Starting a new business is like embarking upon a voyage that will lead you to the horizons of a financially secure future as long as you are heading in the right direction. An entrepreneur carries the responsibility of bringing the venture up to the heights where a team can establish professional prowess and perform better. But do you think that your vast knowledge of a particular business sector, years of experience, and a long list of connections are enough? No, there is still one aspect that you must pay attention to while starting a new business. It's the legal preparation for your upcoming venture.
A fine grip on the market trends and a fool-proof business roadmap are essential for any business type. Still, it would help if you also consumed some of your time looking over the basic legal technicalities for successful business registration. The corporate sector in India is booming with the speed of light almost every day. Each industry is setting up a few regulatory aspects so that various business practices don't clash with anything. Some of these legal formalities will protect your business from any potential threat and help you run your business at a smooth pace.
Let's take a look at some of the most crucial legal requirements for business registration:
1. Create a Legalised Outlay for Your Business in Forms of Agreement
Trade experts highly recommend not to kickstart a new business if you are not aware of the potential outcomes of any legal mis-happenings. If you are not familiar with your new business's legal technicalities, it wouldn't be plausible for you to outlay the venture's legal foreground. To commence a fresh and effective start, you must provide your practice with a defined proprietorship according to which further developments will occur.
When it comes to making proprietary decisions for your new firm, you should always discuss it with your partners and investors in the presence of a licensed professional who can offer the best suggestions in this matter. Before jumping on to any conclusion, you should also learn about different kinds of ownerships and their future consequences because this will create a finite business structure for your startup.
Sole ownership, partnership, and public limited are some of the significant structures of newly founded startups. But mainly, there are two common types of legal business structures – Limited Liability Company and Corporation. Both these structural systems have varying properties that you can consider while setting up proprietorship for your startup. By comparing their differences, you will be able to make a better decision for your new business.
2. The registration process for business structure
There are no specific protocols for registering a business under a partnership or sole proprietorship. You can declare the ownership through a regular legal document. On the contrary, limited liability companies (LLP) and private limited companies require an official registration from the Ministry of Corporate Affairs India as per the LLP Act 2008 and the Companies Act 2013. For complete documentation procedures, you can connect with a reliable legal advisor.
Apart from ownership arrangements and business structure development, you must also consider other major aspects such as member liability, taxation, the maximum number of members, annual proceedings, and filing provisions. These factors play a crucial role in handling businesses, whether it is a small-scale startup, a medium-scale organisation, or a large-scale corporation.
3. Involvement of foreign clients and investors
If a company or investor from an outer country is willing to invest in your new business, it might sound like a resourceful idea for your startup. But you should be careful while involving foreign bodies because this can result in further complications for your business in terms of proprietorship. When running a company on your own or with a partner, letting an outsider get involved in your business may not be the safest choice. Besides, it is not allowed for sole proprietors to offer ownership to a foreigner as per government norms. Even if you are interested in any kind of merger, you must consult a highly experienced and trustworthy advisor who is well-acquainted with the potential outcomes.
The involvement of investors and clients from foreign countries is much simpler for LLPs and corporations. Keep in mind that limited liability companies and large corporations need to ask RBI for permission while choosing a foreigner as one of the proprietary members. There are several official procedures that business owners must follow while filing for government permission.
4. Get a License that Validates Your New Venture
No matter what kind of business you are dealing in, you must have a license because this will validate your services and products in the long run. In India, different kinds of businesses have a separate license system and requirements. If you want to get the license, you should apply for it in the concerned authority and fulfil the qualifications and certification-related obligations.
Even if you are working on a completely new and unique startup business, you will need a genuine license that will land you a great deal of reliability in the eyes of your potential customers and clients. Remember that license is the balancing lever of your business that will set a tone for your ambitious venture. This is the most essential part of beginning life as an entrepreneur; otherwise, you might find yourself surrounded by lawsuits and failures.
Every business type has a specific licensing authority where you can apply for the license. Some of these officials will also ask you to showcase your business idea or a strategy roadmap to ensure efficient business functionality. Every industry has a different process of getting the license, but the Shop and Establishment Act is considered standard for all trading types, including general shops. Besides this, food-serving businesses must obtain a food safety license, and a pharmacist must apply for a healthcare license for issuing medicine to the customers.
5. Dive into the Basic Information of Taxation
You can't be splurging your time in learning the ABCs of running a business, especially when you have to cover other significant business management factors. You may not go back to school to gain the basic knowledge of accounting and taxation, but you can always learn these things through various sources such as online videos and reading materials. Spend your time in research before you tangle your skills in taxation and accounting.
Aside from these details, you must also read through the general guidelines launched by 'Startup India' that will help you collect useful data for your business registration. This is an impeccable initiative by the Government of India for bringing forward the best business ideas budding in our minds. As per these guidelines, most businesses with effective services are given a tax relief of a minimum of 3 years. Apart from this, businesses can also attain exemption on investments and market prices.
If you wish to get these benefits for your new business, you must register your business as per the authorities' guidelines. Just make sure that your business turnover has a specific limit, and you don't run any side business other than your actual venture.
6. Stick to Necessary Laws to Maintain Ethical Values
Your responsibilities as a citizen double up when you start a business and run a team of professionals for a significant period. To maintain your organisation's ethical values, you must be aware of several essential laws related to your employees and their benefits. There is a list of a few labour laws encompassing annual salary, PF, monthly holidays, health care benefits, bonus, harassment, etc.
Some common laws in this list cover the Trade Unit Act (1926), Contract labour Act (1970), Industrial Employment Act (1946), Employees State Insurance Act (1948), Payment of Gratuity Act (1972), and more.
Never forget to discuss these laws with a legal consultant because they can suggest to you the best on this matter. Do your research work, get familiar with numerous laws and regulations, and you will be all set to run your business like a pro.
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