10 Legal Tips to start your business in India

Top 10 Legal Tips for Startups in India

Running a small business may be a thrilling experience, but it also necessitates familiarity with many rules and regulations. It is challenging enough to start a business without worrying about legal duties. In this article, we've compiled a list of the most critical legal guidelines for new enterprises and those just getting started. Some things you must know are vital, while others are just useful.

Here are the top ten legal Tips for Small Businesses/Startups

1. Budget for more extraordinary legal expenses than you believe you will require:

Don't underestimate the cost of legal representation. Legal expenses may be a significant upfront investment when starting a business. In my experience, these expenses are always higher than expected owing to the frequent back and forth, legal complexities, and other considerations. As a result, I recommend including a sufficient cushion in your budget for these services. Also, make sure you meet with your attorney early on to anticipate the overall legal expenses.

In addition, you must pay for license fees, license filing costs, bonds, and other expenses. It might be quite beneficial to communicate with other businesses dealing with similar legal issues to get a more accurate estimate of those expenditures. Finally, budget sensibly so that you don't have to delve into cash that could have been used for other business objectives.


2. Choose the Best Business Structure:

It is critical to define how you wish to organize your firm as you prepare to launch it. You can set up your company as a public corporation, a private limited company, a limited liability partnership, a partnership firm, or even a sole proprietorship.

Everyone from these constructions has its arrangement of regulations that your organization should follow, which is the reason you should cautiously evaluate which framework is the most ideal to your nearby and long-haul business targets.

Ideally, you should be clear about your organization's structure from the start; otherwise, you may have to reorganize later on, which can be both time-consuming and costly.

3. Be familiar with accounting and taxation:

Due to their infancy and the founders' limited time bandwidth, many startups do not spend enough attention on taxation and accounting, which can have a detrimental influence on the growth of their firm. It is critical for any business to ensure that its finances are properly handled and that its tax returns are completed correctly.

The precise form of the taxes regime applicable to your firm will be determined by the structure of your corporation and the industry in which it operates. To ensure regularity in accounts and taxation, it is critical that you adopt the proper accounting practices early on and onboard the right partners, as there may be severe penalties for non-compliance, and it may also be a potential issue in future diligence while raising capital from external investors.


4. Make sure that you have the appropriate counsel for each activity:

Specialization is important. An attorney who is not well-versed in the subject matter might be pricey. Work with a patent attorney, for example, if you need to seek a patent or, worse, go toe-to-toe with a patent troll.

This specialist's years of expertise in intellectual property, as well as an in-depth understanding of patent and trademark disputes, will be beneficial to you. Choosing a general practice lawyer who covers a wide variety of disciplines but specializes in none of them may save you money in the short term.

Still, this person's lack of competence in a specialized sector may cost you in the long run. It is worthwhile to hire the correct individual for the task; otherwise, you will wind up spending more money in the long run.


5. Recognize Investment Structuring:

Raising finance for a company's working capital and expansion is a typical difficulty for entrepreneurs. Investors in India, including High Net Worth Individuals, Angel Investors, and Venture Capital Firms, invest in early-stage and growth-stage firms in various conditions and formats.

Entrepreneurs must get solid legal assistance to understand which terms and structures benefit their firm, especially when negotiating investment conditions and investor rights. Following due diligence, investors and entrepreneurs typically specify their goals for the investment in a document known as a 'Term Sheet,' which includes essential transaction terms.


6. Confirm that your company has all of the necessary permits and licenses:

Obtaining necessary business licenses is critical to the survival and growth of any firm. Depending on the nature and magnitude of its operations, a firm may require numerous charges in various situations.

If your company does not have the proper license, you might be fined heavily, compelled to cease operations, and possibly face litigation and fines. As a result, it is critical to determine which licenses and permissions are required for your business and to guarantee that you, as an entrepreneur, take the appropriate measures to secure them.

A food business, for example, will require a Food Business License by submitting Form B to the FSSAI (Food Safety and Standard Authority of India), a Health/Trade License, Shops and Establishments Act License, NOC from the Fire Department, a Lift Clearance, Certificate of Environmental Clearance, Signage License, and Music License.


7. Understand the IT Laws That Apply:

With increased digitalization, it is unavoidable for your company to gather data from customers or visitors to its electronic platforms, employ servers, and rely on cloud computing. This implies that you must safeguard the data you possess, control, and use to comply with the Information Technology Act of 2000 and applicable state and local regulations.


8. Safeguard your intellectual property:

The company's intellectual property is the most valuable asset, mainly if you rely on unique technologies. Algorithms, scripts, and research findings are some of the most frequent forms of intellectual property owned by startups.

The Office of the Controller General of Patents, Designs, and Trademarks (CGPDTM) oversee protected innovation freedoms in India. Every entrepreneur must register the trademark for their company's brand name with the CGPDTM, which will protect your branding and prevent future infringement.

It is also tricky for entrepreneurs to have competent legal counsel who can assist them in filing patents with the CGPDTM to protect their ownership of intellectual innovations and technologies.


9. Keep track of your secretarial filings:

To guarantee that your company is by the applicable regulatory framework, you must file your documentation, including essential papers, with the Registrar of Companies regularly. Filing and arranging your documentation about workers, financing, corporate structure, intellectual property, and so on is also essential for the due diligence process for further funding once you start your firm.


10. Recognize Dispute Resolution:

Even with the most thorough contracts, disagreements are possible, and if they happen, you must be prepared to pursue or contest them. Understanding that there are several methods of dispute resolution based on cost, time consumption, and effort will assist you in selecting the right path for your organization in a disagreement.

Mediation, for example, is one of the cheapest and easiest ways to resolve a dispute in terms of money and effort. In contrast, litigation and arbitration are the most expensive and time-consuming.



Every company must understand the fundamentals of legal compliance.

If you're thinking about starting a business, you should talk to a lawyer beforehand. But don't panic. You don't need a lawyer to run your company's day-to-day operations. You need a basic understanding of the law and a strategy for staying in compliance.

Don't put it off until it's too late reach out to us at info@bbnc.in and start the discussion.

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