Startup Legal Basics in India: What You Actually Need Before You Launch

A founder I know spent ₹3.2 lakhs resolving a co-founder dispute in 2024. Not because the dispute was unusual — it was completely standard, two people disagreeing about equity and roles after 18 months together. The cost was high because there was no shareholder agreement in place. The lawyers charged for time; the ambiguity made everything take longer.

The fix would have cost ₹15,000-25,000 at the beginning.

Legal setup is the area where Indian founders most predictably underinvest. It feels like overhead when you're trying to build product and get customers. It doesn't feel like overhead when you're the one paying to clean up the mess later.

Here's what you actually need — in sequence, by priority.

Step 1: Entity Registration (Before Revenue)

For most SaaS startups in India, the choice is between a Private Limited Company and an LLP (Limited Liability Partnership).

Private Limited Company if:

• You plan to raise external investment (investors typically require Pvt Ltd)
• You have multiple co-founders
• You're targeting corporate customers (enterprise buyers often require vendor due diligence that favors Pvt Ltd)

LLP if:

• You're building a bootstrapped, service-heavy business
• You want simpler compliance requirements (LLPs have lower annual filing burden)
• You don't plan to raise VC funding

Cost: Pvt Ltd incorporation via a CA or online service costs ₹6,000-15,000 and takes 10-15 business days. The cheapest legitimate option currently is via the MCA portal with a CA helping you file.

One thing founders miss: once you incorporate, you need a current account in the company's name before collecting any business payments. Personal accounts create accounting and tax complications that are painful to untangle.

Step 2: Co-Founder Agreement (Day 1)

If you have co-founders, this is more urgent than your product roadmap. I am not exaggerating.

A co-founder agreement should cover:

• Equity split (the number everyone avoids discussing)
• Vesting schedule — typically 4 years with a 1-year cliff, meaning a co-founder who leaves in month 11 gets nothing, but earns equity proportionally after month 12
• Roles and decision-making authority — who makes final calls on product, hiring, and financial decisions
• What happens if someone wants to leave
• IP assignment — all work done for the company belongs to the company, not the individual

Founders often avoid this conversation because it's awkward. Have it in month 1 anyway. The awkward conversation costs ₹0. The unresolved dispute later costs orders of magnitude more.

Step 3: Terms of Service and Privacy Policy (Before First User)

Under India's Digital Personal Data Protection Act 2023 (DPDPA), collecting user data without a compliant privacy policy creates real legal exposure. This isn't theoretical — enforcement is beginning.

More practically: enterprise customers will ask for your ToS and Privacy Policy during vendor evaluation. Not having them disqualifies you immediately.

These documents should cover:

• What data you collect and why
• How it's stored and for how long
• User rights (access, correction, deletion)
• Your refund policy if you're a paid product
• Limitations of liability

Getting proper legal documents drafted: ₹8,000-20,000 from a startup-focused legal firm. Services like LegalWiz and Vakilsearch offer packaged startup legal kits at lower prices. If you're on a very tight budget, starting with a well-reviewed template and having a CA review it is better than nothing.

If your product serves EU customers (even occasionally), GDPR compliance is also required. This is a separate layer with its own requirements.

Step 4: GST Registration (When Required)

If your annual revenue crosses ₹20 lakhs (₹10 lakhs for some states), GST registration is mandatory. For SaaS companies with revenue from outside India, the threshold is different.

Practical advice: register for GST before you need to, not when you're already over the threshold. B2B customers often require a GSTIN on invoices — not having one costs you deals.

For software/SaaS, the GST rate is 18%. If you're selling to international customers (exports), the services qualify for zero-rated GST with LUT filing, which means no GST on international revenue.

Get a CA to handle your GST filing from the start. Monthly or quarterly filing is not where you want to be learning on the job.

Step 5: Basic IP Protection

Your product name and logo are brand assets. If you don't protect them, someone else can.

Trademark registration in India costs ₹4,500-9,000 per class via the IP India portal. The process takes 18-24 months, but filing date establishes your priority — so file early, even before the trademark is fully approved.

What class to file in: Class 42 covers software and technology services. If you're also selling physical products or have a specific service category, consult a trademark attorney on additional classes.

One thing to check before you launch: search the IP India trademark database and Google for your brand name to confirm nobody else is already using it in your space. Changing a product name after launch is expensive and confusing.

The Minimum Viable Legal Setup

If resources are tight, here's the absolute minimum before taking your first paying customer:

1. ✅ Pvt Ltd or LLP registered
2. ✅ Co-founder agreement (if applicable)
3. ✅ Basic Terms of Service and Privacy Policy on your website
4. ✅ Business bank account
5. ✅ GST registration (if revenue applicable, or register proactively)

Everything else can follow. But skipping these five creates specific, known risks that have already cost other founders real money.

The legal setup that protects a ₹0 company costs about ₹30,000-50,000 total. The legal problems created by skipping it typically cost 10-50x that to fix.