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Legal Way of Startup In India - Afham Akhtar

Updated: Nov 23, 2021

A startup is now the new face of India, which is considered to be a more innovative, practical, and potential application of various ideas that can be implemented for the growing era of India.[1]

A startup is a form of entrepreneurial business that focuses on capturing the market with the new pace of ideas. Startups can be of various forms initializing from sole proprietorship to partnerships or even company formation. We always have new ideas occupying our mind, a new way of providing services or anything. However, not everyone knows the legal facet of establishing a startup. Therefore we try to elaborate on the legal requirement for a startup.

1. Startup structure Formalization.

Before we start a business or entrepreneurship we need to be consistent with the business structure because of the availability of the different structures, e.g. Sole proprietorship, partnership, Limited Liability Partnership, or a Pvt. Company etc.[2]

However due to variation in the business structure the legal requirement tend to differ too, such as proprietorship or partnership holds liability, while in an LLP or private company, it formulates separate individual entity.[3]

2. Licensing of Startup

The first step toward legal entitlement while establishing a startup or business is a proper licensing of the same, a business needs a different tax policy to be applied.[4] This step also includes the formation of a PAN card, Company memorandum, etc. as per the business structure opted. [5]

3. Tax and Accounts & Finance

The government has announced various schemes for startups, one can seek financial or monetary assistance from these schemes which are provided to everyone. Additionally, they charge a nominal rate of interest on the amount borrowed. Another aspect of tax benefit is startup can avail tax benefits for the first 7 years of startup. A Similar facet is of GST, a business or startup needs to have a transaction of more than 20 L annually for filing GST.[6]

4. Local laws/statues

The business entity or startup needs to be sufficiently supported by the local laws governing the particular areas, like Delhi Shops and Establishment Act[7], or Bihar Shops and Establishment Act[8], similarly every state has a separate set of rules for the shops and their licensing. This also gives a hint for labor laws and employee's Act followed.[9]

5. Intellectual Rights

Along with the advent of knowledge of the information technological era, intellectual property is of vital importance. Since IPR are rights attached to a particular invention, creation or way of production, etc. It is highly recommended to get the startup registered under as IP creations through patents, Copyrights, trademarks, designs, or even trade secrets.[10]

6. Contracts

Whenever carrying out a business or dealing with a third party always enter into agreements utilizing contracts. This makes sure the liability on both parties for the completion of the business and transactions. This may be achieved by confidential agreements or Non-disclosure agreements for maintaining the confidentiality of trades amongst parties.[11] While there are various types of contracts fulfilling different set of requirements, like those of HR Policy, Customer Contracts, vendor agreements, distributor agreements, etc.[12]


[1] [2] ibid [3] [4] [5] Law for Startups, [6] Id at 1. [7] [8] [9] State Acts and Rules, [10] Id at 3. [11] Id at 3. [12] Id at 3, also see,

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