copyright, business-registration, software, sri-lankaI’m hoping to start a software (more specifically, app-based) startup. I’m located in Sri Lanka, but my target audience is mainly USA & Europe.
As I’m completely new to this field (business), I’m looking for some pointers on how to go about doing this.
Mainly, an overview of the basic steps involved in establishing a brand for my startup, material and documents needed for registering the products, whether I should register it in my home country or USA (and if not my home country, the benefits/disadvantages), etc. A comparison of the advantages and disadvantages of registering in different regions of the world would also be nice.
You’ve really asked two questions:
How does one protect creations of the mind?
There are a number of different types of intellectual property (“IP”), including inventions; artistic work; designs; and symbols/names/images used in commerce (“trade marks”).
Most jurisdictions immediately recognise and protect such IP without any formalities whatsoever—but infringement is usually a civil matter that one must enforce oneself through the courts. Worse still, it can be very difficult to prove that one owns the IP and that the other party’s infringement was wrongful: for example, one may be unable to prove wrongful infringement of rights over an invention if its workings were openly disclosed (e.g. to someone under no obligation to keep them secret) before the infringing party became aware of one’s asserted rights.
Therefore, some asserted rights over IP can be recorded in official registers in order to serve as notice to others that the rights have been so asserted (thereby reducing one’s burden of proof in the event of an infringement). However:
each jurisdiction recognises different registers, so one should ensure that one’s registrations collectively cover every jurisdiction in which one may wish to enforce one’s rights (there is a UN agency called WIPO, the World Intellectual Property Organization, who have gone some way to alleviating this problem by creating registers that are recognised across many countries);
each register has its own process and requirements for entering a record, so the formalities of registration can quickly become time-consuming and costly; and
each record must be complete and accurate, or else the registration may not fully cover one’s intellectual property.
It is therefore strongly recommended that one seek advice from a lawyer with expertise in this field.
How does one open a business?
Most jurisdictions permit businesses to operate under a number of different legal forms, each of which suits different purposes and you may wish to obtain professional advice before deciding on which is best for you. Furthermore, the process and requirements for adopting a given structure will vary from jurisdiction to jurisdiction.
One consideration is the extent to which the owners may be liable for any wrongdoing that cannot be remedied from the business’s assets. Some structures expose the owners to unlimited liability whereas others expose them to only limited liability; whilst the latter would seem preferable, it usually comes at the cost of reduced privacy and increased operational complexity: in order for creditors to understand the risks that they are taking, such businesses must usually openly publish their financial accounts.
Another consideration is the effect that the structure has on the overall tax position, which can vary dramatically depending upon the form that is adopted.
But perhaps the biggest consideration, especially for a startup, is the cost and complexity of operating each structure.
By way of illustration, the situation in the UK is outlined below.
Ultimately, a business is nothing more than the combination of its assets (i.e. property, including of the aforementioned intellectual variety) and its liabilities (i.e. obligations to others). Every asset/liability must belong to one or more people—each of whom could be corporeal (literally have a body, i.e. human beings) or incorporeal (have no body, i.e. companies).
The simplest structure is to be a sole trader (i.e. the assets/liabilities belong to a single, corporeal person). No formality is required—the trader merely declares the business’s profits on her personal tax return: however, should she ever wish to sell or share ownership of the business (e.g. to raise capital from an investor), she would have to go through the complex, costly and time-consuming process of transferring ownership (e.g. every contract would have to be “novated”, with the permission of its counterparties, to the new owners); similarly, when she dies, her personal representatives will either need to go through that same process or else close the business down. Sole traders have unlimited liability.
Consequently, an alternative structure is to incorporate (i.e. the assets/liabilities belong to a single, incorporeal person). Since companies aren’t born (and can’t die), they necessarily only come into existence once entered onto an official register (and cease to exist once removed from that register). One can create a company by submitting a form (which can be done online) to the Registrar of Companies together with the appropriate fee; and one must thereafter keep certain records, file various documents with the Registrar and file company tax returns. Despite the additional costs and complexity of operating such a structure (especially on closing the business down), one advantage is that ownership of the company is divided between members who can transfer their interests without directly affecting the underlying business. The liability of such members can be either unlimited or limited, depending on the type of company formed.
Where there is a need for the assets/liabilities to themselves belong jointly to multiple entities, one can consider a partnership. Ordinary partnerships come into existence as soon as the partners agree to conduct business together in such a form—they do not require registration (although they must file partnership tax returns); however, it would be very wise to put the partners’ agreement in writing, explicitly setting out all its terms—it is recommended that a lawyer draft a suitable partnership agreement. Such partners have unlimited liability; however there are also other forms of partnership (with similar registration/filing requirements to companies) that can limit partner liabilities.
Registering a startup is highly dependent on location. In general though you need to do approximately these steps:
That is totally the basics and is highly dependent on details but is a rough overview.
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