Examples Of Legal Structures In India for setting up new Business

1. Examples Of Legal Structures In India for setting up new Business NAVIGATING THROUGH LEGAL STRUCTURES IN INDIA In order for some start-ups to succeed, it must be driven by passionate entrepreneurs. Similarly, when we talk about start-ups, we must focus on what is the actual factor that leads to a proper structuring of a company when particularly set up in India. A successful start-up is the one who are focused on building exceptional solutions that provides customer delight as well as internal laws, rules and regulations that will in turn help in the smooth running of a business. In a business it is critical to understand about the basic laws and legislation that will help an organization to move forward without any discrepancy. Entrepreneurs must be aware of and up to date on all the laws governing their businesses and markets, from formalizing a founder's agreement to safeguarding intellectual property. Here are a couple of important legal basics that start-ups need to be aware of before beginning a business: 1. First and foremost, finalizing the business structure and ownership agreement: - Before starting up any business the most important thing to do is to explicitly understand the business structure and work on the nature of the business and its type. There are several types of businesses which a founder needs to incorporate before starting a business, such as partnership, private limited, one-person company, small company, associate company, Proprietorship, limited liability partnership and so on. A clear vision at the beginning is crucial to the business's short- and long-term success and success. Each business type comes with its own set of legal requirements and regulations and businesses should pay special attention to them before incorporating the business. That’s why it is always recommended to consult a “Consultancy and Advisory solution” such as BBNCwho will help in the proper process of business setup starting from co- founder agreement, legal support agreement and so on. A private limited company is the best option for start-ups who are looking to raise funds as it provides the flexibility to accomplish external investments and company stock. It is now advisable to draft a Founders agreement or Co-founder agreement to be able to cop up with the current ecosystem of start-ups in India. A Founder’s Agreement is essentially a document that specifies important details about the founding team and the business, such as, roles, responsibilities, executive compensation, operational details and exit clauses among others. The entire purpose of all such agreement is to reduce the possibility of surprised fraudulent and discrepancy in a full functional company. Especially when a company is growing and is at its peak performance and starting to make a name in the market. It is a basic pillar

2. foundation to start and scale up a business of your dream. It may also act as a go to guide when any sort of disagreement rises. 2. Should apply for Business licenses : - A business license is an integral part of any business irrespective of its types. There are different types of licenses available depending on the nature and size of any business. It will be a best beginning for any start-ups after knowing the type of license required for your business and then obtaining them. The lack of relevant licenses may lead to costly lawsuits and unwanted legal battles. Business licenses are sort of legal documents that will allow a business to operate while business registration is the official process of listing a business (along with relevant information) with the official registrar. Shop and Establishment Act is the common license that all businesses must obtain in order to operate their businesses, trades or professions. Depending on the industry, there may be other business licenses required. For instance, a company operating online, may need additional licenses, such as GST registration, and professional tax registration. In addition to the licenses listed above, a restaurant may need a Food Safety License, Certificate of Environmental Clearance, and Prevention of Food Adulteration Act, as well as a Health Trade License. So it is always suggested to consult someone or any professional to get your business a proper business license and to avoid all such unwanted fraudulent. 3. Accounting laws and Taxation:- Business Accounting is the most crucial part of any business entity. Maintaining accounts and auditing it time to time is to be ensured that relevant accounting and taxation rules are obeyed. It is found that many start-ups in India don’t pay a close attention to accounting and taxation as required time to time. However, this cannot be ignored for a long time as this may lead to some serious issues and discrepancies. It is always suggested to have a proper and reliable payment and invoicing system for clear accountancy. Taxes are an intrinsic part of any business we talk about. In India there are variety of taxes depending on business types and strength. There are state taxes, central government taxes, Custom taxes when your company works on the module of import and export, and so on. Different sectors have different kinds of taxes. Knowing this before starting a company will be useful. Just few years back, the Government of India launched the “Start-up India” program. This was an initiative to promote startups, and to give exemptions and tax relaxations for startups and newly founded businesses. According to this initiative, a startup can avail income tax exemption for a period of 3 years as well as tax exemptions from capital gains and investments above Fair Market Value. Startup Recognition:

3. Under the Startup India Action Plan, startups that meet the definition as prescribed under G.S.R. notification 127 (E) are eligible to apply for recognition under the program. Eligibility Criteria for Startup Recognition: a) Turnover should be less than INR 100 Crores in any of the previous financial years. b) The Startup should be working towards innovation/ improvement of existing products, services and processes and should have the potential to generate employment/ create wealth. c) An entity formed by splitting up or reconsutrctuon of an existing business shall not be considered a "Startup" d) An entity shall be considered as a startup up to 10 years from the date of its incorporation. e) The Startup should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership. We always suggest to have an accounting and Taxation solution in which way you wouldn’t have to worry about it and carrying on your dream business and goals and be worry-free. We at BBNC have professionals such as Chartered Accountants, Company Secretaries, Lawyers, Cost Accountants, Labour Law Experts, and HR compliance experts. We provide all of the services required for a start-ups under one roof so that they don’t have to worry about compliances. 4. Following labour laws: - Labour laws are a bit tricky part in any organisation be it small or big in size. It is obvious that when you are setting up a company you should be subjected to labour laws regardless of the size of the company, you will have to hire people to work within your company and so this is another most crucial part. Laws with regards to minimum wages, gratuity, PF payment, weekly holidays, maternity benefits, sexual harassment, payment of bonus among others will need to be complied with. It is best to consult a legal counsel to assess the laws applicable to your startup and ensure that your startup is compliant to the required labour laws. With regards to labour laws, startups registered under the Startup India initiative can complete a self-declaration (for nine labour laws) within one year from the date of incorporation in order and get an exemption from labour inspection. The nine labour laws applicable under this scheme are: a) The Industrial Disputes Act, 1947 b) The Trade Unit Act, 1926 c) Building and Other Constructions Workers’ (Regulation of Employment and Conditions of Service) Act, 1996 d) The Industrial Employment (Standing Orders) Act, 1946 e) The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 f) The Payment of Gratuity Act, 1972 g) The Contract Labour (Regulation and Abolition) Act, 1970 h) The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 i) The Employees’ State Insurance Act, 1948.

4. Startups under this scheme will have to file self-certified return for the second and third year in order to continue with the exemption. It is suggested to hire a professional consultant especially for start-ups who would be able to cover all such employment policies and details on behalf of your company. If you need any help with legally setting up your company or taking care of your day to day compliance needs reach out to us at info@bbnc.in, we will be happy to help. We have specialized professionals under one roof helping you take care of each and every compliance so that you focus on your business activities without the compliance worry.