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    Categories: MISC

Five Regulatory Essentials Startups Should Keep in Mind Before Doing Business in India

Indian Government since last few years is seeking out some effective measures for encouraging emerging startups. As per latest ‘Ease of Doing Business Index of 2018’ of World Bank, India currently is ranked at 100th position out of other 190 countries for elevating start-ups in their leading days. It clearly shows that, to present business environment small and medium-sized entrepreneurs are still facing difficulties in name of compliances and regulations.

As compared to the last index, India’s rank has significantly improved due to reforms & initiatives bought up by Government including setting up Atal Innovation Mission and Niti Aayog etc . While several additional benefits were also offered to eligible start-ups like fast-tracking of patients, self-certification on regime based compliances, tax exemptions on capital gains, assisting in funding and providing additional legal support. It is often felt that Indian start-ups have to face numerous challenges to be successful in competitive and regulatory circumstances. So here we have listed some key challenges that Indian start-ups face before initiating a new venture :

1. Criteria for Stable Business Structure: In India, basic set up of start-up business depends on whether the concern would be operating as an LLP (Limited Liability Partnership) or a company form depending on their cost of formation, compliance requirements, tax efficiency, the objective of formation, nature and so on. Also, we have seen startups preferring to register as a private limited company as it is very easy for them to raise funds from investors in this form. Thus equating different business forms before choosing the way of doing business is very important.

2. Registration and Licenses : To regulate business legally , start-ups have to comply with a number of registrations and have to obtain different licences depending on their nature of business like Goods and Service Tax Number(GSTN) ,Permanent Account Number (PAN),Tax deduction and collection number (TAN),Import and Export licenses, Shop and Commercial certificate, registrations related to employment , certification from Inter-Ministerial Board (IMBC) etc. To consider each and every license before commencement is yet another important concern.

3. Filing Procedural Compliances: A number of reporting requirements are also fulfilled by start-ups depending on nature of their entity and investment involved..

  • In the event of LLP (Limited Liability Partnership) : Getting registration under the LLP Act 2008 , filing documents with the registrar and getting it authenticated by a professional etc follows a segmented and tiring process.
  • In case of Companies: mandatory registration under Indian Companies Act 2013 and reporting of all details related to members, shareholders, annual filings along with stated different procedural compliances.

4. Intellectual Property (IP) : With a rise in the ratio of Tech based startups in India, a hold over the intellectual property right is also very important. IP specifies claiming of individual business rights by using copyrights, patents, trademarks etc on some software, designs, blueprints, findings, and algorithms etc. IP safeguard start-up from their initial stage.It may also be licensed and/or sold and have some financial implications in the long run as well.

5. Contract Management : A start-up to mitigate risk of diverse arrangements have to enter various written contracts like distribution agreements , employment agreements, service agreements,consultancy agreements with consultants, Non-disclosure agreements (NDA) with third parties for security of confidential information, lease agreements  ,partnership agreements, shareholder related agreements (including subscription agreements and/or share transfer agreements) ,IP related agreements etc. It is important that these agreements are not one-sided and are negotiated properly. Also, it is always recommended to startups to get their agreements duly registered and affiliated with legal authorities before lying them to execution.

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