Things Every Entrepreneur should Keep in Mind Before starting Up in 2016
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“An entrepreneur is someone who has a vision for something and a want to create.” - David Karp, Founder and CEO, Tumblr.
Hrishikesh Datar, Founder and CEO of Vakilsearch, delves deeper into registrations required. Which ones are the most important, the need to complete them and the ways they can help out in the future. The most important reason to register a business is because it is an absolute requirement when the business needs to establish a bank account, get loans, make arrangements with suppliers and to hire employees.
Intellectual Property Registration
Businesses today gain a lot of their value just from their intellectual property, so you would need to protect yours early on. If the intellectual property of a brand isn’t protected then there is no stopping any other business from replicating any part of your company, thereby piggy-backing off of the success of your brand. It also does not allow for you to take any sort of legal action against another entity in case of infringement
A factor that should not be missed is the difference between trademarks, copyrights and patents. The meaning of these three types of business protections are oftentimes interwoven and confused.
- A trademark is essentially a way of referring to brands through a pictorial representation of what your company and its products are all about. It could be a name, word, phrase, symbol, logo, design, or picture All business owners should ideally obtain a trademark for their brand.
- Without registration, the rights of ownership are very limited, meaning that it will put your business, and its products, under risk.
- A trademark is valid indefinitely but also needs to be renewed every 10 years.
- A copyright is taken for a particular piece of work, such as photographs, music, movies etc
- Without registration, the rights of ownership are very limited. This kind of registration is usually applicable only to artists and creative professionals.
- A copyright is valid, once issued, for the lifetime of the creator, plus an additional 60 years after that.
- A patent is granted as an exclusive right for a limited time period for inventions and ideas, and is usually for inventors and designers.
- There is absolutely no ownership without registration of a patent.
- A patent is valid for a maximum of 20 years only.
All businesses need one government registration or another after crossing a certain revenue threshold. Government registrations broadly cover tax registrations – service, VAT and professional – along with an importer-exporter code and to be registered under the shops and establishments act. What makes things difficult is in understanding which registrations are required for your business in particular and which issuing authority it must be registered under.
Shops and Establishments Act:
- The Shops and Establishments Act regulates conditions of work, lists the rights of employees in the unorganized sector and provides a list of obligations for every employer.
- All business must register under this act. It must be done within 30 days of the commencement of operations and is issued by the relevant municipal authority. The filing of returns is not a requirement.
Professional Tax Registration:
- Professional Tax is a tax that applies to salaried employees and professionals, including chartered accountants, lawyers and doctors. If your business has employees in more than one state, you would need to get this registration in each of those states.
- This registration must be completed by all employers within 30 days of operations and must be issued by the State government. Any returns must also be filed for this registration, the frequency of which and the rate at which is differs from State to State.
- Service tax applies solely to services sold within India; so exports are free from paying this tax and thereby requiring this registration.
- This is mainly for service providers and is only really required after sales have crossed INR 9 lakh. Returns also must be filed under this registration and is to be issued by the central government.
- One very important factor to consider is that this tax must be collected when your revenues are Rs. 10 lakh or over, but once this mark has been crossed, you must always collect the tax, even if your turnover is less than it was in the following years.
- VAT is only needed for sellers of goods, this is also only required once sales have crossed INR 5 lakhs and is issued by the state government – this depends on the state under which the business has been registered. Again, returns must be filed for a VAT registrations.
- This is reserved solely for importers and exporters, for any items that they have imported or exported, it is also valid throughout the country. The issuing authority is the directorate of Foreign Trade. Additionally, you won’t need to file any transactions completed under this code or to pay any taxes.
As your product or service becomes successful, these registrations themselves start to develop an intrinsic value. Business investors will assess whether you have taken the appropriate legal protection to secure your brand, thereby setting you up for a great future for your business.