Out of 191 economies in the world, India comes in rank 134 in terms of the legal system. The business laws in India are not clear. Due to which so many businessmen are scared to start or expand their business. If there is any dispute between the founders or in the business then Indian courts take a long time to give a final judgment. 
 

It is easier to do business in countries like Pakistan, Nepal and Bangladesh than in India!

While Mr Modi is promising to change all these and make India a great place to do business soon, we know that entrepreneurs cannot afford to wait for too long to make it happen.
Our Prime Minister has launched MADE IN INDIA and STARTUP INDIA to boost the Indian economy. 
If you want to build a strong business then you need to have a strong legal team. The famous Indian Startups OYO, OLA, PAYTM and Flipkart all have a very strong legal team. 
 

Why do you think Reliance is spending close to 1200 crores on legal expenses in one financial year?

Other top Indian companies are spending on legal and regulatory expenses are  

1. Tata Consultancy Services: Rs 613 crore
2. Larsen & Turbo: Rs 526 crore
3. Infosys: Rs 504 crore.

Let's understand the case study of some of the successful startups which are now shut down due to legal issues. 

1 HomeJoy 

Homejoy was an online platform to connect customers with home service providers, including house cleaners it was the UBER of house cleaning services. Later on, a lawsuit has been filed on it whether its employees are termed as employee or contractor. Due to various lawsuits, the startup failed to Raised funding and unlimitedly it had to shut down. 

2 Ordrx 

Ordrx was a restaurant technology company and it has raised $1.4 Million from Google ventures. Things are going well until they are hit by a patent lawsuit for which they have to pay high legal fees and it becomes impossible for the company to survive too long. Ultimately the company had to shut down its operation. 

Here are some laws which every entrepreneur must know to avoid unnecessary legal issues. 

Incorporation Period 
The honeymoon period of entrepreneurs 

Many Entrepreneurs are too focused on forming a PVT Ltd company or a partnership firm rather than a founder agreement. Later on, the director of the company or partners started litigation against each other. 
Better to make a founders agreement where the duties and liabilities of each founder will be described in detail than a Pvt Ltd. 

Watch here a video on the importance of the partnership agreement 

Get a Lawyer or CA
 Startups are different breeds of business, and their documentation should be different. Lawyers or CAs who don’t work with startups so you must look for those lawyers or law firm which generally consult and make documents for startups.  
LLP can be much cheaper in terms of tax bills and good for service businesses, family businesses, lifestyle businesses etc. especially when you don’t plan on raising any investment in the near future. 
 It is great if at least one of your co-founders or CFO gets these things. 

Business Licenses
Legal compliance gives a strong base for any start-up and in case if a company is not aware of legal compliance or ignorant about it, first of all, it will not get a funding
It may surprise you, but doing almost any business in India, or even running any kind of office or establishment requires several licenses. 
Even before 2016, there were no guidelines for MLM Company. But still, now there are guidelines but no proper authority to check whether MLM companies are following MLM guidelines or not 
For employing more than 10 employees you may need various labour and employment-related registrations.
Also, not following licensing norms lead to fines, costly legal suits and even business shutdown.

Accounts and taxation
A lot of businesses completely fail on this point and many founders face massive fines. Also due to lack of accounting of profit and loss, there may be conflict in the company between the founders. 
Outsourcing it blindly to a CA you know is also not advisable, you have to take the pain to understand some basic taxation and GST laws. 

Vendor contracts
The vendor contracts one enters into at the early stage of the business can be very important. For example, if you want to build a website for your business you need a vendor agreement. You are purchasing raw material from someone you need a vendor agreement 
Now imagine if some of these contracts you enter into contain some hidden clauses that could trigger unforeseen price escalation, or gave away the power to the other party to terminate without notice – your business could be in chaos.
Even Steve Jobs believed that every intelligent person should know how to read and negotiate a contract. 

Intellectual property law 

Also, you must file the right trademark and copyright for your business. An entrepreneur must have some basic knowledge about trademark and copyright law.  When your business started generating revenue then you must file a trademark for your business name. Indian corporate files around 400 to 500 trademarks for their companies. 
 
 
Information technology laws 
Every entrepreneur must have some knowledge about cyber laws. Every startup is now having its website and a social media handle. If your website got hacked then you must know how to file a cyber complaint. You can contact us on 8764001181 on how to file a cyber complaint or you can watch the below video on cybercrime complaint. 

IT laws also include digital signatures and e-contracts. I have seen that so many entrepreneurs left their digital signatures with the CA or in office. Keep your digital signature with you as someone may misuse your digital signature. 
 
 
Employment laws 
Here are some of the employment laws which every Indian entrepreneur must know. 
The Industrial Disputes Act, 1947,
The Trade Unit Act, 1926,
Building and Other Constructions Workers’ Act, 1996,
The Industrial Employment Act, 1946,
The Payment of Gratuity Act, 1972,
The Contract Labour Act, 1970,
The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 
The Employees’ State Insurance Act, 1948  
 
 Agreement and contracts
You must have strong agreements with your employees. Every employee must have to sign an NDA and a non competing clause if they are working with you. Get a bong signed from your employees. I have seen that many startups become a free training center for employees because employees have not signed a bond with the company.

Watch a video on NDA 

If you have any doubts you can WhatsApp us on 8764001181