TOP TEN (10) LEGAL TIPS FOR STARTUPS IN INDIA

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  • Choosing the right legal business structure – It is the most important step foran organization as a different form of legal business structure (Limited Liability Partnership, Partnership, Company, Sole Proprietorship, etc) comes with different set of compliances.
  • Getting registrations and applying for business licenses- Post incorporation, some necessary registrations are required, such as Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), Goods & Services Tax (GST) registration, etc. Also, business licenses are issued by a government authority that allows startups to operate a particular business within its jurisdiction.
  • Ensuring protection of Intellectual Property- It is essential to obtain trademark registration for the business/trade name under the Trademarks Act since the registration of a company or business does not itself give protection against other who might commence using identical or similar marks. Further the literary works and inventions are to be protected by way of copyrights and patents.
  • Vesting and Splitting of founder equity- Founder’s equity should be split amongst founders based on the nature of the role played by each founder. Splitting founder equity equally by default without thorough discussion leads to tension. Founders shares should be always subject to a vesting schedule.
  • Entering into Founder’s Agreement- A Founder’s Agreement would outline the roles, rights, and responsibilities of each owner in a business and help in avoiding future ambiguity.
  • Entering into employment contracts with the employees- Having a clear and crisp employment contract which detail terms and conditions of employment is always advisable.
  • Employee Stock Option Pool (ESOP)- The ESOP’s is incentives given to employees/directors of the Company to attract and retain talented employees by rewarding them.
  • Entering into Third Party Agreements- A third party vendor agreement is a contract between two parties which later adds an outside (third) party which provides goods and services to help one of the parties to fulfill its contractual obligation. Having a third party agreement would enable parties to contract to prevent the third party in claiming any right over any property owned by the startup.
  • Proper Investment Structuring- One of the most challenging and time-consuming aspects of operating a startup is to raise investment. Therefore, there must be a proper investment structure to raise capital.
  • Compliance management of accounts and taxes- It is extremely critical for sustainable growth of any business to have thorough legal, secretarial, accounting and taxation compliances.



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