Launching a new startup? Ensure it complies with all 7 of these laws!

Friday October 06, 2017 , 4 min Read

Startups need to be aware of all the laws and rules of conducting business in India. What happens is that we often forget about the various regulations that govern our business, while trying to maximize the things that are in control. We want to grow leaps and bounds, but pay little taxes in return. However, if we think about it long-term, no business will want to work with us if we aren’t compliant. Nobody will want to invest in us if we don’t abide by the macro- and micro-regulations that control our industry. We can’t jeopardize someone else’s practices by not following those required from us.

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#1 Taxation

Understanding your local and country GST tax code is critical, as it could mean a lot of trouble if not followed to the T. Your government needs you to file monthly, and save all invoices and transactions while entering them via the online GST web portal. You need to register for the GSTN number and align your Aadhar, PAN and other details to the portal to maintain compliance.

#2 RoC registration

Choosing the type of company needed is also important. For example, small/startup companies should register as a LLP, Pvt. Ltd., or Corporation according to what their needs are and what the suppliers and vendors need to fulfil orders. You can also register as an OPC (One Person Company) which needs only one director to start off, while all rules of the Pvt. Ltd. variety are applicable. There are various steps to ensure that all that is needful is done, and you need to follow these regulations appropriately. Ensure that your legal status is as per the business you’re a participant in.

#3 Service Agreement and Documentation

There is a strong need for agreements and bonds that help in any future legal proceedings if things go awry. You need an SLA with every vendor, customer, client, etc. and must ensure that all the laws of India are followed when crafting these agreements. Every agreement and document must state all rules of engagement and guidelines for the duration of the service agreed upon.

#4 IT and Cyber Laws

Your startup must be compliant with all cyber and IT laws including digital signatures, storing customer data, cloud management, and data privacy. IT and cyber laws are applicable to all businesses that operate in India and startups in the tech space should be especially cognizant of these regulations.

#5 Intellectual Property Rules (IP)

There is a misconception in India that the courts don’t protect IP for companies in the country. In fact, just last year, Delhi Courts have made landmark rulings in protection of Intellectual Property, and there have been many startups emerging to support this growing industry of IP Law.

#6 Industry-specific laws

There are industry-specific regulations within each industry that you are a player in. Pharma laws will differ slightly from e-commerce payments laws, but following them is the key to maintaining your legal status. For example, a law that could apply to your company is that of accepting cash for gamification. Accepting direct cash as a means of buying a lottery may be treated and taxed appropriately via a gambling law as applicable in the country. This, and many other laws, can be applicable on your startup, and it’s your job to conduct thorough research.

#7 Residency

Indian laws mandate that at least one director on the board be a resident of India, i.e., have lived for a minimum of 182 days in India in the previous financial year. This is to ensure that a point of contact and a legal rights holder to the business is available in the country of operation.

The amount of compliance needed can seem excessive, but it is important to conduct thorough research and ensure your startup meets all necessary legal requirements. Start from these seven points, and be sure to keep an eye out for new laws and regulations as they come about in the future.