The requirement for Startup –top Huge mistakes in Registration-Difficulty in Registration-Single ownership mistake-Disregard employees-Correct legal structure-Unmanaged Taxes-Legal mistakes in startup–Missing founders’ agreement-Lack of documentation-Solution for Mistakes in Entrepreneurship-Non-compliance with securities laws-Other Legal issues in startup making-Professional compliance Issues.
A various mistake is done by Entrepreneur or Startup person either in complying legal laws of professional mistakes or in following Relevant laws in making Startup
1) Wrong legal entity:
It’s the main factor in which the person would have to determine the type of entity to be formed. This is important because the compliance of various Registration requirements and legal laws depends upon the type of formation of the legal entity. For this, various Appropriate arrangements to be made correctly by our Young Entrepreneurs in each field.
2) Untrackable Expenses:
The common blunder (mistake) made by startups is not keeping track of their expenses, whether its a big or small maybe, throughout the year. So while presenting the ITR (Income Tax Return), many of the important documents related to expenses are lapsed in ITR that lead to misleading information and make one’s business unprofitable in Profit & Loss Account and the whole Financial position gets worse even distorted.
3) Lack of Due Diligence (Take care) of Documentation:
Legal due diligence can make or break an investment deal. It means that Documents are the biggest asset for any nature of an entity. So it must be completed in all aspects it may be in any form of entity (Big/Small).
4) Missing founders’ agreement:
Founder’s Agreement meaning that Memorandum Of Association(MOA) or Article Of Association(AOA) or any other documents on the nature of entity of nature of startup business
5) confusion between capital and revenue expenses:
Major confusions for first-time business filers is about expenses. The dilemma arises among taxpayers or startups in which expenses are to be considered as Assets /capital expenses, so accordingly these revenue expenses deductible in the P&L A/c. For example, the expenses on laptop purchases are not deductible as revenue expenses in the P&L A/c, but only the depreciation/amortization on them is deductible over a period of time.
6) Mixing personal and business expenses:
Often the personal and business expenses become indistinguishable. There is doubt or can be said that confusion that expenses to be considered as personal or business expenses. If properly not evaluated then it may to distorted financial position.
7) Not protecting intellectual property:
Intellectual property (IP) is a startup’s most valuable asset. Trademarks, patents, and copyrights are the three essential components of IP. In other words, Infringement of IP leads to the business at risk at a great extent. The solution for this problem is to not disclosing the agreements i.e Non Disclosure to ensuring this. Generally, this is the main problem arising in Startups as they often neglect the protection of their business IP and does not have a predetermined step thereof.
8) Non-compliance with securities laws:
The startup has a lack of professional knowledge in most of the cases that may be of under securities law or other income tax provisions and this is common so it can lead to serious legal issues at a later stage. It is expected from the entrepreneur to be equipped with or have a TAX or LAW expert as the case may be.
9) Missing regular tax payments:
The businessman is required to pay taxes in advance except for certain exceptions as prescribed under the Income Tax Act, 1961. So accordingly taxpayers are required to determine their liability in advance before the beginning of the financial year for the relevant financial year. If Provision related to Tax do not comply then it might lead to severe penalty. So be regular in tax payments either of any nature by having the knowledge or hiring an expert in the relevant field thereof.
10) Professional Tax consultant :
Due to various compliance, every business would need to have a Professional expert either as a tax consultant or as Law expert, so to avoid all legal complexities that may divert the startup players to accomplish their goals.