How to Start a Business: The Legal Angle

How to start a business? It all starts with a registration of a private limited company. With that, yes, you have taken baby steps towards setting up your company. Now, what next? Incidentally, there is a lot more that a startup has to take care when it comes to legal aspects. However, it's nothing to be intimidated by. The legal aspects are to basically act as a defense mechanism. Let us start with some fundamentals of how to start a business, with a focus on the legal angle.

Do you have a co-founder agreement?

It is quite possible that you have a co-founder whom you trust. But trust has to be alienated from documentation. It is important to recognize that 97% of the startups that we interviewed (sample size of 200) did not have a co-founder agreement in place. Co-founder agreements insulate you from any potential disputes that may arise in the eventual journey of the phenomenal growth of your startup.

Have you listed the Intellectual Property that you intend to build at the startup?

Your intellectual property is your baby and it needs a name. The name and the design has to be approved through a process referred to as Trademark and copyright in some cases. This is the first step that you would take towards making your product known and protected from a legal perspective.

Are you abiding by the state laws?

Specific states have specific laws about Shop and Establishment and other Labour Laws. It is important to abide by them.

Is your startup liable to pay GST ?

If the answer to this question is yes, you need to register yourself for a Goods and Service Tax regime. Note that if you are a service provider to a person registered under GST, the latter may want you to be registered under the GST regime.

Do you have a checklist of your company compliances?

Every year, there are board meetings that have to be conducted and returns filed with the RoC if you are a private limited company. If you are an LLP, there is an annual return to be filed along with solvency status. It is important to keep a track of the compliances required every year as non-compliance can attract hefty penalties.

Have you appointed an auditor?

The law mandates that an auditor has to be appointed within 30 days from the date of the registration. Having an auditor is more than a legal formality as it conveys to the potential investor the hygiene you maintain in the entity. An auditor can also be a great sounding board for compliance related matters. The auditor can also point you toward the right CFO who can be a consigliere to the board in terms of preparation of investment deck and financials.

Do you pay income tax?

There is a specific rate for deduction of Tax at source for various payments that you make. Have a chat with your compliance adviser about the various rates that are applicable and ensure that you remit the same to the government on time. So, when you ask yourself how to start a business, first ask yourself what legal aspects to consider and go through the above list. Happy entrepreneur’ing!