For stating a new business, one of the stepping stones is knowing the laws related to start-ups in India.
Some of the basic laws which a start-up must consider are as follows: –
- Incorporation: –
The very first step in launching a start-up is to decide the kind of business venture it is, followed by its incorporation as per existing company law.
- Labour laws: –
As the start-up may eventually have to hire employees, whether on a consultancy basis or otherwise, it is advisable to look into compliances under the labour legislations.
- Basics of accounting and tax related laws: –
Running any kind of business means that one has to pay taxes to the Central/State government or local bodies. Therefore, it becomes a necessity for every new entrepreneur to be aware about accounting details and tricky lanes of the taxation world.
- Choosing the type of venture: –
The most important thing before pulling up a startup is knowing what kind of organization you want to set up. It can be a private limited company, public limited company, partnership firm, or a limited liability partnership.
Structuring the organization and business vehicle may take some time. It will vary according to your long term objectives and vision.However, an entrepreneur needs to be careful that finer points in the existing legal framework have been taken care of.Each form of business will be governed by separate laws and not complying with them means loss in the form of heavy fines before you can even start making profit.
- Securities and Exchange Board of India (SEBI): –
Familiarity with Securities laws which is carefully regulated by the Securities and Exchange Board of India (SEBI) will aid in easing out the process of listing.
Keeping a track of various updated regulations issued by SEBI will assist in managing the various stages of nurturing a new business, including fund-raising.
- Corporate governance: –
A running-knowledge about corporate governance will help a budding entrepreneur to effectively manage and formulate further expansion plans.
- IT laws: –
We are living in a technologically advanced era where things like e-contracts, cloud computing, digital signatures, securing confidential data from hackers, cloud computing, protecting your privacy are not only very common but extremely important too.
Knowledge of IT laws will help in exploring these avenues and thus, growing your business.
- Contract laws and dispute resolution: –
A business survives on contracts. Nevertheless, disputes may be one of the unavoidable consequences of few contracts sometimes. Therefore, fundamental knowledge regarding contracts, arbitration, mediation, conciliation can smoothen the progress of a successful business.
- Intellectual property laws: –
Legally protecting intellectual property is of supreme importance to any business. Timely IP audits, filing the accurate trademark/copyright/ patent claims will not only protect your business but increase profits too.
- Knowledge related to government contracts: –
This might not be extremely necessary but a successful venture depends upon a steady flow of funds. Bidding for government contracts can create wonderful opportunities for growth, revenues and reputation building.Hence, knowing about all the above legalities can help out in smooth sailing even on a rough sea.
Rules by RBI: –
The Reserve Bank of India (RBI) has also allowed the Indian Startups to raise funds through ‘Convertible Note’ which means an instrument issued by a startup company evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into equity shares of the startup company, within a period not exceeding five years from the date of issue on the occurrence of certain specified events as per the other terms and conditions agreed to. A person resident outside India can purchase these convertible notes issued by an Indian startup company for an amount of ₹25 lakh or more in a single tranche. But a startup engaged in a sector where investment by a person resident outside India requires government approval can issue convertible notes to a person resident outside India only with such approval. Again issue of equity shares against such convertible notes has to be in compliance with the entry route and pricing guidelines.
A sound knowledge of all the legal intricacies in starting and managing the startups can help a long way to scale up the startups which will in turn result in the overall growth of the Indian economy.