Startup Incorporation Process: The Essentials You Need to Know

Coming up with the idea of starting a business is easy, but bringing the very same idea to action can be a debilitating process. To save yourself from all the weary; one should know about the essentials of the incorporation process.

These essentials can range from major details like the nature of the entity, shareholding structure to minor details like devolution of ownership etc. To know these essentials in detail the first thing we need to know is…

What is a Startup?

A new undertaking that involves risk or dares to do something with the aim of capturing the market by offering progressive or innovative products/services that satisfies the need of the public can be categorized as a startup.

Why is an Incorporation Process Important?

The incorporation process creates a new legal entity through the government registration process. Just like a ‘Natural Person’ a corporation can work and sign contracts or even buy and sell property in its own name

After the peripheral information comes the base information of what are the essentials that should be taken into consideration
1) Sweat Equity

Also known as earned equity, it is used as bait by many startup companies. Temporary skilled members are hired to work for the company using sweat equity.

Hence it becomes all the more important to foster the rights of these members even when the shareholding structure of the company changes in near future.

2) Nature of the Entity

There are various options of incorporation available for startups, starting from sole proprietorship to partnership to companies.

Based on these, the structure of the company; the propensity to handle the cooperation along with professional guidance should be sought. Before choosing from the available options the pros and cons of each should be taken into consideration.

Related: Which Type Of Business Should You Incorporate? LLC, OPC, Pvt. Ltd or Others?

3) Rights and Duties of Founders and Co-Founders

It is an important aspect which many startups tend to ignore. In instances of formal decision making, it becomes next to impossible for all the shareholders to be physically present for the decision making which is very important, in such cases, the founders should be given the power to take decision.

However for taking company related decisions, meetings have to be conducted for all the members as the absence of a few members may lead to landing in a no conclusion scenario.

4) Protection of Intellectual Rights

Intellectual rights protection is an essential aspect that demands the attention of these new-age startups as they only have intellectual rights as their assets. By giving legal protection ensures only the founders will handle them on behalf of the business.

Related: The Entrepreneurs Smart Checklist: Starting Up in India

5) Shareholding Structure

This aspect comes to light when there are multiple investors or co-founders of the company. In such cases ownership ratios need to be stated in order to avoid any future dispute.

Familiarizing yourself with the above points can make your startup function better and more efficiently.

Related Articles