Compliances To Look For While Starting Up

An entrepreneur is unique blend of a risk-taker, a mad scientist, a hope addict, an inventor and a magician. But the euphoria of being an entrepreneur can volatilize just as quickly if certain basic compliance related aspects are not addressed. So if you want your startup to get to the benchmark you have set, you need to take care of these key legal aspects first:

  1. MAKE THE DEAL CLEAR WITH YOUR CO-FOUNDER

When getting a startup off the ground, there is nothing more important than having a clear understanding with the co-founders around key areas, critical to the smooth functioning of your startup. These key issues cover areas like the roles and responsibilities of the founding team, equity ownership and vesting and IP ownership.

A Founders Agreement should be executed and signed between the co-founders, so that the agreement lays out the rights, responsibilities, liabilities, and obligations of each founder.

  1. CHOOSING THE RIGHT LEGAL ENTITY

     The very first decision that founders should take, is to choose what legal format should they operate their startup in. The format that is best for your startup depends on what type of business you have and what are your objectives. Typically choosing a entity comes down to three considerations: stakeholders (investors, shareholders), liability and tax issues. Some structures to choose from include a Registered Company (Public Limited, Private Limited, Small Company and One Person Company), Limited Liability Partnership (LLP), Sole Proprietorship, and partnership. The more widely accepted one is a Registered Company, especially for startups seeking investment.

  1. TRACKING YOUR EXPENSES

A commonly made mistake by entrepreneurs is not keeping track of their expenses. Especially for tax returns all expenses should be properly documented. It’s advisable for startups to hire the right resource to manage these records. Also, it’s important to keep these records clean; therefore, it becomes the moral duty of the entrepreneur to not mix personal expenses with business expenses.

  1. STANDARDISED AGREEMENTS

A startup should have a standard agreement for dealing with customers or clients. These agreements are used as a business tool to eliminate any potential risks and misunderstandings in the future. A well-drafted Agreement doesn’t have to be daunting but shall be easy to understand, and make the working relationships between the parties clear. Read More: HERE

  1. EMPLOYMENT DOCUMENTATION

      Entrepreneurs should draw a clear employment agreement when hiring an employee or even a trainee. This ensures that the employees or the trainee understand what is expected out of them and also explicitly explains the terms of employment.

  1. INTELLECTUAL PROPERTY PROTECTION

If you have developed a unique product, technology, logo or service, you need to consider the appropriate steps to register the intellectual property (IP) you have developed. IP is a startup’s most valuable asset. The company’s founders have a stake in ensuring that the intellectual property rights are protected. Read More: HERE

  1. AWARENESS OF REQUISITE LAWS

It is very necessary for entrepreneurs to have knowledge of the basic applicable Laws, otherwise it would become very burdensome for them to tackle and resolve several basic legal issues. Knowledge of certain laws and regulations, irrespective of the type of startup, is very necessary for an entrepreneur. Read More: HERE

  1. TAX COMPLAINT

     Entrepreneurs are required to pay taxes. To be highly efficient avoid penalties they need to determine their taxes for the year in advance and pay as prescribed instalments. They can get into trouble for not paying the taxes on time. It is therefore important to take regular stock of the profit/loss statement at each quarter and pay the advance taxes.

  1. TERMS OF USE AGREEMENT AND PRIVACY POLICY FOR YOUR WEB SITE

A Terms of Use Agreement sets forth the terms and conditions for people using your Website. Your Privacy Policy is a legal statement on your Website setting forth what you will do with the personal data collected from users and customers of the site, and how such data may be used, sold or released to third parties.

 A good Terms of Use Agreement will cover the following:

  • Disclaimers;
  • Limits on liability of the site owner and its employees, officers, affiliates and directors;
  • How disputes will be resolved;
  • Representations and warranties of the site user, and indemnification to the site owner;
  • Rights to refunds and returns if products are sold; and
  • Intellectual property rights.

A good Privacy Policy will cover the following:

  • What information the site collects and How the site uses the information collected;
  • How the information may be shared or sold to third parties;
  • How the site deals with children under 13;
  • How the site may allow the user to access the site through third party services such as Facebook and Twitter;
  • A description of the use of cookies and other technologies on the site;
  • The steps taken by the site owner to protect confidentiality and security of the information collected; and
  • How changes to the privacy policy may be effected.
  1. HAVING THE RIGHT CONSULTANT

A startup must appoint a consultant to ensure all regulations are being followed. This will also give you more time to focus on building your business, forming strategic relationships amongst other things. Compliances are also not something that a company should revisit only once in a year. Founders should consider interviewing several consultants, lawyers, chartered accountants or company secretaries before choosing the right one for your business.

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