Introduction
The startup culture boom in India has caused a wave of entry to new entrepreneurs to the Indian market which according to the DPIIT (Department for Promotion of Industry and Internal Trade) report, start-ups have created more than 900,000 jobs in the past three year. However, there are various legal complexities surrounding the establishment and running of a start-up in India. Registering a business from scratch or running an already established business – both need legal experts for a smooth workflow and to make the business legally compliant as well as transparent in its documentation.
Laws Governing Businesses in India
India has multifaceted regulations encompassing various laws legislated to regulate business activities.
- The Companies Act, 2013, is the cornerstone of company law in India, providing the requirements for company registration, governance, and compliance. The Act regulates the formation of companies, their management, and the duties of directors, among other aspects.
- Intellectual Property Rights (IPR) are crucial for start-ups to protect their innovations. The Patents Act, 1970, the Trade Marks Act, 1999, and the Copyright Act, 1957, provide the legal framework for protecting inventions, brand names, and creative works respectively.
- The labour regulations in India, including the Industrial Disputes Act, 1947, and the Shops and Establishments Act, regulate employment practices, workplace conditions, and dispute resolution.
Indian Start-up Regulations and Legal Issues-
- Dilemma Regarding Incorporation of the Company- Setting up a start-up requires an understanding and foresight by the founders into the future of the business and the liability of the investors. Therefore, incorporation of a business plays a pivotal part in the future of the company. Choosing a right structure for incorporation becomes crucial for the founder along with understanding the liabilities attached to it. The three crucial points to consider before incorporation is-
- Choosing the Right Business Structure Considering the liability the investors are ready to take up
- Obtaining necessary licenses and permits
- Information about the Tax and Labour Compliance and the benefits the entity can receive
- Protecting Intellectual Property- Indian start-ups must safeguard their intellectual property. The term intellectual property (IP) encompasses all works of literature, art, inventions, and commercially exploited names, symbols, and pictures. For entrepreneurs who are unfamiliar with the legal requirements and procedures involved, the Indian legal framework governing intellectual property can be exceptionally complicated and challenging to understand. When it comes to safeguarding their intellectual property, businesses encounter several obstacles including registering trademarks that is crucial to safeguarding your brand and setting it apart from rivals, your brand may be open to imitation and infringement.
- An Understanding Regarding Tax Regulation- Numerous Indian business owners frequently make mistakes when adhering to tax laws, which can have detrimental effects. When following tax laws, it is important to consider some frequent errors made by owners like ignoring GST compliance (Companies with yearly sales exceeding Rs. 40 lakhs are required to register for the Goods and Services Tax (GST)) There may be penalties and fines for not registering for GST. Major error occurs as businesses flout the importance to keep correct records maintaining the precise documentation of every financial transaction is necessary to adhere to tax laws.
We have often seen that entrepreneurs may be passionate on their business models and vision they sometimes make a mistake in not complying with the legal requirements and then face legal complications. This is not done intentionally but usually due to oversight of not even knowing about such operational requirement. It is therefore worthwhile to hire a law firm which has trained resources from various fields of HR, licensing, leasing etc. to navigate the complexities. A full service law firm will offer a back end legal team at minimal cost to opine and navigate a start up in its documentation and compliance needs.
