The technology industry invests vast sums of money on apps and similar projects each year. Investing in your ideas allows you to realize them, but entrepreneurs today are prone to making mistakes that could jeopardize their entire investment. In consequence, we’ve put together a list of the most common registration mistakes that could jeopardize startup success.
Among the top three registration errors that kill businesses are adopting the incorrect entity structure, failing to protect intellectual property, and not registering with regulatory agencies. A vast amount of money is invested annually in new concepts, apps, and portals. Financing gives dreams wings, but entrepreneurs must exercise extreme caution at all times. Even a minor error may lead to large investments being thrown away.
Ignoring the law of the country is one of these mistakes. Many businesses disregard legal procedures such as government registrations, brand name protection, product design protection, etc., and wind up paying hefty fines and penalties.Many businesses disregard legal procedures such as government registrations, brand name protection, product design protection, etc., and wind up paying hefty fines and penalties.
A startup is an enterprise whose founders hope to sell a single product or service. The problem with these businesses is that they usually lack a fully-defined business strategy and, more importantly, sufficient capital to progress to the next stage of development. Founders usually start these companies.
Venture capitalists, family, and friends often invest in companies to increase funding. As well as being known for its thriving venture capital industry and as a popular startup destination, Silicon Valley is also regarded as the most difficult startup land.
Startups can use seed money to fund research and product development. A comprehensive business plan describes a company’s mission, goals, and plans, along with management and marketing strategies. Besides identifying the market for a product or service, market research also contributes to creating a comprehensive business plan, which outlines the company’s vision, mission, and goals, along with its marketing and management plans.
Business models centered around dotcoms were prevalent during the 1990s. A frenzy of investors betting on the growth of these firms made venture capital especially accessible during this period. Many of this online business failed due to fundamental flaws in their business strategies, like a lack of long-term revenue streams. There weren’t many companies left standing when the dot-com bubble burst. The following are two examples of Amazon (AMZN) and eBay (EBAY).
A lot of businesses fail in their first few years. Thus, the first few months are crucial. The task of starting a business involves raising funds, developing a business plan, hiring key staff, and settling nitty-gritty details such as stock holdings for investors. Entrepreneurs must plan for the long term and develop a company strategy and business plan. Many companies began as startups and eventually became publicly traded companies. Examples include Microsoft (MSFT), Apple (AAPL), and Facebook (FB).
Despite the inherent dangers of startups, potential investors may use a variety of methods to evaluate their worth. The idea of a start-up must be refined, tested, and sold. Significant capital must be invested. While most start-ups fail today, there are also many that have become history’s most successful companies. Ford Motor Company and Microsoft are just a few examples.
Errors in registration
1. Avoiding the use of LLPs or private limited companies as legal entities
It is recommended that each startup company in India be registered as a private limited company or as a limited liability partnership. Business registration is fundamental for businesses to operate smoothly. It is, however, possible to incorporate a sole proprietorship without having to register. This makes Single Proprietorship an ideal legal structure for Indian startup firms.
Startups in India must be formed as Private Limited Companies (PLC) or Limited Liability Partnerships (LLP). A startup that does not meet this requirement will not be eligible for government incentives and benefits such as Startup India loans, tax holidays, Venture Capital Assistance Schemes, raw material assistance, market development assistance for MSME companies, Atal Incubation Centres (AICs), Startup Assistance Schemes, etc. A key point I would like to make is that the majority of investors put their money into private limited corporations or limited liability partnerships.
2. No partnership deed and no registration as a partnership
If you have formed a partnership firm as a startup, you must register it or form a partnership deed to provide a proper corporate structure for your partnership firm. All terms and conditions must be outlined and noted with the registrar of firms, so any legal or business-related conflicts can be resolved properly and accurately. Registration of the partnership firm online will also help a startup gain recognition in India.
3. Startups delay or ignore licensing requirements.
There are startups that delay or fail to obtain Shop Act licenses, FSSAI licenses, Health Trade Licenses, or any other necessary state license for conducting business. Understanding the licensing requirements of the state and country where your company is located is essential.
4. Lack of protection of intellectual property
Are you aware of how vital it is to protect your intellectual property? You should obtain such protection since the output of your brain might be utilized for profit by others, resulting in the loss of commercial opportunities as well as financial loss.
The life of a firm is filled with the acquisition and creation of intangible assets aside from tangible assets such as buildings. These include your domain name, corporate logo, and unique form, design, or a unique combination of components that distinguish your product from the competition. It refers to ideas, logos, and innovations.
5. Ignorance of legal boundaries and taxes
Federal and state authorities set rules and regulate business activities. Organizations may be required to register with the local authorities.
Typically, enterprises ignore the application of certain registrations and end up having to pay hefty fines and penalties for not registering with the proper authorities.
The following are some of the types of registrations with government agencies:
Shop and Establishment License – If your business locations include a registered office, a branch office, and so on, a shop and establishment license may be required.
A valid Import Export Code is mandatory for any transactions involving import and export.
Registration under the Goods and Services Tax (GST) is a necessity for individuals and businesses engaged in the provision of goods and services in India.
Professional income tax must be paid by someone working for an employer or as a self-employed person. It is the employer’s responsibility to deduct and remit the tax. However, it is only applicable in some states.
EPF (Employee Provident Fund) Act – This act applies to businesses with more than 20 workers.
6. An lone founder
It is NOT a good idea to run a startup on your own if you are the sole creator. In growing your business, you might require professional counsel, funding, and talented entrepreneurs, so you may choose a business structure that permits a large number of people to join you. It is important to remember that uncountable directors can serve in an OPC business organization, but there can only be one member.
7. Delay in starting a business
Create an actionable business strategy and register it according to the proper framework to obtain legal protection. Starting your business too late could be a big mistake. Putting off taking action can also delay the rewards that you will enjoy, so start right away as soon as you develop an actionable business strategy.
If you’re starting a new firm, ensure that you avoid making these common registration mistakes. Startups need to decide on the partnership deed, company registration, and a few basic yet crucial decisions to run smoothly and in the long run. By working with legal professionals before registering the business, the process can be made more efficient.