A successful startup is one that is carried by an entrepreneur who is focussed on building a unique solution that in return, would deliver customer satisfaction. Hence it is important to have a clear focus over customers and the company defined market but on the other hand, it is equally a must to have a good understanding about the basic country laws meaning regarding the rules and regulations that is particularly needful for the smooth running of any business. From formalizing the founders’ agreement to safeguarding the intellectual property to enforcing any business contracts, entrepreneurs must be aware of the laws governing startup registration in India. Thus, knowledge regarding the legal basis is a must for a startup in India before embarking on any business venture in the country.
What is a Startup?
A startup can be defined as a newly established business that is generally considered as a small setup, which can even be started off by any one person or maybe a group of individuals.
One can differ it on the basis that a startup offers a totally new product or service that is completely different, from all sorts/kinds of service provided to date in the market. The main motto of any startup is “innovation,” i.e. it will either develop a new product/service or will recreate any previous or current product/service into a completely new and in a market familiar manner that would directly help its consumers.
Legal Requirements For Startup Registration
- Formalizing a business structure, its registration, and founders agreement: Before beginning the startup registration process, one thing must be made clear in mind regarding the nature and type of the business. Founders have to incorporate the company as a specific business type such as sole proprietorship, private limited, public limited, partnership, and limited liability partnership, etc. It is essential to have this clarity in mind from the start as it will be an integral part of the business from a future perspective. One then needs to follow all the standard procedures for startup registration under the Companies Act, 2013 regarding any business like obtaining the certificate of incorporation/partnership registration, PAN, and other required compliances.
Documents Required For Startup Registration
- Digital Signature Certificate (DSC)
- Director Identification Number (DIN)
- Name reservation
- Certificate of Incorporation (CIN)
- Memorandum of Association (MOA)
- Article of Association (AOA)
- Permanent Account Number (PAN)
- Tax Deduction and Collection Account Number (TAN)
- Applying for business licenses: A Business license is a legal document that must allow any business (legal) to operate in India, while startup registration is stated as the official process of listing a business with the ROC. Business Licenses are an integral part of starting a new business in India, depending on the nature/size of the company, numerous licenses are applicable. To keep a check and knowledge regarding the appropriate licenses for one’s own startup and thereby obtaining them must first on the checklist before starting any business. The lack of these relevant licenses may lead to costly lawsuits and unwanted legal battles, if not obtained on time.
The standard license that applies to all businesses in the Shop and Establishment Act, which applies to all premises where trade, business or profession is carried out. Other business licenses vary from industry to industry.
- Documentation required by a Startup
Once the startup registration process is over, and the business incorporation is done, a startup needs the following internal and external documentation done. Proper drafting and legal vetting is required for corporate commercial contracts and seeking guidance from a documentation expert become necessary rather than choosing the online agreement templates.
- Employee Contracts and Offer Letters
- Intellectual Property Agreement: An IP agreement must be the key legal document that determines whether one’s startup may attract the investments it needs in order to grow rapidly.
- Bylaws: It establishes the internal rules of the company like how to settle disputes, select leadership and determine the rights and powers of shareholders.
- Non-Disclosure Agreement (NDA): Having NDA readily available is imperative before any business conversations take place between a startup and an outside party. These NDAs protect one’s startup by safeguarding its founder and employees ideas and most importantly, the intellectual property.
- Shareholder Agreements: When a startup is ready to take on private investments, respective CEOs must create a shareholder agreement that determines the rights of shareholders and defines when they can exercise those rights.
- Ensuring protection of intellectual property: Intellectual property is a must for any business, especially for the tech-centric business model. Impulsive Codes, different algorithms, and several research findings and many more are said to be the most common intellectual property owned by these organizations as of now. Startups can also use the Scheme for Startups Intellectual Property Protection (SIPP) under the Startup India initiative by the Government of India. This particular scheme was set-up to nurture and mentor innovative and emerging technologies among startups and help in the protection and commercialization of intellectual property.
Adhering to every legal requirement and knowledge of compliance with applicable laws can be stated as the first step to ensure the smooth business operation once the startup registration formalities are taken care of.
Hiring an expert legal counsel for providing advice, oversee, and maintain all sorts of legal records is the best solution ensure that one’s company is always safe and will not face any legal complications or consequences. LetsComply is the one-stop solution for all sorts of facilities one requires for startup registration in India. To know more, call us at +91-9717070500 or send an email at firstname.lastname@example.org.