Everything is impossible until somebody does it. As quoted by Dennis Crowley-“Don’t let people tell you your idea won’t work. If you’re passionate about an idea that’s stuck in your head, find a way to build it so you can prove to yourself that it doesn’t work.”
Don’t let others decide the outcome of your thinking. Life is either a daring adventure or nothing at all. Same is in the case of building your own startup, take risks because ideas are easy but the implementation is hard. The market research will help you to carry out the implementation of your idea with a systematic investigation of, what are the problems which are surfacing the community, Who are the people suffering from the problem? What are their demands? What your startup can do to solve their problem? Who are the target customers? At the end it’s all about the customers and their interests and preferences. Targeting the problems of the people and building such a product that will gain maximum attention from the people should be the final goal.
Following are certain eligibility criteria that should be kept in mind before calling yourself a startup:
- You should be registered in India.
- Come forth with a new innovative product or service or a significantly improved version of an existing product or service.
- Startup should be less than 5 years old.
- Startup annual turnover should not exceed INR 25 crore in any preceding financial year.
- Startup should not be formed by splitting up or reconstruction of an already existing business.
- Startups can avail tax benefits only if they are certified by the inter-ministerial board.
- Startups should be supported by a recommendation (with regard to innovative nature of business) in a format specified by DIPP.
Legal aspects that are primarily considered before starting a startup:
1. The article of incorporation:
Also referred as the ‘The article of association’, ’Corporate character’ or the ‘Certificate of Incorporation’, it consists of set of documents filed with the state that inheres the basic information of the formation of company like: the name of the company, type of the corporation(C or S corporation), company’s address, amount and the type of the stocks issued, and stockholder information.
2. Intellectual property (IP) Assignment Agreement:
Also referred as Rights Agreement or IP Transfer Agreement.
In a startup it is vital to contract the assignment of intellectual property rights to an individual or a business entity. This agreement emphasizes on the transfer of the possession of intellectual property right from one entity to another entity. The party which transfers the ownership is known as an assignor and the entity receiving the ownership is known as assignee.
A simple definition of bylaws is the set of rules that should be followed by all.
In Corporate sector, Bylaws pin down the day-to-day rules that provide a constraint for the smooth functioning of the company. Bylaws specify the duties and the responsibilities of the members of the organization, Board of Directors, Executive members and others.
4. Operating Agreement (Founders Agreement):
An Operating agreement is drafted among LLC and specifies the ownership and management of LLC. The Founders document will document all the essential things that the founder wants to establish in order to avoid misunderstanding among the co-founders.
5. A non-disclosure Document:
A non-disclosure agreement is a legally signed document that agrees upon not sharing confidential information of a company, their products and business strategies with a second party.
A non-disclosure document is of primary concern when you jointly develop a product mostly seen in technology companies.
6. Employee contract and Offer letters:
While hiring new employees, the founders and CEOs of the startup should clearly state out the employee contract and offer letter. These legal documents should draw in the following points
- Expectations from the employee
- Employability terms (e.g. working hours, responsibilities, reimbursements)
- Company conditions (e.g. dress code, paid leave, vacation days)
- Required commitments
- IP ownership of work
7. Shareholders Agreement
The shareholder document is a contract that describes the relation of the shareholder with the company. It states the expectations of each party. This document will prove out to be beneficial while resolving disputes among the parties. The shareholder document must be flexible in terms and should meet the requirements of any corporation, big or small. The terms and conditions that should be settlements for finance, transfer of shares, buy-and-sell provisions etc.
Co-founder, Z Nation Lab