Understanding the Legal Basis in Startup Business

The law is an important foothold for the company because it is directly related to all business processes that are undertaken. Therefore, the company and the law must go hand in hand.

No exception for startups, even though they are newly established, companies must still comply with applicable laws. These traits need to be disciplined from an early age, so that when the business grows, it doesn't get caught up in the face of taxation.

What are the legal aspects that must be considered when starting a new company? To answer this question, Founder & CEO of Contract Law Rieke Caroline was present as a speaker at the #TuesdayStartup issue of the third week of March 2017.

Rieke gives a lot of tips for startup entrepreneurs, what aspects need to be considered from the start.

Choose CV or PT

According to Rieke, the two are not something that can be answered by considering which one is better, because it depends on the suitability of the entrepreneur himself. Rieke explained, if you choose a PT, there will be a separation of personal property from the company. The ownership in the PT is in the form of transferable shares.

Meanwhile, the assets in the CV are mixed between business assets and personal assets. It is feared that if the company closes or loses money, the owner will have to close it with personal funds.

"But why did people in the past prefer to make a CV? Because it's easier, there's no need to check whether the company name already exists or not because the rules are per region per city only. However, since 2016, the rules for PT have become easier," explained Rieke.

Since 2016, two regulations have been applied as a requirement to establish PT. First, the change in the authorized capital of PT, referring to PP No.29 of 2016. Second, the issuance of a domicile certificate for virtual office, referring to SE No. 6 of 2016. The requirements are at least two people, have at least 1 director and 1 commissioner, and have a notary deed.

Meanwhile, the CV establishment process starts with ordering the company name, signing the deed, then submitting the file to the Ministry of Law and Human Rights. Later the SK will be obtained, so that entrepreneurs can start making company TIN, SKDP, and SIUP to obtain a Company Registration Certificate (TDP). Finally, the entrepreneur will receive an announcement from the State Gazette of the Republic of Indonesia (BNRI).

"The establishment process usually takes 4 weeks with an establishment cost of around IDR 7 million."

Protect brand company

The next step is to protect brand, because this is the identity of the company that differentiates products/services from one another. There are five elements brand that can be protected, ranging from words, logos/images, holograms, sounds, and 3D shapes.

After getting brand It is recommended that startups register them with the Directorate General of Intellectual Property (DJKI). In the early stages must apply to get the date of acceptance. Then the announcement process starts 15 days after the date of receipt and lasts for 2 months.

After that, a substantive process will take place which will take place 30 days after the announcement period ends. This process lasts for 150 days. The last is the registration process, if there are no objections then the registered mark will be officially registered later, a trademark certificate will be obtained. Once a trademark certificate has been obtained, the trademark protection will be valid for 10 years.

"This could take between two to three years."

During fundraising

When a company first gets funding, from the initial process to liquid funds, it is always legal. There is non-disclosure agreement (NDA) which are classified as confidential matters such as marketing strategies, financial projections, product and service development plans. Then technical information, inventions, designs, processes, procedures to concept reports, data, and trade secrets.

There is also a term term sheet which contains points of provision between founder and investors. Due diligence, (due diligence) for investigation and assessment.

When fresh funds come in, they can take two forms. That is convertible notes and shareholder agreement (SHA). Convertible notes are debt securities that are exchanged for equity at maturity. Shareholder agreement (SHA), contains right of first refusal, pre-emptive rights, tag along right, drag along rightand anti-dilution.

Annual tax reporting

Reporting taxes regularly is an obligation that must be carried out by startups that are already legal entities, even though they are just established and do not have to wait for the company's turnover to exceed Rp. 4,8 billion.

What is taxed? Referring to Law no. 36 of 2008 Article 4 Paragraph 1 explains that the elements subject to tax are income from work or services received, operating profits, dividends, and others.

Reporting obligations also need to be carried out on a monthly and annual basis. For the monthly agenda, the taxes that must be reported start from PPh article 21/26, PPh article 23/26, PPh article 4 paragraph 2, PPh article 25, and final income tax of 1%. As for the annual reporting, Final Annual Income Tax Return, Non-Final Annual Income Tax Return.

Things that must be considered in annual tax reporting are the deadline for submission, the form of the Annual Income Tax Return used, the procedure for filling and submitting the Annual Income Tax Return, and sanctions for not submitting it.

The documents that need to be prepared are financial statements, statements of related transaction reports, statements of special relationships, and proof of income tax withholding documents.

If you are late in submitting your annual SPT, there will be administrative sanctions with a fine of Rp. 1 million and 2% interest on the underpayment. If you are negligent for more than two years without reporting, the maximum tax is only valid for 24 months.