A Must-Know Legal Elements Before Starting Your Business

Starting a business is like giving birth to a child. Yes, right from the initiation of an idea to successful implementation, and eventually set up a physical business firm with zero legal interruption is just a milestone task that every founder and CEO will face. It involves endurance and pain, only if you do not know the necessary legal elements needed to be focussed before starting your business. Let us sort out those to make “Starting up Business” efficient and easy.

Deciding the type of Entity:

Before starting your business, it is crucial to decide what type of entity you are about to start. Business entities and their legal elements differ according to the type of incorporation. The business may in the form of Proprietorship, One person company, Partnership, Limited liability Partnership (LLP) or a private Limited Company.

  1. For a Proprietorship firm, the registration is not necessary as it is not considered as a separate entity and so, the owner should be responsible for all its profits and liabilities. But they require certain documents like the Shops and Establishment license,   GSTIN, Small Scale Industry License, and a current account in the bank.
  2. One person company (OPC) is similar to the Proprietorship firm in definition and structure but OPC carries a legal entity-tag that the latter do not require.
  3. The Limited Liability Partnership (LLP) should be registered with the Corporate Affairs Ministry under the 2008 LLP Act and is considered as a separate legal entity. As the name suggests the liability and profits are very limited and it requires a minimum of two persons to start the business. The taxation will be done based on the IT act, 1961. Another interesting fact is that foreigners are allowed to invest in an LLP with or without the approval of RBI depending upon the business value.
  4. Private Limited Company should be registered with the Corporate Affairs Ministry under the Company Act, 2013. The liability differs according to the holder of shares and the taxation will be done according to the IT Act, 1961 with the requirement of filing of tax returns. The Private limited company can even be started with one person. It may sound familiar to OPC but in OPC, the ownership cannot be transferred to another person but in Private Limited, the ownership can be transferred based on share transfer.

Building up the management:

The Founder’s agreement is one of the most important things that need to be discussed before starting a business. Facebook, a social media giant also stumbled on the founder’s agreement license which they underwent a complex legal process to resolve it. So, the management team should be decided upon priority so that it should not cause any future issues. A proper negotiation with the founding and funding members is the best way to tackle this type of issue efficiently.

Getting Essential license documents ready:

First and foremost, general documents like the PAN and TAN should be made ready after registration of the company. This will resolve the initial hustles while starting up. Other necessary licenses like the IEC (Import-Export Code); Shops and Establishment license; EPFO license; and SEZ license etc. could be acquired based upon the company you set up.


Your business will get a uniqueness only if you brand it. It undergoes a legal process of registering with the GI office based upon the Intellectual property you own. If your business is simply a private company that provides technological or other related services, then trademarking the business is enough. If your business involves any sort of invention or idea, it is essential to patent it to prevent any misuse. To know more about dealing with intellectual property, you can visit the site http://www.ipindia.nic.in/

Financial dealings:

Taxation is a crucial part of the business part that needs to be dealt with carefully. A minor mistake in taxation would lead to severe consequences. The present government is encouraging the Start-ups by providing tax exemption from the capital gains and investments for 3 years through their “Startup India” program. So, an experienced financial wing is needed to be set up to look over the taxation and other related transactions of your company.

Creating borders and targets:

If you want your business to reach sublime heights, you need to fix certain targets and develop a vision and mission. They encourage you and your employees to be focused on work and to achieve reliable targets on time. Policies play a vital role in structuring corporate governance and healthy management. It also builds a trust bond between you and your client and help in your business growth.

The policies need to be fixed according to the business you start and should be unique and aspiring.

These are some of the legal points you should focus on while starting up a business.

Reference source links:

  1. https://mylegalwork.com/guides/starting-a-business
  2. https://economictimes.indiatimes.com/small-biz/resources/legal-guide-to-start-your-business?from=mdr
  3. https://razorpay.com/blog/legal-basics-that-every-indian-startup-should-know/
  4. https://cleartax.in/s/business-resources

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