Tag Archives: business

Legal Requirements for Startups in India

As we discussed in the earlier posts, you already have a great idea, team and everything that you need to get to building a great business. You may also already have started and are growing. To grow, at some stage you will have to interact with the complex legal systems in India. This will be the most critical phase during the growth of your business as some of these will make or break your business.

India ranks 142nd on ease of doing business index by World Bank Group of 189 economies in the world.

The legal complexity to do business in India acts as a barrier to most entry businesses and kills any unsuspecting entrepreneurs. But if you can manage things right and have a right set of advisors, you will benefit.

Facts show that Reliance is spending about INR 1200 Cr every year towards legal and regulatory expenses. This helps them get a significant strategic advantage over their competitors. Some other companies spending over INR 500 Cr towards legal and regulatory expenses are Infosys, L&T and TCS.

As a startup, we are not competing with these huge budgets, but what our main focus should be on is to avoid spending on legal expenses at all. Let’s see how we can accomplish this.

  1. Incorporation

Many entrepreneurs get into incorporating a private limited company without even validating the needs and exploring options. I would recommend to get into a detailed Founder’s agreement instead of incorporating at the beginning. Incorporate only when you start generating some revenue. If you decide to incorporate right at the beginning, you should consider; tax liability of the business and managing foreign investments which many companies may take. LLP’s are cheaper than Private Limited’s in terms of tax liability and offer almost the same features. What we need to know is that a LLP can be converted to a Pvt. Ltd and vice-versa. Taking foreign investments from an offshore parent company is a smart move to save on income tax as a founder or cofounder.

2. Licenses

To conduct any kind of business in India, you will need various business licenses depending on the nature of the business. Consulting a lawyer or a CA who specializes in handling transactions for a startup is advisable. The licenses which are required are tax registrations, trade license or shop act, manufacturing and import-export require multiple licenses. As soon as you employ more than 10 people there are another set of labor and employment related licenses. Not following the licensing norms leads to heavy fines, legal suits and sometimes even business shut down. As an entrepreneur, you should have a sense of all the licensing requirements and ensure that you do not violate any license conditions at any point while conducting business.

3. Accounts and Taxation

Many businesses fail at proper accounting and end up fighting legal lawsuits, hefty penalties, sometimes imprisonment with respect to tax bills. All this just due to negligence or lack of knowledge.

When the business is very small, you don’t come under the radar of the tax officers and you are safe, but as soon as you grow, the tax officers are going to run a micro scan of all your transactions even for the entries during your startup. Any violation will lead to many legal actions and you end up paying very high amounts to tax lawyers. Avoid this by paying equal attention to legal requirements.

4. Vendor contracts

This is also an important aspect of conducting business. Here the authorities are not going to question you, but your business could be at stake if you do not have a detailed contract with your vendors. If your contracts have confusing clauses which may help your vendors to take an action for the company and using the contract the vendor play you around with your competitor, your business may incur major losses. To avoid such situations, the only way out I see is to learn some contract law because as an entrepreneur you will go through many of them.

Steve Jobs once at Apple said, “every intelligent person should know how to read and negotiate a contract, just like everyone should start learning how to code!”

This topic is very vast and I will keep writing more details of each aspect in my future articles.



Creating a successful business

 “Ultimately, there’s only one way to start your career, and that’s by starting a business. If you find yourself hesitating, remember my motto: Screw it, just do it,” – Richard Branson

Remember, starting up a business is a no easy task. Here is what you need to have within yourself to startup.

  1. Fall in love with your idea.

Falling in love with your idea is the key factor which drives you to achieve and create a successful business. Don’t start a business because you think it will make profits. Think of what the subjects and problems are that interest you and then justify which idea to convert into a business. Find out a talent or industry knowledge you have, then carry that with passion and love. This will help drive achievement.

2. Start locally

Now that you are sure of your idea and have justified it, start looking for the problems you have as a customer in the product or service you intend to sell/provide. Start with your area/city and think how your business could help overcome the problems you and your friends face. This way you would figure out what the market is missing and design solutions in your own product/services that could make the customer experience better. Once you have achieved in a smaller areas, think of expanding to other areas/cities.

3. Work around things

Just focus on designing your product and service to serve the society, this is the way how business work, : “by improving other’s lives”. Once you have done that, you make more money than you spend to create the product.

4. Listen to advice and overlook discouragements

Ensure to take advice from the ones who have experience in your field and be careful not to confuse discouraging comments for good advice. There will be numerous people who will tell you that you won’t succeed, you need to overlook discouragements but at the same time you also need to listen to those people too.

5. Stay Focused and Stay Motivated

In the first year, focus and motivation is a key to success. You need to dream big but at the same time you need to concentrate on establishing your business and surviving through the first year. Set small targets for each day, then week, month, quarter and a year, this way you will be motivated at all times and enjoy your success very frequently.

6. Be passionate of what you do

Passion is a vital part of your business. Enjoy and be passionate of what you do, let your employees be passionate and love what they do and so your customers.

Just adding an image which may feel irritating to the eyes, but if you focus on the word “focus”, it will give comfort to the eyes. So Focus is the key to success.


Keys to build a successful business

Startup is a term that means you start with a new business. I would now like to bring in focus on business, which is what the core of a startup is.

If you think that starting up your business needs a very unique idea, you need to rethink. It’s not only a unique idea that will succeed. Even if it is a very popular theory to be the first in the market to be a successful company, it’s not always the most important tactic, and it’s like playing a major risk businesswise as you don’t know what the customer reaction to it will be.

An entrepreneur can cut down the risk by entering into a business that already exist even though his idea is not unique.

Building a successful business takes “drive, determination, belief in what you’re creating, bulls**t and charm.” – Richard Branson.

This is what you need to create a successful business. A unique idea is no bad, but entering into a market that already exist is not bad too.

It’s a tricky thought, entering into a market product that already exist may be a major risk as we are actually competing the already existing successful businesses. All it takes is, long term vision for your company, its customers and your determination.

Think about the changes that you would like to see as a customer. Even if you have found only a few, those little changes may add up to a bigger idea that leads to an entirely new and truly disruptive product or service. It’s less necessary to have entire knowledge about the industry you enter with a business but it is necessary to have the drive, determination and belief in your company and its products/services.

A classic example to this is Virgin records, Richard and his team lacked the insider knowledge about the music industry yet created a very successful business, and instead this lack of knowledge was countered by the idea of inviting potential customers to a cool shop they setup where customers could spend hours listening to their favorite music.

Judge from your own customer experience, you will always find better ways of doing the same thing. “Just do it.”

I think drive, determination and belief are the 3 keys to a successful business.


Just Do it!

The first thing, I would say to young aspiring people is start calling yourself an entrepreneur from the day you get your first business idea and you have a faith that your product will make wonders. This way you will be able to overcome all the discouragement that will come when you talk to people about your idea and the obvious answer you will get is: It’s not going to work! People have tried before. Listen to people and then just say this to yourself; “Screw it, just do it!”

Every one of us has an entrepreneur within us, it’s just that only a few have the gut to become one.

Here is a perfect example; Sir. Richard Branson. At the age of 15, Branson dropped out of high school to start his first business, a magazine for young activists titled Student. Four years later, in 1970, Branson began selling records by mail. In 1971, he opened his first record store. In 1972, he opened a recording studio. In 1973, he started his own record label. The Virgin business was scaling very high and if we look Richard was not even 24 that time.

Today, the Virgin Group is a well-regarded global conglomerate of about 350 companies, branching into the entertainment, travel, and mobile industries.

Not all of Richard’s ideas have been successful, Virgin Cola was unsuccessful and finally it shut down. But here is what Branson has about overcoming failures: “If you have enough determination…. It’s more likely that you will succeed because of what you learned from the occasions when you didn’t succeed, the most important thing is to not be put off by failure.”

Here is an advice video from Sir. Richard Branson for you to be motivated: