Being an entrepreneur or running a business is not easy in India. As an entrepreneur, you have to be well aware of every aspect of the business. For someone who always focuses on delivering unique solutions and services to the customers, they should also have a strong focus on their clients and the market competition. This is one part of the business, but for running a successful startup, an entrepreneur should know the basic rules and regulations for growing. To run a smooth business, legal formalities are most important. Taxation, legal contracts, business licence, founder agreement, labour laws, employment contracts, and company terms and conditions are all the basic legal laws for a business.
If you are starting a startup and don’t know what legal activities are to be done to run a smooth and successful business, then you don’t have to worry because we will be sharing all the necessary information so you can know what are the basic legal laws that every Indian startup should know.
Some Basic Legal Activities for Starting an Indian Business
1. Business Formalization
For understanding your business, the first thing which you will need to take care of is what is the nature of your business and what type of business you are going to do. Will you do a partnership, limited liability partnership, or a private limited company, although a sole proprietorship is not supposed to be a startup under the startup India initiative. Each business comes with its own set of legal rules and regulations, so you need to pay attention to what type of business property you come under and what will be its legal laws.
2. Business Licence
Every business needs a business licence. If you have just started the business then to stay away from the legal activities you must apply for the licence. There are several licences application in India according to the nature of the business. A common licence is applicable under the establishment act, which is a must for every shop owner, trader, and businessman and some other licence are also applicable depending upon the type of business. For example, e-commerce companies require VAT registration, service tax registration, and professional tax registration. Other business like a restaurant needs food safety licence, food adulteration licence etc.
3. Basics of Accounting and Tax Laws
Taxes are an integral part of the business. There are different types of taxes which are applied to businesses like central tax, state tax, local tax etc. Just now for growing startup culture, the Indian government has taken a good initiative which is known as the ‘Startup India’. Under which new companies are forming and getting freedom in taxes. If you have a new startup then for 3 years you are exempted from taxes as well as from capital gain.
4. Labour Laws
It doesn’t matter whether your company is big or small labour laws are applied everywhere. When you establish a company, you need workers to work for you. The labour laws such as PF payment, payment tax, weekly holiday, and sexual harassment all these legal terms are applied to establishing a company.
5. Intellectual Property Rights Protection
A startup always comes with new business ideas and products. There is a possibility that this idea may be stolen by someone else, so to protect intellectual property rights, the Indian government has made a protection law to protect the copyright, trademark, and design of the product that is involved in the Indian startup.
6. Business Contract Management
Contracts are the backbone of any business. For running a business smoothly and effectively business contracts must be fulfilled. According to the Indian contract act 1872, the salary, stock option, and scope of the work must be discussed properly.
7. Foreign Direct Investment (FDI)
Indian government encourages foreign investment for startups but there are some rules and regulations for foreign venture capital investors (FVCI). Schedule 6 of the foreign exchange management act (FEMA), 2000, and the third amendment is also the same act used in 2016 for regulating investment according to which foreign companies can contribute 100% capital to the Indian startup.
Conclusion
We have shared all the information that is a must for a startup but other than these there are some more important legal laws out there which depend upon business to business.