Oct 27,2018 | 15 min read

Corporate Law And Legal Compliance: An Introduction To Legal Setup For Startups

Bubbling with excitement and ambition, you’ve put your heart and soul into building an organization from the ground up, the likes of which has never been seen in India before! Your idea is fresh, and sure to affect the lives of millions! But all of a sudden without warning or intimation, you find yourself defending missing legal compliances for a corporate law you didn’t even know existed! Or worse still, a rival opens up shop, with a strikingly similar product, capturing your target market.

And before you start developing any grandiose ideas of defending your startup in court, relying on the common sense of your peers and a sympathetic judge - let me say, it just doesn’t work like that. Dispute resolution in the Indian legal system is a long and arduous journey, with no certainty of outcome.

Protect yourself. No one else will!

For those developing a proprietary product or service, it would be wise to consider patenting. There is a process for provisional patenting, which applies a ‘patent pending’ label to your product and prevents competitors from developing a similar one.

Note that patenting does not extend only to physical products or services. Under the purview of intellectual property, you can now protect and patent digital assets as well.

Startups with many people in their employ would benefit from making their employees sign a non-compete clause, which prevents them from setting up rival businesses or stealing clients. Similarly, a non disclosure agreement can halt workers from sharing details of your product.

Business Registration There exist numerous types of business registration, each covering a different form of legal entity.

  • Products and services do not need business registration, rather they are trademarked.
  • Business names, used to identify a business, need to be registered.
  • Company names need to be registered.
  • Domain names, used to identify your website, need to be registered.

You may notice I have mentioned business names and company names separately. This is because, they are both separate legal entities, as we will now discuss.

Types of Legal Entities

A legal entity refers to the different types of organizations bound by legal rights and obligations as defined under corporate law. The different forms of legal entities are:

  • Sole Proprietorship
    A business owned by one person. Sole proprietors own all assets, but are also responsible for liability and debt.
  • Partnership
    Any business owned by two or more people is by default a partnership. Partners are all equally responsible for liability and debt.
  • Corporation
    For this type of legal entity, all corporate compliance of liability and debt falls upon the business, instead of owners. According to corporate tax law, companies file taxes separately from owners.
  • Limited Liability Company
    A mixture of corporate, partnership and sole proprietorship, LLCs can be taxed as corporations or as proprietorships - as they choose.
  • S-Corporation
    S-corporations pass all income, credit, loss and deductions directly to shareholders. All shareholders are required to report income and loss on personal tax returns.

For hassle-free business registration of your startup, and advice on legal compliance of corporate law, head over to Lawyered - India’s leading online platform for legal discovery.

Find us at Lawyered.in OR Post Your Requirement

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Lawyered Team

Lawyered Team