Startup Tool Kit
If your planning to incorporate a Startup in India, you must follow legal compliance and procedures to safeguard your business interests. Apart from company registration, they are other aspects such as Co-Founder Agreement, Intellectual Property, Business Bank and Pan Card, Digital Signature, Labour laws, and Contracts that are to be maintained for the smooth running of your business activities.
Before we get into the checklist, let us understand the definition of Startup under Indian Laws, In India, one can choose from five different types of legal entities to conduct business. These include Sole Proprietorship, Partnership Firm, Limited Liability Partnership, Private Limited Company, and Public Limited Company.
According to Startup India, The Startup should be incorporated as a private limited company, partnership firm or a limited liability partnership, Being incorporated or registered in India for less than seven years and for biotechnology startups up to 10 years from its date of incorporation. Annual turnover not exceeding Rs 25 crores in any of the preceding financial years. And it should be working towards innovation, development, or improvement of products or services, or processes.
Once a company is registered as a Startup under the Startup India platform and gets the DPIIT Recognition Certificate, it would be able to avail a wide range of benefits in terms of taxation, IP, and others.
Here's a quick checklist to help you with the formalities to be in place.
Founders Agreement: A Founders agreement is a contract that is executed between all the co-founders of a company. The Agreement sets forth the ownership, rights, responsibilities, dispute resolution, compensation, details of formal exit, the process for dissolution, and other matters related thereto. It should be executed in writing rather than on an oral statement and should be legally executed to ensure no concerns are raised by the parties in the future.
Company Registration: The Startup should be incorporated as a private limited company, partnership firm, or limited liability partnership.
Trademark: As a business entity, your product and services will have an identity that would differ your business from other parties in the market. It is essential to protect your company logo, tagline, designs, invention, and other intellectual property from misuse by other parties. By the registration of a trademark, exclusive rights to use the trademark are granted to the owner and allows the owner of the trademark to obtain an injunction against the other party for infringement or passing off. Trademarks can be registered for a period of 10 years and can be renewed by paying a nominal fee as prescribed, for further extension of time.
GST Certificate: Any business whose turnover exceeds Rs 40 lakh in a financial year is required to register under GST. This limit is Rs 20 lakh for service providers. The GST exemption limit for Northeastern and hilly states, including Arunachal Pradesh, Assam, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, and Uttarakhand, is Rs 10 lakh. In order to get the GST number, you need to apply for GST registration by visiting the GST portal i.e., www.gst.gov.in.
Business Bank Account: It is essential for a business, to have a bank account in the name of its business to undertake all the commercial transactions and also to establish the credibility of its business. Only a registered company will be able to get a business bank account, it is one of the key requirements. They are many banks in the market that can help with opening a business bank account.
Business PAN Card: Any corporate body doing business in India requires a PAN card whether it is registered in India or abroad. Any individual or entity involved in business with an Indian firm requires a PAN card. To apply for a company PAN Card, the company should be registered. One can get a company pan card, by filling in their application on NSDL website.
Digital Signature: Digital Signature is also known as DSC they are digital equivalents of physical or paper certificates. They are used to sign documents digitally, to prove one’s identity, to access information or services digitally. The main function of the DSC is to authenticate the details of the signer. It captures the date and time period when the signature was executed. ensuring there is no misuse of the signature for fraudulent use. Ministry of Corporate Affairs has made it mandatory for companies to file all reports, applications, and forms using a digital signature only. (Read more: Digital Signature Certificate)
MoU and Agreements: When two business organizations enter into a business transaction it is essential to have a Memondarum of Understanding agreement which will capture the details of the partnership, tasks to be undertaken, remedies in case of liabilities, the jurisdiction where the parties can approach the relief and process for ceasing the contract in case of Force Majeure or by notice period due to failure to carry out the activity. In terms of Legality regards to the MoU under Indian Law, the Indian Contract Act, 1872 is the principal legislation governing contracts under the system. According to Section 10 of the Act, agreements made by parties, competent to contract under the Act, of their own free will and for a lawful consideration and object are contracts. (Read More: Importance of MoU)
By-Laws related to HR Policies: Adhering to labor laws is integral for every organization, regardless of the firm size or number of employees. Some of the laws which deal with labor law are minimum wages, gratuity, PF payment, maternity benefits, sexual harassment, and others. Startups registered under the Startup India initiative can complete a self-declaration (for 9 labour laws) within one year from the date of incorporation in order and get an exemption from labour inspection. (Read More: Self Certification) Apart from the labor laws, a company should also have HR policies and workplace rules for the welfare and benefit of its employees and also to ensure compliance in terms of data security, code of conduct of its employees during and post departure from the organization regarding confidentiality material.
Legal Counsel: Timely legal advice can help protect your business interests and decision-making processes. It is essential to take your legal counsel's advice when entering into business agreements, raising funds, Intellectual property matters, and other unforeseen business decisions. Always sure that you have the right set of legal counsel teams to help you, one doesn't need to have an in-house team rather they can have a third party to work on their legal matters and affairs. Also if you're looking for legal advice in corporate matters, connect with us at firstname.lastname@example.org