WARNING: IGNORING THESE LAWS MAY CAUSE YOUR STARTUP TO SINK

Business is not something that can be run arbitrarily. Every business has to follow a set of statutory laws and ignoring these laws may land the business as well as its owners in serious trouble ranging from facing legal suits to loss of competitive advantage.

Ignorantia Juris non-excusat– means ignorance of the law is not an excuse. The message is loud, clear and importantly unambiguous. You cannot defend your stand in the court of law just because of the reason that you do not know the repercussions of your actions.

The business has been regulated by various statutory laws. Some are universal i.e. applied to almost all types of businesses like Company’s Act, taxation and accountancy, Trademark Act or labour laws while some are specific to a particular business for instance Drugs and Cosmetics Act for pharmaceutical industry while Patents Act for the innovative and technology-driven industry. Startups should have an understanding of the laws that may have a direct or indirect impact on their business. Any step taken without due care to the law may land them in trouble and at worst, may lead to disastrous consequences.

Structure of Company: Indian laws such as Company’s Act offers various options for forming the organization. This includes proprietorship company, partnership company, limited liability partnership, or private limited company. Each type has its own advantages and disadvantages. By critically analyzing each type in great detail, the owners of the startup should choose what best suits them.

Labor Laws: Startups have to work under moderate resources and they have to do the optimum utilization of those resources. In such a scenario, they are not in a position to hire a battery of lawyers or an experienced human resources team. Ignoring the basic laws related to hiring and managing team sometimes becomes critical. To get an exception from the inspection, start-ups have given the opportunity to self-certify for compliance to the following nine labour laws in India:

• The Industrial Disputes Act, 1947
• Building and Other Constructions Workers’ (Regulation of Employment and Conditions of Service) Act, 1996
• The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
• The Employees’ State Insurance Act, 1948.
• The Trade Unit Act, 1926
• The Payment of Gratuity Act, 1972
• The Contract Labour (Regulation and Abolition) Act, 1970
• The Industrial Employment (Standing Orders) Act, 1946
• The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

Further, startups should have a clear, and transparent HR policy which helps in high productivity, attracting great brains with a minimum attrition rate.

Contract Act: Startup owner/s should have a basic understanding of the Indian Contracts Act, 1872. Every facet of business requires a contract, whether it is with the employees, with the stakeholders or with the clients. A strong contract helps you to run the business smoothly. The basics of the contract are that the parties should give free consent, should be eligible to enter in contract, the object must be lawful and for a lawful consideration and the contract should not be void by any reason whatsoever.

Taxation Laws: One of the important aims of every business is to earn a profit. The startup owners should understand the basic taxation laws related to the profit earned. Indian Government has provided various exceptions in tax laws to create a healthy environment for startups, provided the startups are eligible for those exceptions. Proper accounting system helps to maintain the proper payment and receivables.

Business Licences: License is required to carry out business in India. The owners of the company should have a clear understanding of the licenses required to run their business without any legal and procedural trouble. For instance, in drugs, licenses may be applicable as per the Drugs and Cosmetics Act while in the food business, the license should be obtained as per the Food Safety and Security Act. Different industries have different licensing requirements.

Intellectual Property Laws: Startups are generally based on new ideas and innovative business plans but they have a lack of funds. Established companies may copy their plans and through huge investment, they may take edge over the startups. Thus, to protect the copying of their ideas and innovations, startups should have a basic understanding of Intellectual Property Rights which includes patents, trademarks, copyrights, and designs. Startups should apply their innovations and other intellectual properties for registration in the appropriate category.

Author Bio:

Pragnesh Tavadia the CEO at MeraSEO which is a Digital Marketing Company based out of Mumbai. having served a vast number of clients in these past 7 years. His experience and certifications enable him to good knowledge of SEO, SMO, SEM, Web Design, Digital Marketing, Business etc.