One of the stepping stones in starting a new business successfully in India is gaining knowledge about some basic laws for startups. With that in mind, we have listed some of the most prominent startup laws that can help you start your entrepreneurial journey in India.
6 Laws for Establishing a Startup in India
1. Choosing a Business Structure
This one is probably the most essential and fundamental step you’ll need to know before establishing a business in India. You must decide on the type of company you need to set up so that it meets your business goals in the long-term. You can choose from public limited, private limited, a limited liability partnership, or a partnership firm.
Before choosing a venture type, consider things like visibility, practicality, profits, and sustainability that you will get from choosing a particular structure. Separate laws govern every kind of business, and if you fail to comply with any of them, you run the risk of incurring losses or facing hefty fines.
2. Getting Business Licenses
In India, you’ll need to obtain several licenses to run your business venture smoothly and trouble-free. It pays to have proper knowledge about all the applicable licenses and get them as soon as possible.
One of the most common licenses that are required for almost all businesses in India is the Shop and Establishment Act. There are several other licenses, depending on your company and industry.
For instance, there is Goods and Services Tax (GST), service tax registration, professional taxes, etc. for e-commerce companies. If you’re planning for a restaurant business, you may need to obtain a Food Safety license, prevention of food adulteration, certificate of environmental clearance and health trade license, among others.
3. Getting familiar with SEBI
SEBI stands for the ‘Securities and Exchange Board of India.’ SEBI helps businesses in the listing process. So, make sure to keep track of SEBI’s new regulations. It can help you handling different stages of your business and raising funds to meet the capital requirements. As an intelligent entrepreneur, you should be aware of angel investors, foreign direct investment, joint venture, and venture capitals, to name a few.
4. Understanding the Taxation Laws
The good news for Indian entrepreneurs is that the Government has launched several initiatives to provide several tax exemptions to new startups. For instance, under the Startup India program, new startups can get tax exemptions for up to 3 years. However, your startup must be a registered partnership, private limited, or limited liability company. Secondly, it must not be older than seven years and should have a turnover of lesser than 25 crores, among others.
5. Knowing the Labor Laws
Hiring new people is a constant process in most startups. All employee-employer relationships are governed by labor laws in India. It’s a good idea to get familiar with all such labor legislation and comply with them.
Neglecting these laws not only has financial implications, but it can adversely affect the reputation of your startup. Following proper labor laws, make sure that your employees are happily working for you. It would improve their productivity and bring success to your business.
6. Understanding IT laws
In this technologically advanced era, every business owner needs to educate themselves on prevailing IT laws and other stuff related to information technology. Today, knowing things like cloud computing, e-contracts, the security of confidential data, protecting the privacy and digital signature, etc. are critical to run your business successfully.
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