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TOPICS ON STARTUP THAT CAN HELP FOR AN INFORMED DECISION

STARTUP: INTRODUCTION

This is the era of start-ups and they're growing in number, every day! Every single person who aspires to change the world, make a difference or become someone - takes the start-up route. It's commonly said that if you're not passionate and self-driven, you should never venture into the world of start-ups!

In the hustle to grow big, raise money and become a multi-billion dollar company, start-up founders forget to protect their company! While hustling to build your dream, scrambling for more sales, pitching to investors, you might forget to protect your company! Many start-ups end up getting the wrong form of registration for their company, forget IPR registrations, use template or sample agreements or don’t sign one at all - unaware of the fact that these seemingly small actions might lead into a damaging lawsuit in the future!  

The Government’s “Start-Up India” Campaign defines a few qualifying traits for start-ups, distinguishing them from SME, MSME, etc. stating that they should be:

  1. In existence for less than 5 (five) years,

  2. Having an annual turnover not exceeding INR 25 crore in any preceding financial year, and

  3. Working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

Start-ups have seen an uprising worldwide - from the global biggies who have started revolutionary companies, to the Indian masterminds - start ups are becoming the best career option for most! Since start-ups are a new age concept, it is important to be aware of the fact that laws and compliances for start ups - are different from the laws for companies! There are also several exemptions, compliances and regulations that are mandatory to be followed by a startup and MyAdvo shall assist you with the same!

 

Kick start your entrepreneurship with MyAdvo! Have all the compliances met and ensure a smooth run- simply drop a mail atinfo@myadvo.inor call now at +91 9027217218

QUESTIONS YOU MAY HAVE!

Legal compliance and regulatory work is of paramount importance for every startup. Legal compliances can however, never be a “one size fits all”. Consider your start-up to be O.J. Simpson and the legal framework the ‘glove’, it may or may not fit! Every startup belongs to a specific industry and every such industry has a specific list of compliances and regulatory requirements to be taken care of!

As a startup, it is important to classify yourself into the relevant sector i.e. the area of your business depending on the kind of product or service you want to provide. Legalities will be best determined when you are categorised in the right sector. To understand legal compliances for your company better, ensure all regulations are taken care of, you need to know where your start-ups fit in.

Below is a table containing some of the different sectors of start-ups in India. Check to see where you fit in!

Type

Description

Examples

Food

Serving Foodies - Aim to make dining out easier!

Swiggy, Zomato, SpeQue, FirstEat etc.

Health

Makes reaching a doctor easier, faster and more convenient. Also, the pharmacy at your doorstep, anyone?

Practo, Exocan, HealthCare, Doxper etc.

Finance

Can’t afford an Accountant? They’ll help!

Finzip, WealthPack, etc.

Education

Studying becomes a little more convenient - and interesting!

Simplilearn, BYJU, AspiringMinds, Edupristine, Acadview, Edulabs etc.

Legal

Making Legal Simple

MyAdvo

E-Commerce

Shopaholics just got their drug - sitting at home!

Stich My Fit, Mad4Crazy, Convowear etc.

Entertainment

Fighting the creative with the biggies - publishing movies, et al.  

MilkyLiars, Waayo etc.

Travel

Traveling alone? Your iPhone is also your Travel partner now!

Redbus, Waayo etc.

Remember the time when the Government requested you to get out of your house and sweep the streets? Mr. Amitabh Bachchan was seen with a broom amidst litter. What most of us wanted, the Government attempted to deliver.

It feels good, doesn't it? To realise that the government is actually doing things for your benefit?

There are numerous schemes provided by the government and other private agencies for the benefit of start-ups - the only problem being, most of them are not aware of these schemes!

Our Prime Minister, Shri Narendra Modi recently launched the ‘Start-Up India’ Campaign which includes a 19 – point plan to help a start-up’s growth. This is a central programme and helps start-ups in more ways than one. Amongst many things, it removes difficulties in registration procedures, facilitates self-certification, reduces patent examination expenses and provides easier access to financial aid, tax exemptions, rebates and legal help in terms of filing and other compliance matters.

InShort - An Analysis of what the Government has in store for you!

What it is?

What does it do for me?

Self- Certification Compliance

No inspections will be conducted for a period of 3 years under Labour laws;

Self Certification under Environmental Laws & only random checks

Creation of All-India Startup Hub

Better collaboration with Investors, Mentors, banks, incubators, legal partners (MyAdvo, of course!), consultants, universities and R&D institutions

Mobile App & portal

Single platform for start-ups to interact with each other or the target audience

Relaxed Norms

Government shall exempt start-ups (in the manufacturing sector) from the criteria of “prior experience/ turnover”

Faster Exit

Swift closing of Start-up in case of failure/bankruptcy, etc.

Fund of Funds

Total Corpus - Rs. 10,000 Crores

Credit Guarantee

Assist in Debt Funding

Tax Exemptions

Tax exemptions on Capital Gains

No income tax payment for 3 years;

Innovation Centres, Incubators

Management, Funding, Mentoring, etc.

 

There’s a ‘Start-Up Village’, based out of Kerala which aims at providing new technology, financial aid, legal assistance and anticipates a boost of about a thousand start-ups in the next decade. Other than this scheme, as a small business, one can even receive financial assistance from Small Industries Development Bank of India (SIDBI).

An organisation which runs by the name of Micro Units Developments and Refinance Agency Ltd. (MUDRA), deals with financing small businesses and companies. Apart from this, a couple of funding institutions also provide aid to medium and small enterprises, for example Market Development Assistance Scheme. Other schemes like Tool Rooms and training centres also provide similar assistances to small business and start-ups.

The Intellectual Property Scheme for Facilitating Start-ups Intellectual Property Protection (SIPP) endows start-ups with a lot of benefits. The SIPP has recognized facilitators who are to assist start-ups in gaining intellectual property protection to impart the importance of IP to each and every start-up.

Now that you have decided to start your own business, you must be intrigued by the procedures you must adopt for a safe & secure future. The list of checks and balances can be never ending and one cannot be prepared for every contingency. However, you can strengthen your fort’s defence by being decisive and vigilant.

In order to secure the future of your enterprise, you must decide on the form of enterprise you wish to choose. You have a plethora of options to choose from which include the likes of Sole Proprietorship, One Person Company, Partnership, Limited Liability Partnership, Private Limited etc.

Once you’re done choosing the structure of your enterprise, you need to incorporate it and make it legal. Subsequent to choosing the form of registration for your Company, you must have your legal documentation tailor-made to your requirement, keeping in mind your industry as well as your company set-up!   

You must decide on the following:

  • The shareholding of the Directors/Partners, a document supporting the details.

  • The Trademark and other intellectual property of the enterprise.

  • The website documents customised for your portal.

  • Service documents where the document is made from perspective of the Users as well as service providers;

  • Investment documents become the most important - while raising a round of funding!

It is essential to have your documents updated as and when your services, reach, liabilities, functions, etc. are changed!

Every business venture has its hurdles and start-ups are not immune to these impediments either. In all honesty, start-ups are the most vulnerable and prone to face the most legal obstacles if they are not dealt with in the beginning because of the high voltage environment and critical decision making.

Problems which every startup faces, but if not dealt with at its very infancy, can deal a harsh blow to the functioning of  a startup are -

  • Wrong choice of form of Registration - Companies tend to make an uninformed decision regarding their registration and end up choosing the wrong type of Company! Factors like a cheaper option for registration, lesser time, wrong or half baked information are a few influencers! While choosing the wrong form of Company is not a disaster, as it can be cured, it is definitely a major setback!

  • Absence of a Co-Founder’s agreement - You started a Company with a friend! Friendships don’t need agreements, right? Why would you want to list down liabilities, exit clauses, equity-holding and other such formal (and friendship-ruiners) terms on an agreement with your friend? That thought right there - needs to be changed!

  • Shareholding Patterns, promise to pay: Start-ups in order to make big, tend to hire members with the promise of shareholding, pick investment in lieu of the same and oftentimes skip the most essential part of these transactions - the agreement laying down the terms, discussions with legal consultation, etc. These shortcomings may lead to disputes affecting the longevity and finances of the business.

  • Employee Contracts: In order to build a strong and loyal team, secure your company and protect your business - you ought to ensure that the employee agreements are well-drafted and contain clauses relating to non-disclosure, non-compete, etc.

  • Intellectual Property: You wouldn’t want anybody pretending to be associated to you, copying your well-designed, highly marketed logo and exploiting your goodwill. In order to avoid the abovementioned, you must comply with all necessary intellectual property laws (especially Trademark) at the very advent of your startup life. These disputes do not only cost time, but can run into millions of rupees if disputed.

There are many problems which can surface due to the divergent nature of different businesses. The above are only few of the problems which you should be vigilant about.

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