Today the number of
startup concerns are quite increasing. The percentage of legal challenges faced
by a startup is also proportionately increasing. Startups focus more on
building their business and brand. Unfortunately, they ignore the legal
component of setting up of a business and building the same. There are few
legal aspects which every startup must consider before and after starting a
business.
Law is just not dispute
resolution. The trend that a legal consultant should be approached only in
event of a dispute is slowly changing. Role of a consultant is not just to
safeguard when an entrepreneur land up in a problem but also to give ample
guidance to ensure that a business is in par with statutory / legal
compliance.
Here are few basic
legal decisions / practices which every business aspirant / start should
consider at the beginning stage of the business.
1.
Register your entity: Every
startup need not be a registered entity. It can be a sole proprietorship or an
unregistered partnership. There is no legal mandate for registration of a business.
However any entity formation or a registration has its own advantages in terms
of a business development. It protects your brand and improves your business
credibility.
The
following are various types of entities and their corresponding Statutory Authorities:
Nature of
Entity
|
Authority
|
Public/Private
Limited Company
|
The Registrar
of Companies
|
Limited Liability
Partnership (LLP)
|
The Registrar
of Companies
|
Partnership
Firm
|
The Registrar
of Firms
|
Based on the business
requirements (both short term and long term), one should choose the manner in
which the entity is to be incorporated. While deciding the same various legal
parameters should be analyzed.
2.
Document Everything:
Documentation is the core component of every business. It has two fold
implications – Proper documentation is a value addition to the credibility of
the entity. On the other hand, incomplete/ineffective documentation is the
major reason for litigation in many situations. Every business entity should
invest time and effort in drafting of agreements of contracts (External
documentation) and maintenance of business returns and registers (Internal
documentation).
3.
Protect your IP:
Intellectual property plays a major role in this era of technological
development as IP infringement cases are increasing day by day. Right from your
business name and logo to your trade secrets, literary works/publications and
designs everything can be registered as Trademarks, Designs, Copyrights and
Patents. Registration of your IP not only protects your brand at the local
level but at the international level.
4.
Statutory
Approvals / Compliance:
To
commence a business entity formation is the first step and not the only step.
There are other industry specific approvals to be obtained to commence and
continue business operations. For instance every packer/manufacturer or
importer of packaged commodities should obtain a license from Controller of
Legal Metrology.
Similar
to approvals, compliance is another important component of every business. Right from maintenance of documents,
periodical filings to manner in which the business is to be conducted adherence
to law is important. Companies should comply with the requirements of Companies
Act 2013. All business entities should follow tax laws applicable to them.
Compliance
play a huge rule in business acquisitions and appreciates the business image to
a greater extent. On the other hand, non- compliance in many cases lead to huge
penalties and legal proceedings which hinder the growth of the business.
5.
Plan your finance: Financial planning is
not just making financial decisions in the light of present business
requirements. An effective financial planning should involve forecasting future
implications of the said decision in light of the business entity’s
environment. A wise financial planning should not always stick to the decisions
that are cost effective. Tax planning, management control are few other
parameters in valuation of a financial decision.