Overview
The term “startup” refers to a business in its early phases of development. These businesses often have high costs and limited revenue to begin with, which is why they seek money from a variety of sources, including venture capitalists.
Passionate entrepreneurs want to use their start-up enterprise to provide useful, one-of-a-kind solutions for customers. The company must concentrate on its potential customer base, unique selling proposition, and market situation. At the same time, entrepreneurs should have or recruit or outsource someone who is knowledgeable about the basic laws of the land, applicable rules and regulations, and numerous government schemes designed for the benefit of new firms and their smooth operation.
Eligibility Criteria For Start-Up Recognition By The Government:
- The Startup should be formed as a private limited company or registered as a partnership firm or limited liability partnership (LLP).
- In any of the prior financial years, turnover should have been less than Rs. 100 crores. A company is considered a start-up for the first ten years after its incorporation.
- It must be certified by the Inter-Ministerial Board established for this purpose, and it must be focused on improving/innovating existing products, services, and processes, as well as having the potential to create jobs and wealth.
- A company founded via the division or rebuilding of an existing company is not regarded as a “start-up.”
Some Key Legal Considerations And Regulations That An Entrepreneur Should Be Aware Of Include:
(I)CHOOSE THE TYPE OF BUSINESS ENTITY THAT WILL BE ESTABLISHED.
The first step in launching any business is to determine whether it will be incorporated as a sole proprietorship, a private limited company, a public limited company, a partnership, or a limited liability partnership (LLP).
(II)COMPLIANCES BASED ON COMPANY LAW
To operate any business, several sorts of approval are necessary from various authorities in the form of permits and licenses that allow the business to operate, without which the business would be subject to unfavorable judgments, multiple penalties, and fines from various authorities.
List of Compliances based on Company Law According to the regulations of the Companies Act, all start-ups registering their firm as a private limited company must comply with the following requirements as per the Companies Act, 2013
A) GENERAL MEETING ANNUAL (AGM) Approval of financial accounts, declaration of dividends, the appointment of auditors, and other special business agendas are on the AGM’s regular business agenda.
B) BOARD OF DIRECTORS MEETINGS Within 30 days of the company’s incorporation, the Board of Directors should hold its first meeting. There should be a minimum of two meetings per half calendar year, with at least 90 days between them.
C) AUDITOR APPOINTMENT The first Statutory Auditor is appointed in the first board meeting within 30 days of the company’s incorporation. In the case of succeeding auditors, the appointment is made in the AGM for a period of five years.
D) ADDITIONAL REQUIREMENTS File e-Form MGT-7 Annual Return data to ROC based on the company’s statement of accuracy.
(III) COMPLIANCES BASED ON TAXATION There are two types of taxes. Indirect (Income Tax) and direct (Sales Tax) taxes (GST, Excise duty, Customs duty, etc.) In India, taxes are levied based on the nature of the business and its operations.
(IV) COMMERCIAL LICENSING This advertisement has been reported. To operate any business, several sorts of approval are necessary from various authorities in the form of permits and licenses that allow the business to operate, without which the business would be subject to unfavorable judgments, multiple penalties, and fines from various authorities. These legal documents differ depending on the nature of the business, the industry in which it operates, and the size of the company.
(V) COMPLIANCE BASED ON IPR The entire goal of the start-up programme is to strive toward the development, commercialization, and innovation of new processes, services, or products that are fueled by technology or intellectual property. The first step for any startup is to assess and prioritize the IP Rights that are relevant to its operations.
IP Rights can be quite important depending on the sort of industry. With a start-up, IP Rights are sometimes the sole asset and secret sauce available. It can be safeguarded by timely registration, engaging into non-disclosure agreements, safeguarding its trade secret, and putting in place procedures as preventative measures. Under the Start-up India initiative, start-ups can take advantage of the ‘Scheme for Start-ups Intellectual Property Protection’ (SIPP).
(VI) COMPLIANCES WITH LABOR LAWS Regardless of their size, businesses are subject to a variety of labor rules. Minimum wages, PF payment, Gratuity, Maternity benefits, and protection against sexual harassment are just a few of the laws that must be followed.
(VII) CONTRACTUAL OBLIGATIONS ARE COMPLIED WITH The purpose of any business contract is to ensure that work runs smoothly. In the event of non-fulfillment of job, redress is available. One of the most important factors to consider when beginning a business is work contracts with employees or freelancers. Non-Disclosure Agreements are one of the most crucial contracts that start-ups should have.
Thus, prioritizing compliances helps and ensures data safety, levels up the confidence of clients, increase the chances to stay in the headlines for the right reasons
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