Establishing a business in Bangladesh is an adventure, but like any other, it can have its fair share of legal pitfalls that many entrepreneurs simply ignore. Preventing these normal legal mishaps is key to your future success. In this post, we will discuss the 8 most common legal mistakes your startup in Bangladesh should avoid to stay on the right path and grow your business.
1. Neglecting Proper Business Registration
One of the greatest legal issues affecting startups: not properly incorporating your business. In Bangladesh, the business entity must be registered based on the business type, i.e. sole proprietorship, partnership, or private limited company. Your business, the failure to register a business, could get you in legal trouble, with fines and no business bank account available.
Why It Matters:
Registration gives you the legal right to own a Brand Name and makes others stop using your brand name. It also serves to foster trust and credibility with clients and associates. Without one, you are leaving yourself open to litigation, which can shut you down.
How to Avoid It:
Go to Registrar of Joint Stock Companies and Firms (RJSC) for company incorporation. Ensure that you file all the relevant paper work and do not forget to have a Trade License form your municipal corporation.
2. Skipping Intellectual Property (IP) Protection
Startups frequently fail to ensure that their intellectual property is protected when they are in a hurry to get a product or service to market. If it’s a logo, a slick product design, or even a company name, without IP rights, competitors can rip off your idea and get away with it.
Why It Matters:
Your brand and product designs are important assets. Working without IP security, you risk losing your competitive edge and may experience legal action regarding your innovations.
How to Avoid It:
You can register a mark through the DPDT (Department of Patents, Designs and Trademarks) in Bangladesh. For patents or industrial designs, file the necessary paperwork to protect your intellectual property.
3. Overlooking Employment Contracts
Another crucial mistake is hiring people without the right contracts. People like to think that verbal contracts are legally sound and as binding as a written one.
Why It Matters:
A clear employment contract states the rights and responsibilities of both employer and employee, reducing disputes over job duties, wages and termination terms.
How to Avoid It:
Prepare contracts of employment for all staff covering job description, working hours, salary, benefits, confidentiality and termination procedures. Have both parties sign the document before hiring starts.
4. Ignoring Tax Compliance
Startups do not have the luxury of not complying with the laws related to tax payment. Most entrepreneurs do not register for taxation in time or record money transactions properly, and they end up paying big fines and sometimes going to court.
Why It Matters:
Tax evasion or improper tax reporting isn’t going to give your startup a good name, and you may have to pay fines. Further, good bookkeeping is necessary for auditing and financial accountability.
How to Avoid It:
Apply and file via BIR for TIN and payment of VAT if required. Always get your AIT (Advance Income Tax) & VAT (Value Added Tax) iissuesclarified from a chartered accountant.
Learn More: How to Get VAT Certificate in Bangladesh
5. Poor Data Privacy Practices
In today’s digital age, data privacy laws are becoming increasingly stringent. Startups that collect customer data without following legal protocols may face lawsuits and reputation damage.
Why It Matters:
Data breaches put sensitive information at risk and can also result in legal liabilities in accordance with the ICT Act of Bangladesh.
How to Avoid It:
Enforce heavy data-preservation policies. Inform about the use and storage of Customer data. Anything collected should reflect the subjects consent and be securely handled.
6. Not Having a Founders’ Agreement
When founding a business with partners, it’s common for many entrepreneurs to operate on gentleman’s agreements and not bother with a formal founders’ agreement. This creates some pretty big problems when conflict arises.
Why It Matters:
A founders’ agreement stipulates the responsibility of each partner, the shareholding, and the process for conflict resolution. Without it, disagreements can tear your startup apart.
How to Avoid It:
Write a good founders agreement – covers profit sharing, what people are responsible for, and what happens if they leave, etc. It will raise the status of this agreement to a legally binding one once notarised.
7. Disregarding Compliance with Labour Laws
There are quite a few labour laws in Bangladesh, establishing the employee’s right to working hours, wages, and a safe work environment. You can be penalized and can also be sued by employees, if you do not adhere to these laws.
Why It Matters:
Not only can violations of labour law incur fines, but they can also harm the reputation of your company. Negative publicity can result from the mistreatment of workers.
How to Avoid It:
Read up on the Bangladesh Labour Act, 2006. Establish safety worker measures, which is what you can control. Consistently educate your HR staff on compliance rules.
8. Inadequate Record Keeping
Maintaining accurate, detailed records of business dealings, employee information, and financial activities is not just good practice—it’s a legal requirement. If you don’t keep good records, you could have tax issues and problems during financial audits.
Why It Matters:
Accurate record keeping is vital for tax administration and potential legal defence. Sloppy record keeping can mean it’s difficult to keep up with where you’re spending the money and, as a result, you may fall down in filling in various revenue authority forms.
How to Avoid It:
Establish an organised method of recording, whether on the computer or manually. Organise payroll, tax receipts, business contracts, and financial statements. Utilise financial software to automate data management.
Why Choose Legal Advice BD?
We know startups in Bangladesh face a different set of legal struggles. Our legal counsels offer personalized solutions for entrepreneurs to man the intricacies of the law and safeguard their business interests. Whether that is contracts drafting or IP advice, we are here to support you on your journey. You can rely on us to assist in creating that strong legal base for your startup.
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Final Thoughts
Have a great idea? In most countries, that’s all you need to start a business. It is critical to navigate empires of shit to protect your startup from dangers that lie in wait. From the right registration to data privacy and following the rules of the labour laws, proactivity will save you legal headaches later.
At the same time, by avoiding these common legal blunders from the start, your startup will be well-positioned for long-term prosperity. Contact Legal Advice BD for advice at every stage of your venture.