It’s critical for entrepreneurs to have basic legal knowledge. While startups innovate to disrupt society in general, and laws of the land have to catch up to them, there are specific legal aspects that an entrepreneur needs to know about.
Choosing a business type: At the absolute beginning, when you set up your organization, you must brand it as a ‘private limited’ or ‘single proprietorship’ or something else. While this may seem unnecessary, it goes a long way to decide your company’s visibility, sustainability and profitability.
Choosing your brand will depend on your long-term goals and vision. Every type has a separate set of laws, and you have to decide keeping the existing legal frameworks in mind.
Taxes: Taxes can be taxing. Every company has to pay central, state and local taxes. You will be in a better position if you know the basics of accounting and the how taxation works. Tax laws are tricky. More importantly, taxes vary across sectors, regions and products. Keep all that in mind.
Securities laws: You’d want to list on the stock exchange at some point. The Securities and Exchange Board of India (SEBI) reforms these laws periodically. Keep up with these.
Business finance: Business finance means the way you manage your startup’s financial needs across its life cycle. This includes everything from FDI (foreign direct investment), angel investors, VCs (venture capitals) or even joint ventures. This will take your business to the next level.
Labour laws: It’s obvious you’ll have people working for you. You’ll also need freelancers and contractors. Those are all protected under labour laws. You must follow labour laws. This will increase their productivity and morale as well.
Intellectual Property (IP) laws: If you’re doing anything new – with codes, designs or research, intellectual property (IP) is with you. Timely IP audits are important. Also, it’s critical that you file the right patent/trademark/copyright claims. This will prevent theft.
Information Technology law: IT laws include digital signatures and e-contracts. As you start using proprietary software and cloud computing services, you’ll get your hands on a bulk of data collected from consumers.
You must protect your client’s privacy electronically. There will be hackers who’d want to steal this data. That’s where knowledge of IT laws come in handy.
Contract law: When you can’t always hire, so you hire contractors. Contracts are indispensable to entrepreneurs. Hence, basic knowledge of fundamental principles of contracts can help.
Settling disputes: Disputes are inevitable. What’s important is how you settle them. When disputes arise, legalities do creep in and things do get messy.
Since you are the CEO, if you know a bit about the formal and informal ways of dispute resolution, it’ll take you a long way. The best friction is no friction.
We good to go?