Startup and Legal Documentation

Introduction

In India Startup is the new innovative idea where the practical application and expression of an idea are implemented to be worked on. A startup can be in two forms i.e. partnership and sole proprietorship. It does not fall into the proper corporate culture at its initial stage but it has the legal responsibilities to be fulfilled while starting the business.

There are 8 basic legal responsibilities such as:

Proper business structure: The founder of the startup needs to understand and apply the proper business structure because different business structures have different business applications to carry out the business. There are different types of businesses like proprietorship, partnership, limited liability partnership, and private limited company. So there are different basic legal details like registration, legal status, taxation, member liability, number of members allowed, etc.

Licensing Business Laws: A license is the most important document for every business. So the founder of the startup needs to start the licensing issuing process to stay away from the legal battles.

Taxation and Accounting Laws: There are many tax exemptions for startups launched by the government scheme of startups in India. Every business has its own tax policy that needs to be applied according to the business structure.

Labour Laws: Every business organization must have labour laws to protect the work culture of that organization.

Following labour laws must be implemented such as:

• The Industrial Dispute Act,1947

• The Trade Union Act,1926

• The Inter-state migrant workmen Act,1979

• The Payment of Gratuity Act,1972

• The Employees’ provident fund Act,1952

• The Contract Labour Act,1970

• The Maternity Benefits Act

Intellectual Property Rights Protection: Every startup shall have a trademark, copyrights, and design protection. As per the new regulations initiated by the government of India, the patent fees have been reduced up to 80%.

Foreign Investments: To encourage foreign investment in the startup there are regulations for foreign venture capital investors. Foreign exchange management Act in its schedule 6 and the third amendment has used to regulate investments.

Business contract Management: There must be a proper legal contract under section 10 of the Indian Contract Act. There is an employment contract for every business which should be drafted properly. Non -disclosure agreements are mandatory in maintaining the privacy of the company.

Winding Up: A business must know about winding up to deal with the worst situation. There are 3 modes of winding up such are first track exit, court or tribunal route, and voluntary closure.

Essential Documents Required for startup

Trademark Registration:

To protect the brand name of your company trademark registration is very important. There is a disadvantage you may find when you register with the trademark office: everyone with a similar sounding name is alerted and allowed to object, so you may find that people who wouldn’t have been interested in what you were doing will start paying attention to your work due to your catchy trademark.

Article of Association:

There is a common mistake most startup founders make is failing to put the proper business structure in place. A sole proprietorship can be set up when it results in huge income tax bills and legal liabilities because of their own irresponsibility.

Non Disclosure Agreement:

A non-Disclosure Agreement is the first piece of paper that you need to reach out for when dealing with any client or investor. This agreement ensures the privacy of your company. Non-disclosure agreements work as an asset to keep the reign tight on your employees.

Employee contracts and offer letters:

A team is very crucial to set up your business for success. There are reasons why you need to ensure proper contracts for each new addition of employee to your organization for your growth. This contract may also be important at the initial stage of your startup.

Shareholder’s Agreement

If your startup is ready to move ahead with private investments then you must need a Shareholder’s Agreement to be put in place. This document helps to determine the rights and liabilities of these shareholders and their ability to exercise these rights.

Bylaws

Every startup and company needs some set of rules to run their office. Bylaws act as those sets of rules. It ensures the smooth and pleasant work culture of any startup or company, voting rights to select leadership, the election of board members or taking approvals as well as other internal functioning of the organization are included but not limited in Bylaws.

Conclusion

These legal frameworks and documents do not ensure the success of your new startups but they ensure the utmost protection of your company. If you have these legal documents with you, your company will create trust in the market. So, it is necessary to put some effort into getting the legal formalities for a brighter future as a company.

REFERENCES

• Drishti Dasgupta: Laws for startup entrepreneurship

• Khusbu Sharma(24 Sep 2021): Indian Laws you need to know for your startup

• 10 essential legal documents for startups, legalwiz ( Feb7, 2020 )

Find us on LinkedIn, Instagram, and Facebook for more information.