Corporate

INTRODUCTION

Startups are the most popular form of business in India among individuals looking to launch their enterprise. You can establish a startup firm, with any amount of funds and any degree of resources, both online and offline. In some cases, you don’t even need an office to launch a startup business. 

For any startup, legal documentation is essential for running your business as it prevents misunderstandings and issues related to day-to-day situations. During a business’s lifetime, legal documents also safeguard the rights of the owners. In the event of any disputes involving the business environment, they help to maintain transparency and accountability.

In this article, you will understand;

• Important Legal documents for a start-up
• Trademark Registration
• Articles of Incorporation or Charter
• A Non-Disclosure Agreement (NDA)
• Bylaws
• Shareholders Agreement
• Employment contract
• Tax Registration Certificate 
• IP Agreements
• Founders Agreements
• Business Insurance
• FAQs

IMPORTANT LEGAL DOCUMENTS FOR A START-UP

Let’s learn about the 10 important legal documents required in India to launch a start-up!

Trademark Registration

The first and foremost essential legal document is trademark registration. A start-up must register its trademark so as to get exclusive rights to use that mark. It ensures direct authority over it and guards against any unauthorized access or possible misappropriation of your trademark This document essentially enables you to protect your business against fraud and unfair competition by taking legal action against those who misuse it once your trademark is registered.

Articles of Incorporation or Charter

An essential startup legal document that every entrepreneur should be aware of is the Articles of Incorporation. It is one of the legal documents that enable a company to conduct business in any city or region. You must submit articles of incorporation, also known as charters, for your company to be recognized as a legal business entity qualified to conduct business anywhere in the nation, and is also an essential document to launch your corporation. You will be required to provide information like your company’s name, a brief description of its operations, a physical address, the name and contact information for a resident agent in the state where you are filing, and the name and signature of the person submitting the registration.

A Non-Disclosure Agreement (NDA)

An NDA is a contract that requires the signee to take all reasonable steps to protect intellectual property. The privacy of all the information shared between you and other parties, such as investors, stakeholders, third parties, etc., is protected using NDAs and other startup-specific contracts. If you’re dealing with targeted consumers, investors, or even your staff, the NDA’s function is crucial. NDA benefits the startup’s founder and its staff by giving them protection. It accomplishes this by protecting the business’s and its employees’ intellectual property rights.

Bylaws

By-laws are the rules that govern the organization. The founders should increase potential bylaws right away to ensure that a firm runs as smoothly as possible. The company’s internal procedures, such as how to resolve disputes, choose leadership, and specify the rights and powers of shareholders, should be stated in the bylaws. The bylaws should most importantly provide vote criteria for consent to specific business actions, such as electing new board members or getting into debt.

Shareholders Agreement

When your startup business is ready to move forward in a direction involving investments made by other enterprises or individual investors, the Shareholder’s Agreement’s function comes into play. It helps in identifying the relationships between the several shareholders of the organization. If the startup’s founder intends to quit the company, the shareholder agreement loses its value. The issue of these stockholders’ obligations and overall rights is now being questioned. At this level, both the investors and the new firm are provided with a clear picture of the relationship between the shareholders via this pertinent document.

Employment contract 

To prevent further problems, this contract outlines the responsibilities and expectations of both the employer and the employee. An employment agreement is not required for every job, but it might be helpful if you want to prevent some recruits from leaving your company too soon, leaking sensitive corporate information, or working for a rival. Before allowing an employee to sign the contract, it should be examined by an attorney with expertise in employment law.

Tax Registration Certificate 

Similar to the GST, Indian startups must get a tax registration certificate. It’s mostly necessary when your annual revenue exceeds 20 lakh rupees. In addition, if you have more than 10 employees, you must be registered with Employee State Insurance Corporation (ESIC). The FSSAI License is also necessary if you work in the food industry. Startups are increasingly looking for import and export opportunities; in such a situation, IEC Code Registration is required.

IP Agreements

Deep values and intellectual property (IP) are the successful ingredients for most businesses. However, these intellectual property rights are absent from many firms. Startups frequently rely substantially on intellectual property because the portfolio assessment of the business is what attracts credible investors. It’s crucial to have complete control over intellectual property.

Founders Agreements

An official contract that is signed by each of the company’s co-founders is known as a Founders’ Agreement. Each founder’s initial investments, ownership interests, and duties are listed in this document. A founders’ agreement should be made during the incorporation stage of a business because it will explain the duties and functions of each co-founder. It is also advisable to have this document in written form.

Business Insurance 

In situations where your liability protections are insufficient, business insurance can cover your venture’s losses. Insurance can safeguard both your assets and the assets of your company. Some insurance, including those for unemployment and disability, are even required by law. Having insurance that shields your startup from additional dangers is another smart move. General liability insurance, product liability insurance, commercial property insurance, and others are a few of them.

CONCLUSION

For any business, complying with the law is essential. One must understand and abide by all applicable regulations if you are an entrepreneur looking to launch a small business in India for it to run smoothly. The best way to protect your business and stay out of serious action is to seek out experts who specialise in such services.

FAQs

How do you start an enterprise/business?

An idea, money, and time are the three things required to launch a startup. You will need to work on all fronts at once and establish the relationships and support networks required to acquire an investment or be able to launch your firm.

What are the main essential legal documents required for a startup?

To start your own business, several legal documents are required as mentioned below;

• Incorporation
• A Non-Disclosure Agreement
• Employment contract and offer letters
• Shareholders agreement
• Bylaws
• Intellectual property
• Founders Agreement
• Terms of use agreement
• Business plan document

REFERENCES

10 Documents required for Startup Registration in India in 2022 (draftmydocuments.com)

10 Essential Legal Documents for Startups | LegalWiz.in

Top 5 Legal Documents for Every Indian Startup – TheRodinhoods

Documents You Need to Start a Business in India – Razorpay Business

10 Essential Startup Legal Documents Every Founder Should Know About – Lexology

“Why Are Agreements Essential For A Startup?” By Lockhart Legal (lawyered. in)

10 essential legal documents needed to start a startup in India – iPleaders