Legal Compliances Needs for Software Companies

Saptaparni Raha
Dec 25, 2022
3 min read

Written by Saptaparni Raha, Lawyer

Introduction

The Central Government of India took several initiatives like Startup India, Make in India, Digital India, etc. These initiatives renewed the importance of innovation in the technology space. With an increasing number of online shopping, concepts like the internet of things are quickly catching up, and cloud computing is growing by leaps and bounds. These tech businesses have introduced many concepts like software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS). These software and IT companies need certain legal compliances to start and run their business effectively.

Read further to know more about the nitty-gritty of software companies that could be of help to someone if they want to incorporate their own company.

Types of Software Companies

Service and consulting based company like Wipro and TCS
Product and development based company like Amazon, and Microsoft

Few Important Legal Compliances

Domain name

All registrations, whether for a corporation, limited liability partnership, or partnership, must include a business name. Similarly, your software company needs to have a distinct identity. It is critical to secure ownership of your domain name to demonstrate your online presence to your clients.

Ownership over intellectual property

It is important to have ownership of your intellectual property, like trademarks, patents, etc. If you find a case of infringement like misuse of your brand name, logo, or goodwill, you can establish your right over intellectual property with ease. You must seek a patent registration at the earliest for your scientific innovation, as the average time taken from filling to the actual grant is about five years in India.

Insurance

Software companies must get insurance to protect themselves from natural disasters like heavy rains and fire. Companies also need to cover the risk of default if they take any debts with their asset-based collateral.

Protection against data leaks

Your carelessness in the workplace could have disastrous results. If there is a chance of heating, short-circuiting, and Wi-Fi issues, the organization may experience a confidential data breach, which could have far-reaching negative effects. Therefore, the business's owner must exercise caution and be aware of all such situations.

Security, accountability, and audit

The privacy policy must be published on the website and made accessible. It must state the type of data collected, disclosure of information, and reasonable security. Companies are liable to perform a yearly audit of such practices and procedures.

Incorporation of Software Companies

A software company can be registered under the Companies Act, 2013, like other companies.
Such a business can be a partnership, limited liability partnership, private limited company, and one-person company.
The minimum number of members should be two, and the maximum number be eight.
Companies need to provide a brief description of their business that includes the types of products, fields, targets, and technologies they will use.
Companies need to register under the registrars of companies.
The new software companies need to obtain the Software Technology Parks India license that provides benefits like zero tax rates for the initial five years and no export or import duty for hardware and software products.

License and Legal Registration Required for a New Software Company

GST Registration
Trademark registration and protect your brand name
Copyright registration on your source code
Patent registration for new technology innovation
Software license agreement

Conclusion

Due to the advancement of technology, software companies play a crucial role in the satisfaction of clients. Nowadays, there are issues like data theft, insurance, and trademarks arising with these software companies. So to deal with these problems, companies need to go through certain legal compliances and register themselves as a company under the Companies Act.