Image Credit – Direct Cannabis Network
As a start-up, your business is probably all set to disrupt the market with its innovation and fresh new ideas. With all that excitement bubbling inside, it is easy to get carried away and overlook the crucial (and often boring) aspects of the legal framework of your company.
That is when you get into trouble for ignoring the fine print of a law or have someone take you for a ride as you watch helplessly.
I strongly recommend that you hire a legal consultant in the beginning of your venture to make life easier – trust me it is worth the investment. However, as a business owner, you should not come across as a babe in the woods and must be familiar with some broad legalities too.
While I am certain your legal counsel will have a checklist or a ready reckoner for your company, here are a few basics that you must get acquainted with:
- The business structure and company registration
The nature of the business is the first thing you need to be clear about; whether it is a partnership or an individual proprietorship, private limited, public limited or an LLC.
The legalities for each of these business types differ and depend on which category you fall into.
Usually, registering the venture as a private limited company is recommended for start-ups since it offers flexibility when you raise external funding.
- Licencing & Taxation
Not having the right licenses can cause your business to shut down – it is as simple as that. A small oversight can lead to a loss of money and more importantly, your dream.
Not only that, if you are found operating without the requisite license, you could additionally be sued by your clients.
Some of these licenses include business licence, Import Export Code, Food Safety & Standard Authority of India (FSSAI) registration if you are in the food business and others.
The implementation of the GST may have made life simpler since you know longer have to get into VAT, Service Tax etc but you still need a good tax consultant who can help you with it.
- Labour Laws
As a start-up, you will be employing a lot of human resources falling into different categories – permanent, part time, freelancers, consultants, contractors and others.
Regardless of the fact that you are just beginning, you will be expected to comply with a host of labour laws such as minimum wages, Provident Fund, weekly offs, maternity leave, sexual harassment policies and others.
Addressing this will not only ensure that you are clear from a legal perspective but will also reassure your associates and employees that you know what you are doing and care about their welfare.
- Intellectual Property & NDAs
With new ideas bursting out every single day and innovation becoming more and more competitive, it is your duty to protect your intellectual property, irrespective of the nature of business.
Earlier it used to be limited to only tech centric ventures, but it is no longer so. You could be opening a restaurant and be forced to change its name because someone else has taken it. If you are a creative agency, a client may use the ideas from your pitch presentation and implement it through another agency. Similarly, a freelancer you hire may share confidential business data with a competitor.
The government’s Startup India initiative has made life simpler for a lot of us and you can leverage its Scheme for Startups Intellectual Property Protection or SIPP for your business.
A Non-disclosure Agreement is also a useful way to reduce risk of your ideas being stolen.
- Contract management
As an entrepreneur, you will be entering into agreements and contracts in different categories – employee contracts, vendor contracts, client contracts and others.
My recommendation is that you do not use a cookie cutter approach for this. Yes, there are hundreds of templates available online but you must have each agreement drafted and vetted by your legal counsel, keeping in perspective the need of the company and nature of agreement.
This will help you in several ways such as getting payments on time, ensuring timely delivery of work and others.
- Information Technology Laws
Irrespective of the nature of your business, technology will play a huge part of it. The way we depend on technology to improve our ventures also makes us vulnerable to the darker side of it.
You do not want to get involved with data theft, online privacy breach or have your client’s data hacked out of your systems.
Familiarise yourself with the latest IT Act and how it applies to you. Remember, information security is everyone’s business.
- Winding up
You may not want to think about it when you are embarking on a new venture, but from a legal point of view, you must be prepared for the difficult call of winding up your business.
There are three ways in which you can do this – Fast Track Exit Mode, Court/Tribunal and Voluntary Closure.
Personally, I have noticed that the Fast Track Exit Mode is best suited for start-ups since it helps you wind up at a lower cost and a shorter period of time. To be eligible for this method you should not have any assets and liabilities or have had any business operations for the last one year.
Another new addition to the law for winding up is the Insolvency and Bankruptcy Bill 2015 wherein you can hire an insolvency professional to liquidate your assets within 90 days, which is in accordance with the Startup India Action Plan.
This was just a basic list of laws that you should be aware about. I would love to hear your thoughts on others that you believe could be useful in the comments below.
As author Sonja Foust once said, “If it’s your dream and your life and your business, you need to be responsible for protecting it.”
