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Startups in India are one of the fastest growing businesses of the world. Multiple new entrepreneurs and businessmen enter into this world to set up highly profitable businesses. These startups start with very little investment and few resources but go on to extend their business to the point where it is difficult to manage different tasks. 

Startups mostly fail to realise the significance of the compliance and hence fail to maintain the health of the business. The compliances should be sincerely adhered to, failing which the company’s progress can be hindered and other several consequences such as certain disqualifications and imprisonment to the director’s or the persons in management can  be attracted. Ignoring some of the important legal compliances might lead to the strict actions by the legal agencies. 

Legal Compliance: Why does it matter?

While the startups are in the race of earning profits and staying competitive in the market, it becomes a difficult task to manage the legal requirements and become compliant to run the business ethically. 

Complying to the range of legal requirements for example: to the laws, rules and regulations can give many added advantages and benefits to the startup. Some of the important legal aspect and compliances that a startup must adhere to are:

1. Select the type of business entity to be registered:Whether the business needs to be incorporated as a sole proprietorship, partnership, company, LLP, private limited or public limited etc.

2. Business Licensing: In order to run a business entity, there are different licences that are required from various authorities known as permits and licences, which allows the businesses to operate. If the licence is not obtained from authorities, it may lead to innumerable lawsuits, penalties and fines by the authorities.  

3. Law regarding Company based Compliances: There are certain compliances from Company Law  that need to be followed by the startups like conducting the AGM’s, Board Meetings, Appointment of the Auditors and other compliances related to the company.

4. Tax Based Compliances: Based on different types of business, the taxes are levied on the business like Direct Tax and Indirect Tax. However, with the project of ‘Make In India’, new startups have been given certain exemptions from filing certain taxes like three year  tax holiday in a block of seven years, exemptions from tax on long term capital gains, exemption in tax on certain investments above fair market value etc.

5. GST Based Compliances: If the turnover of the business exceeds 40 lakhs in a financial year, then the business is required to register under GST. The limit is lowered down to 20 lakhs if the business is a service provider.

6. IPR Based Compliance: For any startup it is very important to prioritise their IP rights involved in their business. IP plays a very crucial role in a business and hence a timely registration or by entering into non-disclosure agreement the startups can protect their IP rights.

7. Compliances based on Labour Laws etc: The businesses can be subjected to various Labour Laws depending upon the types of business and therefore it is best if the legal expert opinion can be taken to analyse what labour laws are applicable to the business.

Importance of Legal Compliance:

Adhering to the laws and complying with the rules and regulations, is one of the most crucial steps to ensure that the business runs smoothly as well as the business is legally protected. It provides a backup for the efficient and successful business growth to any new business or startup. 

What is ensured by complying successfully to the regulations and laws is that the company is protected from being levied by any penalties and punishments in case of illegality and hence possibly can stay out from risk and difficulties that may come in its path of growth and success.  It can be possibly concluded that the company’s longevity in success and growth depends upon how secure and deep its legal foundations are.

Lawyered’s Startup Membership, offers verified and personalised agreements, quick solution and answer to all the legal queries raised by its members. It applies a systematic and organised problem solving approach for each issue and also provides timely information of government notifications etc.  On the whole, it protects the startups and new business entrepreneurs legally by advising them end-to-end prior to starting their business.