation, copyright for creators, etc. Among the other legal compliance for startups in India, IPR protection is totally aimed at shielding the interests of such startup business only.
Contracts and Agreements - As the startup comes into existence, and even while proceeding towards starting a business, there are several agreements which should be taken care of to avoid any future trouble. Those include Founder’s Agreement, Vendor Agreements, Employment Contracts, Investment Agreements, Customer Agreements, etc. The language of such agreements should be carefully crafted so that the interests of startups are nowhere compromised.
Tax Regulations - Timely paying the taxes is crucial for startups to keep up in the longer run. Among other legal compliance for Startups in India, payment of Income Tax and timely filing of Annual Tax Returns should not be missed at any cost. This helps build the clear track for a growing business.
Labour and Employment Laws - There are some laws governing the workplace where employers and employees coexist, stating their responsibilities and rights. The Employment and Labour Laws also lay the provisions for resolving conflicts among employers and employees. The legal compliance for Startups in India also need to be catered in this direction, to avoid any trouble. Such laws include Industrial Disputes Act, Payment of Wages Act, Maternity Benefits Act, etc.
Preparation of Accounts - As part of the legal compliance for Indian Startups, it is important to keep the Books of Accounts and Financial Statements updated. If the Company Finances are not clean, it may bring a lot of trouble for the business. Erroneous accounts shift the focus from business towards unexplained financial gains for someone else, and this may impact the startup business to an extent that the business may wind up. Thus, Preparing and keeping accounts updated is a thumb rule for startups in India.
Written by: Advocate Kalpana Sanap
