The turning off “eureka” business idea into reality is a startup. In the process, the owner might get lost in the journey of battling market legion & high growth. But one must not forget the legal aspect of running a company because the last thing the owner wants to deal with is legal repercussions. Here are some free legal tips for startups that every founder needs to follow to avoid getting caught up in a lawsuit -
4 Important Legal Tips For Startups By sumHR
Hire & Fire are the rights of an employer, but in business where anything could backfire, we should always calculate our actions twice or even thrice. So, here are a few points that you should consider when it comes to the employment term of candidates:
- An employee is liable to inform the organization about his/her resignation.
- It is mandatory to serve the 30 days notice period after the resignation. This should depend essentially on the the terms of the agreement entered into between the Employee and the Employer.
- Legal actions can be taken against employees who leave the organization without any prior notice and the relieving letter may not be provided to the employee for the same.
- Termination of an employee should be solely dependent on the terms agreed between the Employer and the Employee.
- In case of Lay-Off, the company is liable to give mandatory termination notice 8 days prior to the termination. As such, prior permission to lay off employees is required to be obtained from the Government. For this you have to apply to the appropriate sector of the government in the prescribed form (form Q-3). Once you get permission to lay off, only then can you proceed with laying off. Remember that lay off is permitted only for specific reasons. This being the situation the government will have to see whether the layoff applied for is really a layoff or the first step to retrenchment or closing of establishment.
By incorporating this startup business advice into the policies of your Startup, you're also ensuring that employees don’t abscond.
2. Non-solicitation/Non-Compete Clauses
It's almost impossible completely shielded from competing businesses during your startup ventures. However, you can upgrade your defenses by integrating this free legal tips for startup business into the clauses of your employment documents:
- An employee after termination, cannot work for rival companies for a defined period of time.
- An employee after termination, cannot start his/her own company with the same services as of previous company.
- In case if the parent company places an employee in the client company, he/she cannot take up any job in the client company for which he/she is working. The parent company can take legal actions and also demand compensation for the loss incurred.
This was employees are less likely to leave their positions, which further protects the investment that startup owners put into their employees.
3. Non-Disclosure Agreement (NDA)
If you talk about legal tips for startups, you just cannot leave out the NDA. Always assure that your trade secrets are kept locked up safely. There's a vast difference between disclosing an idea and disclosing business strategies. Ideas are still abstract concepts; however it is the execution of these ideas that makes a vast difference in their success or failure. And it is sharing these business strategies and influential data without the owner's consent that will create a lot of chaos and will be directly declared as a crime. The NDA came into existence to provide legal help for startups to prevent this leak of confidential data and logics. NDA ensures that an employee cannot disclose any information related to the company to a third party. Some points that you need to remember if your employees have signed an NDA:
- Keep good records of everyone who has seen your sensitive data.
- An employee cannot copy or record confidential information pertaining to the company. If the recorded information is used or passed to any third party, the company can take legal actions against the employee and demand compensation for the same.
- NDA is valid for a certain period even after the termination of the agreement.
Drafting a NDA needn't cost a fortune and ultimately, the purpose of the NDA is to notify the other party that you are serious, that you care about what you are sharing with them and that it has commercial value.
Let me start with telling you that "Forgery is an offensive crime", it is the act of falsely making or copying a document in order to cheat people. Startups and SMEs cannot afford to fall prey to fraud & forgery. In order to prevent these mishaps in your business career, here are some legal tips for startups to prevent fraud & forgeries:
- Distribute the job duties on to different people for financial purposes.
- Regularly audit all the protocols and processes of your Startup and inspect the credibility of the vendor list. Also, renew the offers every three years from existing/new vendors.
- Background check must be done of the potential hires for any sensitive positions.
- Increase your anti-fraud measures and prevent criminal risks by working with insurance professionals/company.
- In case if an employee decides to make false documents under the company name without any authorization, the employee can be charged with severe criminal charges and punishment up to 3 years in jail or high compensation for the losses incurred.
Tick all the boxes in the above mentioned checklist to provide a concrete base to your company for growing quickly and wisely.
If you know any other legal tips for startups, just share them in the comments below.
May the Force be with you!