Start-Up and New Businesses
‘Start-up’, is neither a word nor a concept, it’s an emotion which comes from within the people, who want to go out there and achieve something beyond the realms of a 9 to 5 job. They are visionaries and leaders who have broken the social barriers and moved ahead. Start-ups today are not restricted to mere online platforms but are quickly sprouting in other, more traditional domains as well such as agriculture, automobiles, etc. With such a versatile approach towards implementation of a noble idea, compliance related complications also increase.
Your start-up begins its journey as an idea, but takes birth post incorporation which is just the tip of the iceberg, as you dwell deeper and deeper, you realize that your day to day operations, which were earlier concentrated towards developing the unique product, is now geared more towards daily fire-fighting and regulatory compliance work, and before you know it, your undivided attention is already split. Thus affecting your product.
An entrepreneur as far as possible should never have to deviate from the core element of the start-up, which is the product, therefore, let us help you in un-complicating your baby’s legal woes. Your success is our priority, which can only happen when we empower you to take greater control of your product rather than messing about with the legal compliance.
Some of the Legal Issues Start-Ups face and should avoid are:
Incorrect Legal Structure of the New Business: One of the most important decisions that new business owners have to make is regarding an appropriate legal entity for their new venture. The legal type of business chosen has an impact on the funding options for the company, its tax responsibilities, and the personal liability of the owners. The correct format can help save taxes as well as protect the personal assets of the proprietors in times of crisis.
Absence of A Founder’s agreement: Must new ventures are the product of the combined efforts of more than one individuals. The founders who are instrumental in the inception of the new company can also cause its closure. The closure can happen in the case where the roles and responsibilities of all the co-founders have not been delineated clearly. A founder’s agreement which clarifies the ownership of each member along with their duties towards the organization must be framed right at the beginning. It must also contain the manner in which the equity of a person will be dissolved when he/she wants to exit the business.
Not Having Proper Licenses: Every business act falls under the purview of legal regulations. Businesses must know the licenses and permits they need to have in order to function without a trouble. Legal and statutory non-compliances can have serious ramifications for an organization. It can lead to hefty monetary penalties which can cause financial losses.
Ignorance of Applicable Tax Laws: The ignorance of relevant tax laws is the cause of one of the most significant legal risks faced by startups. Enterprises must know about applicable taxes and the various returns to be filed in the jurisdiction where they are located.
Improper Documentation Used for The Sale of Shares: Entrepreneurs sells the stock of their startups to investors in return for funding. Using improper documents to formalize such agreements can easily cause legal troubles. The sale of stocks to investors is guided by the securities laws which have their own disclosure and filing requirements.
No Legal Protection for Intellectual Property Assets: Another common legal hazard with grave financial repercussions is no or improper protection of the Intellectual Property (IP) assets of a company. A unique product or an idea must be shielded with a patent while the brand name, logo, etc. must be secured with trademarks. Copyright laws must be used for obtaining the right to use original works of authorship like software or advertising content.
Lack of Employee Agreements Or Contracts: Failure to maintain adequate employment documentation can cause troubles for a startup. Companies must hire experts to draft agreements and contracts for formalizing the employment of permanent and temporary workers. These documents must contain the terms and conditions of employment and clearly define the individual’s duties and the compensation being paid to him/her. Moreover, they must provide all staff members with employee handbook which clarifies their policy on leave, employee benefits, healthcare, etc.