LEGAL CHECKLIST FOR START-UPS AND SMALL BUSINESSES

India has the third-largest start-up ecosystem in the world. Start-ups in the country have been able to create an estimated 40,000 new jobs over the year. India has become the hot spot for Start-ups. To allow the business of the start-up to thrive, the following checklist is a must to follow.

A start-up is a company initiated by individual founders or entrepreneurs in search of a scalable business model. Sometimes Start-ups are so very passionate about scaling their business that they forget to take care of certain issues that create trouble in the future. 

The Government of India motivates the person to start a new business. There was also a scheme started by the Government known as start-up India. There is an official website called https://www.startupindia.gov.in/ where they provide every kind of legal information regarding different types of Start-ups. If you want to start a business or start-up you must go through the website for certain clarifications.

The Companies Act, 2013 defines start-ups as “An entity that provided commercial goods and services and does not have a turnover exceeding 25 lakhs INR for the first five financial years”.  

So, before starting any start-up, one must fulfill certain legal conditions and keep in mind the below mentioned legal checklist :

1. Research Online-

One must research everything regarding the type of business they want to start online. Online research is an important part as you should know what you are getting into. On the same hand, talking and exploring new ideas for the start-up are also important. 

2. Choosing a business type-

The most basic step of starting your organization is you must decide on which type of business you want to establish. You can choose from a sole proprietorship, limited company, or a corporation. This keeps your assets and liability separate from your business in case of any lawsuits. A start-up should choose a limited company and a one-person company.

3. Place of business-

Identify the place of business you want to incorporate and set up to legally operate in all of the places you want to do business.

4. Business finance-

You should always create a separate bank account and set up the finances to ensure that the assets of your company remain separate from your assets. It is always advisable to maintain proper books of accounts from the initial step of your business. 

5. Taxes-

Taxes can create a big problem if not handled properly. Every company has to pay central, state, and local taxes. You will be in a better position if you know the basics of accounting and taxation works. Tax laws are tricky. You can always hire taxation lawyers for better understanding. 

6. Protect Intellectual Property- 

When you plan to start up your organization you do so with some ideas in place. Before you begin operating, you need to develop patent, trademark, and/or copyright protection for the products or methods that will come from ideas. This ensures no one can steal them and run on them before you can set up your business. 

7. Agreements and Contracts-

There some inside risks that run from the organization itself, you need to protect your company from that also. Any agreement you have with the co-owners or investors need to be in writing and should contain terms which are legally beneficiary for your organization. All the agreements should also have valid arbitration clauses. Non-disclosure agreements (NDA) are also necessary for some companies and should always be signed by the employees. 

8. Labour laws-

When you start your organization, you’ll have people working for you. You will need different types of specialized people and these people are all protected under the labor laws. Following labor laws will increase their productivity and morale as well. Agreements with employees must be executed keeping in mind these clauses:

A. Term of employment

B. Probation period

C. Intellectual property safeguard

D. No poaching

E. Non-solicitation

F. Terms of termination

G. Contract of service

H. Arbitration or Mediation clause in case of dispute

I. Remuneration clause    

9. Get your licenses-

Most businesses require some or the other kind of licenses. If you are a legal start-up you will need a license to offer legal advice and practice it. Similarly, other industries like construction, manufacturing, chemical factories will also require certain licenses. It is better to be safeguarded than facing some massive legal consequences because of it.

10. Hire competent legal counsel-

Start-ups are usually concerned about expenses, but one should not be concerned when it comes to having the right attorneys on your side. It is always advisable to hire legal professionals who can help you navigate through the legal and regulatory framework. The cost is worth avoiding any legal troubles.

CONCLUSION- 

Starting your business is hard. As you can see a lot of legal aspects are involved in starting your own business. Through this legal checklist, you can easily make your thing in order. It may be a little overwhelming but don’t be moralized. All you need to do is speak with a legal professional. Generally, when you start a new business you only think that the product is which need to grow, spending money on compliance and legal documentation is the last on the mind of a start-up but the right action at right time is the key factor to run a successful business.

This article is purely for educational purposes and shall not be misconstrued as a piece of professional advice. If done so the people at The Legal Cartel along with the author shall not be responsible for any loss or harm incurred whatsoever. 

About the author: The author is an advocate practicing before the Hon'ble High Court of Madhya Pradesh Bench at Indore and the Lower Courts below. For further clarification, kindly consult the author.