I want to start a web-based business. What legal regulations must I keep in mind?

The last decade has witnessed the very healthy phenomenon of many young people (and not so young people) turning to entrepreneurship and starting businesses of their own. Businesses create employment and wealth, and are vital to feed our large and burgeoning population.

Whether you are receiving money through a payment gateway or a brick and mortar payment system like Cash on Delivery, a very essential legal formality is the filing of tax returns. Secondly, if you are providing content or using a logo/design, get the necessary Intellectual Property rights protection. It is very easy to copy a logo from a website, and unless you take precautions, you will have no remedy if someone copies it later.

Thirdly, even if the business exists in cyber space, the people who run it are very real. So you need to decide a suitable structure for your business. A Partnership is easier to start, needing only a registered (highly recommended) partnership deed, but your liability is unlimited. If you default on a debt, your house, car etc. can simply be taken away. If you see good prospects for your business, long term, it makes sense to create a private limited company. For this, you need to prepare necessary documentation, like the Memorandum and Articles of Association of the Company, among other formalities. The formalities are maximum in this option. Typically, your web based business may involve one ‘technical’ person, and one ‘marketing’ person, and the technical person may only bring his technical expertise to the firm, and no capital. This arrangement, if it applies to you, must be stated very clearly in writing at the outset.

Since 2009, another form of starting an enterprise has come into existence, called a ‘Limited Liability Partnership’. Here, you can enter into a Partnership, but still suffer only limited liability. If something goes wrong, only your capital contribution to the partnership will be affected. This is an interesting animal, and you must definitely explore this option.

The disadvantage is that expanding such an enterprise when business grows is a little more difficult than in a private limited company. In the latter, you can offer equity to investors and bring in funds, or ‘go public’ which means offering shares to the general public. A lot of small firms however are choosing to go the ‘Limited Liability Partnership’. If you are starting the business alone, you do not initially have to incorporate a company. Filing personal income tax returns and getting intellectual property rights protection is necessary, however.

This, it must be remembered, is just a broad outline of the process. No general prescription can be made since every case is unique, so have your situation studied by an expert before deciding the best course of action. Writing sound software code is just part of the process, your understanding and application of the legal code has to be sound, too.

If you want to write your Will, prepare your Rental Agreement, or send a cheque bounce notice, get legal advice for your business or get any other legal service online just turn to vakilsearch.com


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