STARTING A NEW BUSINESS LEGAL CONSIDERATIONS RITAMBHARA AGRAWAL Entrepreneurship Seminar DECEMBER 2011 NIILM-Centre for Management Studies, Gr. Noida, India

2 STARTING A NEW BUSINESS Start-up Is A Vital Time To Consider Legal Issues LEGAL ISSUES Structure of the Entity Compliance & License ContractsIPRFunding

3 STRUCTURE OF THE ENTITY Structure of the entity is a critical aspect, which needs attention since the start of the venture. Structure of the entity decides the liabilities of the directors, tax implications, benefits, and statutory compliances required under the said structure and also the ability to raise funds. In India, one can register as a private limited company, sole proprietorship, partnership, LLP or public limited company. Every structure has its own pro and cons. While deciding the structure of the entity one has to also look into the target market and the nature of product and services offered. Many entities go for a US incorporation depending upon their needs.

4 STRUCTURE OF THE ENTITY Proprietorship Partnership LLP Private Limited Company Public Company Limited Liability Partnership 1 Person Venture More than 1 person operating jointly Corporate Structure Established Stage

5 PRIVATE LIMITED COMPANY Pros Limited Liability Separate Legal entity/Status of Recognition Perpetual Succession Greater potential to raise capital Corporation taxation Cons More formality & Expenses incurred Management Flexibility limited

6 PROPRIETORSHIP Pros Easy to start No public disclosure of finances required Management Flexibility Keep all the profits Cons Unlimited LiabilityNo separate legal entityLimited capitalNo perpetual successionLow public perceptionDifficult to raise capitalTaxed at Individual level Sole Proprietorship Concern, sole owner funds and operates business

7 PARTNERSHIP Pros Easy to start Management Flexibility Pool of resources & capital Tax advantage Cons No separate legal entity Unlimited liability of general partners Low public perceptionDifficult to raise capital Partnership amongst individuals to operate jointly and share profits

8 LIMITED LIABILITY PARTNERSHIP Pros Separate legal entity Fusion of partnership & company Partner’s liability limited to partner’s contribution Perpetual Succession Cons Ability to raise capital, limited due to lack on clarity on FDI LLP is an alternative corporate business structure that gives the benefits of limited liability of a company and the flexibility of a partnership

9 FUNDING Self- Finance/Bootst rapping Private EquityVenture Capital Public Stock Markets Angel Funding Debt/Bank Finance

10 CONTRACTS Contracts form an essential part of a business. A Contract defines the understanding between the parties, stating their roles & responsibilities, mitigates risks and defines liability of each party. It’s important to have all the agreements in place and work under the same. Offer Acceptance of Offer Consideration Written understanding between the parties Agreement enforceable by law Commercial Vendor Customer Franchise Marketing Outsourcing Supply Procurement Operation Human Resources Founders Agreement Employee Consultancy Non-Compete & Non-Solicitation Stock Options Transactional Joint Venture Merger & Acquisition Investments Shareholders Concession Project Financing IPR License Assignment NDA Technology Transfer Data Protection

11 INTELLECTUAL PROPERTY RIGHTS For any venture like tangible assets, intangible assets are also highly valuable. Therefore, maintaining and protecting the IP of the company is very important and needs to be done since the inception of the company. TRADEMARK Word, name, symbol or device used in trade with goods/ services to indicate the source of the goods/services Logo, Tagline, brand name, domain names Registration is mandatory for protection Territorial Apple (Name & logo), Just Do It COPYRIGHT Protection for literary, dramatic, musical, artistic and other intellectual works Registration is not mandatory Worldwide Software, photographs, books, movie, songs, architectural work, cartoon characters PATENT Invention, novel, useful, non-obvious product or process, machine, improvement Registration is mandatory Territorial Not to be in the public domain Apple, Software, pharmaceuticals, semiconductor, automobiles, mechanical INDUSTRIAL DESIGN Creative activity in the form of a shape, configuration, pattern or composition applied to any article 2-D or 3-D Registration is mandatory Territorial Shape of Nike shoe, Coca-Cola bottle, iPod, furniture

12 INTELLECTUAL PROPERTY RIGHTS Search & Analysis Registration Litigation Brand Protection Recordals & Maintenance IP Protection Renewals Competitive Intelligence License, Assignment Post Registration IP analysis & Due Diligence IP Policy & Process Agreements Commercialization Compliances IP Management

13 COMPLIANCE & LICENSES Every business and industry has different compliances to be followed. Make sure to comply with all the statutory and legal compliances and keep it documented. PAN, TAN, Service Tax, IEC Code, VAT ESI, PF, Gratuity Board & General Meetings Statutory Registers, Filings Shops & Establishment Act Environmental Clearance & Licenses Statutory licenses for operations Labour Law compliances

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