LAWS FOR STARTUP ENTREPRENEURS

Startup in India is like innovative ideas in the minds of the young brains. Those ideas must be
under application abiding all the rules and regulations, the implementation of the idea which
needed to be worked upon. It is an entrepreneurial business management idea which a person
setting up is eager to set up and establish in the market.

The idea of the startup business always starts with high aims and remaining in the market for
long but that only happens when all the business rules and even the legal rules are followed
so the government intervenes the least and flourishing business would get a legal path to
work upon. When a corporate culture begins many new buds are to be taken care off such as
the accounting laws or the labor laws, licensing of the business which we carried, even the
legal responsibilities of winding of business must be taken care and kept in mind as if one
day the formalized legal end, it must be authorized by law.

There are a few main legal responsibilities discussed in this article.

1) BUSINESS STRUCTURE FORMALIZATION

A proper business structure is important for a startup to flourish. There are different types of
businesses that can exist such as proprietorship, limited liability, private partnership, or
simple partnership. They all differ in the legal background and need to established and work.
The basis of the legality of a business depends on the common grounds such as legal status or
the members which are allowed in partnership and certain conditions according to the law to
become a member of business or firm. The non-disclosure agreements would form the basis
of trust in the business for a strong base. Even the business contract is covered under the
structure under the Indian contract act, 1872 and if a firm needs to establish partnership the
Indian Partnership act, 1932 will be followed.

2) LICENSING BUSINESS

The shop and establishment act, 1953 make licensing compulsory for establishing a business
around the country. As the new startups are coming round the day by the young minds the
government needs the license to ensure the proper and legalized working of the firm. All the
licenses are different and varied from business to business. The common licenses used in the
country are for proper payment and analysis of the taxes the businesses pay. The act needs
every legally running a business to have a license of the product they are dealing with.

3) TAXATION AND ACCOUNTING LAWS

The tax policy has been made by the government to be abided by the different business
according to the nature of the product they are dealing with under the Income-tax Act, 1961.
Even the new GST act is important for the new business. The government also helps startups
by giving tax exemptions to entrepreneurs. In the first 7 years of a startup, tax benefits can be
availed by the entrepreneurs and even the turnover must be limited which is less than 25
crores and even must be limited liability partnership. Every firm also needs to make proper
business transaction records and tax audits must abide from time to time and the country’s
policy must have adhered.

4) LABOR LAWS

The most important part of a business to run is labor and its laws. For efficient functioning,
the government is providing many benefits that help employees to get favoring conditions.
Many laws related to equal wages, harassment at the workplace, bonus for the extra work,
etc. even the considers the labor benefits and considers that if a firm abides by all the laws
related to the labor such as the Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952, the Payment of Gratuity Act, 1972, etc then the government might relive the
person from the labor inspection which could be comforting to the firm which is stepping in
the marketing and yet to establish.

5) INTELLECTUAL PROPERTY RIGHTS PROTECTION

As the young minds have put all their innovativeness in the startup so there is a lot off
creativity which needs protection. Certain laws can protect the set up of unique ideas and the
way or the product in making can be included in the innovativeness. The startup India
program of the government also has a clause for intellectual property rights.

The program run by the government takes the responsibility to inform people about the patent
laws procedure and how to save themselves and their innovation in case anyone copies it.
Even the patent fees have been reduced for the entrepreneurs who are new in the market by
80%.

6) FOREIGN INVESTMENTS

The foreign aspect of the business proves helpful in expanding a business. The foreign
venture capital investors (FVCI) introduces regulations has brought some regulations for
encouraging foreign investments in the business. For regulating the investments the schedule
6 of the foreign exchange management act (FEMA), 2000, and its third amendment was were
used. Even the government allowed 100% investment in the share capital of a startup from
the foreign native in the Indian startups under the FEMA Act, 2000.

7) WINDING UP OF BUSINESS

Even though when discussing laws about startup winding up sounds strange but knowing this
part is also important. The winding process has 3 modes which are fast track exit, court or
tribunal route, and voluntary closure. The three modes cover most of the types of cases while
winding up of a company.
The fast track exit comprises conditions that the company must not have any asset or
liabilities left. Even no past business must not be left so that after this process the company’s
name can be removed from the registrar of companies. (ROC). Under voluntary closure the
settlement of the accounts is important and all the shareholders and the creditors of the
company must be on the same line. The court or the tribunal closure includes prolonged and
hard work, as it includes to be dealt with all the shareholders.
Even the act of Insolvency and Bankruptcy Bill, 2015 plays an important role in winding up
the business. For efficiently keeping a look at the resolution process and following the
government policy, sections 55 to 58 of involuntary and bankruptcy code, 2016 are written.

Hence, all the legal steps are to be taken care of while starting a business and for coordinating
with the government and availing the benefits all the policies have to be abided. The
establishment in the market is important to keep a business going, in which knowledge of all
legal aspects would be helpful.

REFERENCES
 Laws Relating to Startups in India | Legistify, Legistify.com (2020),
https://www.legistify.com/blogs/view_detail/140-laws-relating-to-startups-in-india/ (last
visited May 8, 2020).
 Ranjeet Roy, Important Indian Business Laws Every Startup Entrepreneur Should Follow
Leaders Interview, IT and Technology News India | CXO VOICE (2020),
https://www.cxovoice.com/important-indian-business-laws-every-startup-entrepreneur-
should-follow/ (last visited May 8, 2020).
 India’s startup laws – a checklist for entrepreneurs, SME Venture (2020),
https://www.smeventure.com/indias-startup-laws-checklist-entrepreneurs/ (last visited May 8,
2020).