Nov 05,2019 | 17 min read

Laws for Startups

Author - Associate Shereen Abdin

In recent years, the rise of start-ups in India by budding enthusiastic entrepreneurs has become vibrant. These start-ups intend to deliver quality solutions to the customer. To achieve this, it is important to have a good insight into the laws and rules to run your business prosperously.

Let us look into the basic laws that every start-up should be aware of before launching an enterprise venture.

Formalizing a business structure and owner’s agreement

The foremost thing to consider before launching a business is to categorise the business type. The business type may be a sole proprietorship, private limited, partnership-oriented etc. Each type of business holds a different set of rules and regulations and necessary to have visibility before starting any venture.

Let us look into the basic laws that every start-up should be aware of before launching an enterprise venture.

Taxation

Tax is unavoidable for any business and paying them on time reduces any business risk. Being aware of your local and international GST tax code is a mandate to file the tax to be paid to the government. There is an online GST portal created for this purpose wherein the start-up owner has to submit his Aadhar and PAN in the portal to get himself registered for the tax process.

Recently Government of India launched the ‘Start-up Initiative’ to help start-ups utilise the tax exemptions and holidays. The prerequisites for the above are the start-up must be less than 10 years and the turn over value should not exceed 25 cores.

1. Roc Registration

Legal registration is essential for any company to establish its identity with customers and stakeholders. Under this section, start-ups should register as an LLP, Pvt Ltd or Corporation depending on the standards to be followed. There is also a provision to register as a One Person Company (OPC), which involves only one founder.

2. Service Agreement and Documentation

There is a potential need for agreements that assist in running a business sleekly if things go wrong. You need to fix an SLA with every vendor, customer, client etc. and must ensure all the laws adhere when composing these agreements. Every agreement must clearly define the guidelines and the span of the service agreed as per terms.

3. IT and Cyber Laws

All start-ups must be compliant with cyber and IT tech laws, which includes digital signatures, customer data, cloud management, and data privacy. Technology-based start-ups must follow these IT laws and directions to have a hassle-free business.

4. Intellectual Property Rules

The intellectual property of a company plays a pivotal role in tech-oriented businesses today. Codes, algorithms, and research documents connect to the IP’s of a company. The law was launched to sustain innovative technologies among start-ups and helps in the protection of intellectual property. Every startup should adhere to this law by utilising the Start-ups Intellectual Property Protection (SIPP) under the initiatives taken by the Govt.

5. Adhering to labour laws

As the liable owner of a company, you are obliged to follow certain labour laws and entitled to provide fair remuneration. This requires a legal counsel to analyse the laws required for your startup and provide direction on the laws to adhere. Laws coming under this regard are minimum wages, gratuity, PF Payment, maternity benefits, sexual harassment, and bonus to employees.

The nine laws are:

  1. The Industrial Disputes Act, 1947.
  2. The Trade Unit Act, 1926.
  3. Employment and Conditions of Service Act, 1996.
  4. The Industrial Employment Act, 1979
  5. The Payment of Gratuity Act, 1972.
  6. The Contract Labour Act, 1970
  7. The Employs PF Act, 1952.
  8. The Employees State Insurance Act, 1948
  9. The Trade Unit Act, 1926

6. Ensuring Contract Management

A well-drafted contract is a lifeline for running any business.

Employee contracts are mandated when starting a small enterprise. This details the nature of work, salary; leave benefits which will provide a mutual understanding between the owner and the employee. This will avoid the risk of delayed deliveries or project call –off due to lack of labour to complete the work.

Another important deal is the signing of the Non-Disclosure Agreement (NDA). This will be useful for new enterprises in preserving their private information and software, which in turn ensures a safe business in this competitive market.


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