Startups commonly make mistakes during registration in India
Thousands of dollars are invested every year in technology projects, software, and other related initiatives. Investments allow you to put your ideas into action, but today’s entrepreneurs are inclined to make mistakes that leave their investments at risk. In light of this, we developed a list of the most common registration mistakes that could threaten firm viability.
One of the most common reasons for a startup to fail is a lack of finances and management. It is recommended, however, that you adhere to the country’s legal formalities and criteria so the company registration mistakes doesn’t collapse. We have now listed in this post some of the common mistakes made by start-up enterprises in India that need to be avoided if you don’t want to lose your business.
Choosing the wrong business structure:
The decision isn’t just about choosing a business structure. It can be a sole proprietorship, a partnership, a corporation, a limited liability company, or anything else. In addition to deciding on a legal structure with a time-bound compliance schedule, statutory responsibilities, and legal duties, it also requires the entrepreneur to develop a plan for meeting those obligations.
Choosing the wrong entity form during the early stages of the business might leave the entrepreneur unable to comply with a long list of requirements. Entrance through an easily-registered entity type, however, will allow for more competition and might even invite competitors into the market. A tax advisor can help you select a legal structure that reflects the nature of your business and the associated expenses and compliances.
Ignoring the importance of registering
It’s common for start-ups to lack the necessary expertise or staff that can assist with law-related issues. People who are not aware of the registration requirements imposed by various government legislations neglect this issue. As part of India’s regulatory process, officials check for compliance/registration with all applicable requirements, such as securities laws, employment laws, labor laws, income tax laws, state laws, and so on. In this situation, it is necessary for entrepreneurs to complete all ancillary registrations in addition to registering their businesses as legal entities.
A company’s employees are not considered assets.
You must have talented employees on your team if you wish to grow your business. What can you do to attract this talent without tarnishing it? Motivators must be provided as well as emotional and mental health issues addressed at work.
Companies now organize engaging training workshops and engaging lectures to keep employees fit and stress-free at work. It is true that ESOPs (Employee Stock Option Plans) are offered to workers, which in turn makes employees responsible for their work and motivated to align their efforts with corporate objectives.
One of a company’s most valuable assets is its documents. It is always recommended that any documents that are used for registration, such as an MOA or AOA, as well as a partnership or joint venture agreements, be reviewed by specialists before they are submitted. Companies have an advantage when they conduct due diligence on all legal standards, paperwork, etc. declarations, Before applying for registration under any given statute, ensure that you comply with all government requirements.
Not forming a partnership or failing to create a partnership agreement
The partnership firm you’ve formed as a startup must be registered or a partnership deed must be created so that the partnership firm has a proper corporate structure and all terms and conditions must be laid out and recorded by the registrar of firms in order for any legal or business-related dispute to be handled accurately and correctly. Further, creating a partnership business online will make it easier for a startup to be recognized in India.
Lists of upcoming expenses not being made
If a business is registered under a specific entity type or under a specific law, it will not only face regular compliance costs, but it will also incur legal fees, from advisory boards, and other documentation costs, all of which will increase the Startup’s limited income in the early years. Hence, before choosing any registration, formulate a clear action plan that matches estimated costs, expenditures, investment, and compliance required.
Refusing to sign agreements
The company’s Memorandum of Agreement or AOA, director policy documents, partnership agreements, liquidity agreements, insolvency and bankruptcy documents, incubation agreements, employee agreements, intellectual property agreements, etc., must all be in place in case of a business conflict.
Startup businesses often forget the necessity of drafting statutory agreements. The development and filing of government agreements help businesses run more smoothly and save a lot of time and money in legal battles. Contact our Tax expert to learn about all the legal contracts your company will need. Be sure to check whether associated agreements are created to protect your company from legal penalties if you formalize your registration under any legislation.
No protection for intellectual property
Do you realize how important it is to have your intellectual property legally protected? Getting such protection is crucial as the output of your brain may be exploited for profit by others, causing a loss in economic prospects and financial loss.
As well to tangible assets such as buildings, many intangible assets are created and acquired over the course of a business. Your domain name, logo, or another distinctive aspect of your product sets it apart from the competition. Examples include ideas, innovations, and logos. It describes who owns the right to develop a creative idea. Additionally, it is an intangible asset that you created and designed specifically for your company’s products. Registration trademarks, patents, and copyrights under various IP protection can be a good safeguard to protect companies’ intellectual properties.
Remember that the federal and state governments both create laws, policies and regulate corporate activities. Every company should register with the appropriate authorities. It is common for business owners to overlook some registrations, which can result in heavy fines and penalties. Let’s examine a few of the government documents.
Shop or establishment license: For your company site, such as your registered office, you need an establishment license.
Only IEC registration can be used for import and export transactions.
Businesses selling goods and services must register for GST.
Employers and self-employed individuals must pay this tax. If your employer collects it, it can be deducted from your pay.
A delay in starting a business
Business strategies should be legally protected if they are actionable and registered in accordance with relevant frameworks. You might want to avoid delaying the launch of your company. The delay in starting can also postpone the rewards that you will enjoy, so if you have a business strategy that you can implement, you should start as soon as you can.
Avoid these common registration errors when starting a business in Chennai. An organization requires registration, a partnership agreement, and certain crucial decisions in order to run smoothly and for the long term. Before you register your business, Phoenix Tax can assist you with the process, which will allow the process to proceed at a faster pace without any mistakes.