To start a startup is no easy feat and most people learn as they go on with their plan. However, even the best of ideas need to be supported with certain factors so that you end up creating a stable business. In order to help you kick-off, we have listed 6 things you should know when you start a startup.
Select the Type of Business
It is important to understand and decide on the type of company you want to start. Whether you want to start a sole proprietorship, a partnership firm, a limited liability partnership (LLP), or a private limited company, you should be ready with your research. Each of these types of company structures has its own set of rules and regulations that determine registration, taxation, licensing, etc. For example, registration for sole proprietors is not required, it is optional for partnership firms but mandatory for LLPs and private limited companies. As per Indian law, only a private limited company, partnership firm, or LLP can be considered as a startup, a sole proprietorship does not qualify.
Company Registration
It is essential to register your startup as a legitimate business before you begin operations. The required registration procedures should be followed depending on the type of company structure you have opted for, like obtaining a certificate of incorporation or partnership registration.
Register with ‘Startup India’
The Government of India launched a scheme called ‘Startup India’ to promote innovation and the startup ecosystem in the country. This initiative allows individuals who want to start a startup to claim tax exemptions that can prove beneficial at the beginning of a business. Your startup would be eligible to register with this government initiative if:
- you have registered your business as a private limited company, limited liability partnership or a partnership firm
- your business was registered less than ten years ago
- your business turnover for any financial year after its registration has not crossed Rs 100 crore
- your business is working towards innovation, development or improvement of products or processes or services, or has a high potential of employment generation or wealth creation
Employee Contracts, Policies and Agreements
If you start a business in partnership, a founding agreement that has details of the roles and responsibilities of each founder, along with other operational details such as compensation, non-compete, contingency plans in cases of disagreements, etc is an important artefact. It is also important to make sure that you have transparent employee contracts as well. Avoid future complications by outline all the terms outright in the contract such as remunerations, work output, and expectations.
Be well-versed with Labour Laws
Being aware of your responsibilities as an employer is equally important. This includes ensuring compliance with all requisite labour regulations such as payment of wages, provident fund and gratuity, workplace sexual harassment, and maternity benefits. If you have registered your startup with ‘Startup India’ then for the first one year from the date of incorporation or registration of partnership, you can sign a self-declaration and be exempted from inspection under the following laws:
- The Industrial Disputes Act, 1947
- The Contract Labour (Regulation and Abolition) Act, 1970
- The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
- The Employees’ State Insurance Act, 1948
- The Industrial Employment (Standing Orders) Act, 1946
- The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
- The Payment of Gratuity Act, 1972
- The Trade Union Act, 1926
- Building and Other Constructions Workers’ (Regulation of Employment and Conditions of Service) Act, 1996
For the next two consecutive years, you can continue to receive the exemption by filing a self-certified return. The certification does not mean that you can evade the labour laws, however.
Intellectual Property
Every businessman needs to protect their innovative ideas. These new ideas are legally referred to as your intellectual property. While registration for a trademark, patent, or copyright can often be a complex process, there are government schemes in place under the Startup India initiative that make these processes easier and affordable.
If you want to start a startup and need help with basic compliance, you can avail advice and services from experts at Company Wizard.
