Principal Legal Aspects Related To Startups In India
Before initiating a new business, you should know about the various aspects of the business. One of them is the legal aspect, which is very crucial. Several laws can be applicable for a business, such as a shop and an establishment, company's law, provident fund, professional tax, customs act, GST (goods and services tax) act and so forth. Not all of them will be applicable to your business.
You are required to find which laws will be applicable to your business depending upon your business's nature and ensure that the company abides with them to avoid inviting any legal battles in the future. But first, you must ensure new company registration in India online or offline post which a lot of compliance requirement may come up. Registration can be done with required documents and legal compliances by visiting the respective websites. Suppose if you want to register your company with the private limited company, then it can be done as per provisions of the companies act, 2013 under the ministry of corporate affairs.
Now, let's look into the legal aspects that govern the start-up in India.
- Selecting the right type of business.
This is the first decision you will have to make on what type of company you should register. The answer to this question can differ depending on your business's nature, long-term vision, tax benefits, and other factors such as scale and requirements for funds. You can select from LLP (limited liability partnership), partnership firm, private limited and one-person company (OPC) or even a sole proprietorship. Selecting the apt business form for one's venture goes a long way in affecting sustainability, visibility, productivity and profitability. Thus, selecting your brand will rely on long-term vision and goals. Every type of business will have its separate laws that they will have to abide by.
- Various State laws.
A business is obliged to register its office address. There are 29 states and 7 UTs in India, and if your business is registered in any of these states, then you are required to follow the state laws that might be applicable to your business. Employee professional tax, shops and commercial establishment act, stamp act, and labour laws can differ from state to state. For instance, the stamp duty payment you make to register a partnership firm in Gujarat would differ from Delhi or Maharashtra.
- Acquainting yourself with IP (intellectual property) law and its registration.
Trademark, patent and copyright are of vital importance for your business. Every business sui generis and is operated by an individual who is not thinking in the same way or developing the same product. It is crucial to safeguard your brand, patent your invention and copyright your content. It is important that you submit the right patent/copyright/trademark claims. This would also help you from theft.
- Understanding of the tax laws that are will be applicable to your business.
You are required to pay the taxes even though you like it or not. Hence, it is crucial to comprehend what all taxes will be applicable to your business and make such payments within the due date to avoid penalty. It is also vital to remember that several tax laws are applicable only to businesses that exceed the limit of turnover. In this scenario, you are not required to pay the tax. For instance, in several cases, GST registration is applicable only if the turnover of the company goes beyond Rs. 20 lacs. Such understanding would help you save costs by not paying taxes when there is no requirement and avoiding potential penalties.
- Bookkeeping is must for your business.
It is vital to maintain your books of accounts monthly or in internals, which would help you analyse the cost linked to each segment and help improve the company's performance. Right financial data can assist you while making the business's important decision, which can give productivity and efficiency to the business.
Along with the above-mentioned compliances, the company is required to comply with some governing and regulating statutory bodies such as RBI (reserve bank of India), SEBI (security and exchange board of India), ICAI (institute of chartered accountants of India), IRDA (insurance regulatory and development authority), ICSI (institute of company secretaries of India) so on and so forth relying on whether your business activity is governed or regulated by such bodies.