Introduction

In the ever developing and face paced world, capitalism have stemmed its roots into the deep economic development of the nations. Nations have felt the need for capitalism in order to develop and cope up with the faced pace technological development. And the idea of capitalism starts with a startup idea. Furthermore, all big players in the capitalists market today was once a startup.

Thus, capitalists market stems its roots from startups and due to this reason many countries are providing an inclusive environment in the form of incentives for startups to grow and compete with other big players.

Realization of need of startups

Startup culture in India

Compliances and Regulations needed for a startup

Conclusion

Realization of need of startups

The trend of startups started back in 1991 when the reforms for Liquefied Petroleum Gas started and inflation hiked to an unimaginable length. However, the real need for startups felt during the 2008 recession. Most of the employees lost their jobs due to recession and economic threat was affecting GDP the most. Then felt the need for the startups, which not only boost the economy of the country but at the same time also creates many employment opportunities.

Today, India is considered as one of the most friendly nations for startups to operate and grow.

Startup culture in India

India with its vast markets and commercial opportunities is often described as land of vast opportunities and posterchild of emerging markets. Furthermore, with such diverse and complex commercial structures, it poses vast potential for startups. However, setting those startups is not easy and require lot of hard work as Indian law poses a complex structure with its various rules and regulations which are required to be followed by the startups in order for their origination.

Furthermore, since the business is at its initial stage, promotors usually find it difficult to find the correct business model, trial and error occurs which results in not having a developed business model. A startup isn’t like a regular company as it has to focus of developing and manufacturing a product which has high demand in the market.

However, Indian Government tries to overcome these challenges by analyzing the importance of startup and thereby launching the Startup India initiative in 2015. Under this initiative, startups which met the following criteria were eligible for the benefits under the initiative:

• Firstly, the startup cannot be a sole proprietorship. It has to be registered as a private limited concern or a partnership concern or a limited liability partnership;
• Secondly, turnover of the concern should be less than Rs. 100 crores in its previous financial years;
• It should not have been incorporated for more than 10 years;
• And lastly, the startup should be focused on working towards innovation and improvement of an existing product or service thereby creating the potential of employment and wealth generation.

Furthermore, the initiative clearly defines that an entity which is formed up after splitting up or is a reconstruction of an existing business shall not be considered as a startup under the initiative.

Compliances and Regulations needed for a startup

Starting a startup is not an easy task, especially when so much rules and regulations are required to be followed for. Although Government of India have made starting a startup comparatively easy than before, still there are various legal formalities and compliances that needs to be fulfilled by the company in order to establish the business without any king of hindrance from any agencies.

Furthermore, before drafting any agreement or entering into any king of transaction, founders must be aware about the prevailing laws governing their business and must ensure that their activities are not against the law.

Thus, these are the types of regulations which founders must be aware about before getting a startup registered:

• Type of business – The first and foremost thing which the founders need to take care of is the type of business they want to engage in. Whether it be a private company or a partnership concern or an LLP, deciding the type of business becomes of utmost importance as profit sharing, capital investment and decision making authority depends upon it. Further, each type of business comes with its own merits and demerits and therefore, one has to be careful while deciding the type of business.
• Registration and incorporation of the startup –Once the founder/s have decided which type of business they want to form, next important step is to get such type of business registered. The registration process involves two steps viz.
  • Incorporating the startup –With the type of business, incorporating also depends upon the same. In case of partnership concern, the startup has to be registered with the registrar of firms, in the state where the firm is situated. However, in case of an LLP or a private company, the same has to be registered with the Registrar of Companies whereby all the directors have to have Director Identification Number.
  • Registering with the Startup India Initiative –Once the concern have been registered with the proper authority, the next step is to register such concern with the startup India initiative. Thus step is easy as it can be done online after uploading the necessary documents. Once the documents have been field and other conditions are met, the startup will get recognition of the Department of Promotion of Industries and Internal Trade, which provides benefit of tax exemption for 3 consecutive years with other benefits such as access to high quality Intellectual Property services and resources, relaxation in public procurement norms, self-certification under labour and environment laws, easy winding up process etc.
• Documentation of founder’s agreement – This part is not necessary, although it is advisable in order to avoid any future dispute. This document provides all the necessary details pertaining to the founders of the concern including their roles and responsibilities, executive compensation, exit clause etc.
• Applying for business license – License are important to run a business and avoid any king of dispute with a Governmental agency. It is legal document which authorize the concern to carry on with their business. The fees of the license and license can vary depending upon the nature and size of the business.
• Employees contract and adherence to labour laws – Employees forms major part of the concern and are responsible for the success or failure of the concern. Thus, establishing relationship with the employees is extremely important. Furthermore, employee contract further defines the roles and responsibilities of both the employee and the employer, thereby defining a good relation and future prospects between them. Furthermore, having employee contract is not sufficient. Adherence to labour laws are equally important as non-adherence can lead to employee dissatisfaction along with dispute with the Government.
• Non-disclosure agreement and Intellectual Property – Intellectual Property forms an important part of the concern as it is liable to protect the goodwill of the concern. Without goodwill the concern might not be able to protect its business qualities thereby threatening its survival. Furthermore, codes, algorithms and research findings are some of the intellectual properties which are responsible for day-to-day conduct of the concern. Thus, protecting such intellectual properties becomes extremely important. And this can be covered by non-disclosure agreement with its employees, dealing agencies and partners, which provides safeguard in case of breach and disclosure of such confidential information by them.
• Privacy policies and other terms and conditions – As online presence has becomes a necessity rather than requirement for most of the businesses, having a website is the initial stage of such portion. And websites usage is subject to activities than can harm not only reputation of the business but can also land them in trouble with the Government. Therefore, pre-determining some privacy policies and other terms and conditions in order to use the website can go a long way. Not only such terms and conditions define the usage of website but also defines the legal relation with its clients and aspects in case of a dispute. Furthermore, such terms and conditions must cover all aspects of the business the concern is engaged in and must defines limit to the liability of the concern.

Conclusion

Starting a startup in India does not seem to be that complex, with Government supporting the culture of startup and providing them with incentives. However, even after such procedure of removing complexities and incentivizing them, a surety cannot be provided for the success of the startup. Therefore, it becomes extremely important for the founders of the startup to carefully observe all the risks associated with the startup and take decision accordingly.