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This is an Open Access article, distributed under the terms 
of the Creative Commons Attribution CC BY 4.0

1 Odesa State University of Internal Affairs, Ukraine (corresponding author)
E-mail: makoviy09@i.ua
ORCID: https://orcid.org/0000-0002-6847-2309
2 Police Academy of the Ministry of Internal Affairs, Azerbaijan
E-mail: rmammadov037@gmail.com
ORCID: https://orcid.org/0000-0002-0893-2262
3 Odesa State University of Internal Affairs, Ukraine
E-mail: klochkoilya94@gmail.com
ORCID: https://orcid.org/0009-0000-2794-8983

DOI: https://doi.org/10.30525/2256-0742/2025-11-3-277-286

ECONOMIC AND LEGAL PREREQUISITES  
FOR THE FUNCTIONING OF STARTUPS IN MODERN SOCIETY: 
ISSUES OF INTERNATIONAL AND NATIONAL LEGAL REGIMES

Viktor Makovii1, Rashad Mamedov2, Illia Klochko3

Abstract. The subject of the present study is the conceptual, theoretical, methodological and applied foundations 
of the legal and economic nature of the functioning of a startup as a form of innovative activity. Methodology.  
The present study employed a combination of general scientific and special legal methods. The analysis determined 
the quantitative and qualitative parameters of the organisational, legal and economic principles of determining 
startups in modern conditions. The synthesis yielded common features inherent in the phenomena of socio-
economic and legal nature, which serve as a prerequisite for the functioning of a startup. The employment 
of a comparative legal methodology has facilitated the identification of both the common and distinctive 
characteristics inherent in the legal consolidation of a startup within the legislation of individual countries, with due  
consideration for legal and economic prerequisites. The formal legal method established the necessary foundation 
for formulating conclusions regarding the effectiveness of the regulatory consolidation of the concept and 
characteristic features of a startup as an innovative product and a subject of the corresponding organisational  
and legal form, and outlining the corresponding normative proposals. The purpose of the article is twofold:  
firstly, to establish the state of determination of a startup as an economic category; and secondly, to highlight the 
prerequisites for the formation and development of such products in the context of international and national 
legal regimes. This will be achieved through the study of the legal and economic foundations of the specified  
phenomenon. The results of the study demonstrated that the economic and legal prerequisites for the functioning 
of a startup are derived from the innovative essence of such a form of entrepreneurial activity and are projected 
into the plane of implementation of the corresponding product and the exercise of legal personality of a certain 
participant in such relations within the framework of both national and international legal regimes. Conclusion. 
From an economic perspective, a startup is regarded as a technological innovation in the context of entrepreneurial  
activity. Its primary objective is to ensure the most optimal and effective utilisation of available and accessible 
resources, which are inherently limited in the modern context. It is evident that the emergence and development 
of a startup is contingent on a number of economic prerequisites. Primarily, there is a necessity for the effective 
implementation of the formula "small investments – significant profit". Furthermore, there is the possibility of an 
intensive transition from small to large-scale projects, and the attraction of additional resources in the form of 
so-called incubators. A startup is defined as a form of innovative activity, characterised by a distinct operational 
production cycle and a focus on maximised efficiency (defined as the ratio of costs to benefits received, with a 
high probability of achieving innovative outcomes in comparison to other forms of such activity). A complex 
combination of means of achieving the set goal and the probability of forming the defining features of a startup 
(operationality, resource limitations, novelty, innovation) is the most effective when compared with other forms 
of innovative activity. For nascent enterprises, the investment procedure is a highly effective mechanism that 
facilitates exponential growth, albeit at the expense of various sources unrelated to the project's originator and 
the constituents of the pertinent legal entity, which is the form of its implementation. The contract thus serves  
as the primary instrument for the execution of the startup's legal personality, which is subject to variation in 



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accordance with the diverse scope of its activities. In the context of economic activity, a startup is synonymous 
with the legal personality of an individual entrepreneur, a private enterprise, a limited liability company, or, in 
certain circumstances, a structural unit of a specific business entity. Empirical evidence has demonstrated that the 
organisational and legal structure of a nascent enterprise is predominantly characterised by one of the recognised 
forms of business entity, with a particular emphasis placed on those models that impose limitations on the 
contributions of its stakeholders. Conversely, in instances where the initiation of a project is undertaken within the 
ambit of a structural unit of a legal entity, the latter may not be applicable to business companies. In order for a 
startup to function legally, it is necessary to determine the legal status of those involved in this type of innovative 
activity, in terms of both the nature of the object and ensuring the implementation of their powers, in view of the 
needs of society and the individual.

Keywords: results of creative, intellectual activity, startup, economic prerequisites, legal prerequisites, investment 
activity, entrepreneurial activity, economic activity, intellectual property.

JEL Classification: E22, K15, M13

1. Introduction
The integration processes taking place in modern 

society at global, regional and national levels are 
primarily due to the development of the characteristics 
of the information space. The information space fully 
contributes to the penetration of information in all its 
forms into the deepest foundations of social existence, 
reflecting the formation and development of a post-
industrial information society.

Indeed, the modernity of social existence is directly 
related to the plethora of information available, which 
is a defining feature of the information society. In this 
context, information of various kinds, in an extremely 
wide variation, serves as a means to satisfy a number 
of needs in a particular sphere of manifestation of  
private or public interests. Concurrently, the economic 
experience of developing the most successful projects 
demonstrates that a significant means to achieve 
such a result is the utilisation of innovative tools in 
the organisation of the functionality of the system of 
measures that mediate the achievement of a specific 
goal. It is evident that startups occupy leading places 
among the latter.

A study of the global ranking of startups reveals that 
projects pertaining to the processing of information 
of various kinds, utilising neural network tools and 
other advancements in the domain of information 
technologies, which amalgamate modelling tools and 
other methodologies of processing data of a diverse 
nature, dominate the initial positions. Consequently, 
within the Ukrainian iteration of this evaluation, the 
top ten products encompass innovative information 
and technology initiatives that are either directly or 
indirectly associated with the utilisation of artificial 
intelligence and software products as a medium for 
addressing challenges across a wide spectrum of social 
domains (Startup Ranking, 2025). It is evident that 
the content of startups is intrinsically linked to the IT 
sphere. Consequently, there is a necessity to elucidate 
their nature and establish their position within this 

particular legal relationship. This is inclusive of the 
introduction of various information and technology 
products into a specific domain of social life, as well as 
the outcomes of intellectual and creative endeavours.

It is imperative to examine the fundamental nature 
of a startup as a participant in IT relations within 
the socio-economic and legal context. This analysis 
reflects the characteristics of the legal status of the 
subject and the legal regime of the object of the 
relevant relations. The study employs extant scientific 
research and the provisions of current legislation 
in this area, encompassing both international and  
national frameworks.

These issues have attracted considerable attention  
from scholars and practitioners in the fields of  
economics and law. Among the key economic studies, 
several notable areas of focus can be highlighted. 
These include research on the volume of financial 
capital as a core resource for startup operations (Singh 
& Subrahmanya, 2020); the role of incubators in 
supporting startup development (Sousa et al., 2018); 
the selection and alignment of marketing strategies 
to ensure the successful market entry of startups 
(Tokarev & Shkarovskiy, 2020); the integration of 
startups into the global economy (Bailetti, 2020); and 
the commercialisation of startup projects (Eslamloo, 
Brown & Biyouki, 2025). Further studies have explored 
the implementation of startup initiatives across various 
sectors, such as software development (Melegati & 
Goldman, 2016), the use of artificial intelligence in 
recruitment (Laun, 2023), and applications within 
segments of the creative industries (De Lazzari, 2018).

In the context of scientific studies examining the 
legal regulation of public relations in the context of 
a startup, it is essential to distinguish those works that 
elucidate its innovative essence (Kornukh, Makhanko, 
2014), and those that explore the implementation 
of the legal personality of participants within the  
national innovation system (Hlibko, Georgievsky, 
2018). From the perspective of the legal personality 



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of a company that fully implements startup projects in 
its own activities, this issue was considered in terms of 
the legislative basis (Boyarinova, Kopishynska, 2017) 
and legal prospects for its improvement (Zelisco, 
Solomka, 2021). In the context of various national 
legal frameworks, particular emphasis is placed on 
the subject of regulating startups, both in terms of its 
objective and subjective nature. This phenomenon has 
been examined in countries such as Brazil (Pimenta, 
Lana, 2022), Indonesia (Rohendi, Asriani, Kharisma, 
2023), and Slovakia (Patakyova et al., 2020).

The extant and referenced studies serve to update the 
corpus of knowledge pertaining to the economic and 
legal nature of a startup as an innovative phenomenon 
in the modern international and national context, in 
the context of the prerequisites for its emergence and 
development.

2. Economic Prerequisites for the Functioning 
of Startups in Modern Society

Economics, when considered within the context  
of a multidimensional space, is concerned with the 
various manifestations of numerous phenomena. 
Collectively and in their interconnectedness, these 
phenomena are directed towards the primary objective 
of achieving the most optimal and effective use of 
available and accessible resources. These resources are 
limited a priori in the modern existence of mankind.

The economic introduction of a number of  
products is a notable innovation, with a particular 
emphasis on the prominent role of startups. Indeed, 
there are several approaches to the nature of a startup 
as a social category, the predominant essence of 
which is directly reproduced in the economic plane.  
In particular, it is proposed to perceive a startup as 
a form of organising entrepreneurial activity, which  
finds development in a certain idea, a plan for its 
promotion on the market, a company development 
strategy and at the same time combines the optimal 
(limited) use of resources (Oksenyuk, 2019). 
Steve Blank, a pioneering figure in the field of 
entrepreneurship, defines a startup as a temporary 
organisation used to search for a repeatable and scalable 
business model (Blank, 2013). The Startup Ranking 
web resource defines a startup as an organisation  
with high innovative competence and a strong 
technological base, which is endowed with the  
ability to accelerate growth in economic terms and 
maintains independence in time with a maximum 
implementation period of up to 10 years (What is 
a startup, 2025).

It is posited that, in consideration of the results  
which indicate that financial capital constitutes the 
primary resource component of the functioning 
of a technological startup, three fundamental 
financial requirements of a resource nature should 

be distinguished: human, research and social capital  
(Singh, Subrahmanya, 2020). It is imperative to  
concur with the authors' assertion concerning 
the categorisation of the aforementioned types of  
resource capital, which is presented as an irrefutable 
assurance of the success of a devised and executed 
innovation project in the form of a startup. In particular, 
human and social capital are a sufficient parameter 
in the functioning of a startup, and research capital 
is necessary. The absence of research capital results in 
the determination of a startup as a means, rather than 
as a form of innovative activity. It is research capital 
that engenders innovativeness and impulsiveness 
in achieving the most effective, even revolutionary, 
solution to a scientific and technical task in the  
relevant sphere of social life.

A retrospective analysis of the development of 
startups as economic phenomena reveals several 
notable trends. Firstly, there has been a transition  
from small to large-scale projects. Secondly, there has 
been an exponential level of success in overcoming 
all stages of entrepreneurship. Thirdly, there has been 
a proliferation of new technological solutions and 
an intensification of existing ones. Fourthly, there is 
a high probability of project failure at the initial stages. 
Finally, the need for additional resources is partly  
met by incubators (Sousa et al., 2018).

In the context of the selection and correlation of 
marketing strategies for the successful implementation  
of a startup in entrepreneurial activity, it is imperative  
to consider the following parameters: the formation  
of an appropriate basic economic toolkit; the 
systematisation of the principles of such activity 
based on the results of monitoring and processing of 
implemented cases within the framework of relevant 
startups; the determination within the marketing of 
innovative activity of the stages of implementation and 
introduction of a startup; and the presence of specifics  
of the selection of tools for the implementation of 
a startup at each stage (Tokarev, Shkarovskiy, 2020).

A significant aspect of a technological startup is its 
integration into the global economy, which is facilitated 
by the capacity of such a venture to operate from its 
inception within the global market and to undergo 
a transformation in its operations to align with the 
demands of both the national and global economies. 
Concurrently, the following component models of 
startup globalization, among other forms of innovative 
activity, are proposed: the scale of the problem; 
stakeholder commitment; joint entrepreneurship; 
capital; legitimacy; global opportunities (Bailetti, 2020). 
It is imperative to acknowledge that the fundamental 
prerequisite for the establishment of a startup is the 
necessity to develop and implement a set of rules 
and models that would ensure the viability of such an 
innovative endeavour to address a specific scientific and 
technical problem within a designated industry sector.



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A cross-contextual comparative study of the 

phenomenon of startup commercialisation was 
conducted, and it was concluded that this process 
is significantly influenced by the combination of  
accelerator programmes and the startup ecosystem. 
Conversely, the success of startup accelerator 
programmes is hindered by factors such as inadequate 
future investments, the immaturity of the ecosystem, 
inefficient public administration, limited enthusiasm 
among young people, and inherent defects in the 
programme itself (Eslamloo, Brown, Biyouki, 2025).  
It is evident that the aforementioned researchers' 
position warrants support, as they posit that the  
capacity of the devised system to self-regulate its 
institutionality through the monitoring of outcomes 
and the subsequent realignment of phases in the 
implementation of a given product, manifesting 
as a startup, is of considerable significance to the  
evolution of such entities.

The following criteria are proposed for evaluating 
startups by the client firm itself, ensuring their ranking 
for effective implementation in one or another sphere 
of social life: the level of innovation and achievement 
of a specific goal and fulfilment of the corresponding 
task, the ratio of the received benefit to the invested 
support and resources in the development of the  
startup (Wouters, Anderson, Kirchberger, 2018).  
It is evident that validation of this assertion is to 
be found in the inherent nature of a startup, which 
is defined by its status as a venture necessitating  
minimal investment in comparison to the benefits it 
provides to its participants.

The implementation of startups in various industrial 
sectors is an issue that is characterised by certain 
peculiarities, which are appropriately reflected in 
scientific works. As previously stated, the software 
industry is the most dynamic of the economic sectors, 
a prerequisite for the establishment and development 
of high-technological innovative products in a  
relatively timely manner (Melegati, Goldman, 2016). 
This area is distinguished by a notable absence of clarity 
regarding the initial parameters, in comparison to 
other areas, and a pronounced restriction of resources 
available for the establishment of a technological  
project in the form of a startup.

The utilisation of artificial intelligence in the  
domain of recruitment by startups has garnered 
notable attention. This is attributable to the fact that 
artificial intelligence is employed by business entities 
on a global scale to optimise production processes 
and attain enhanced economic activity indicators.  
This was a prerequisite for the introduction of startups 
as innovative products based on artificial intelligence  
in various variations of their use, taking into account  
the quantitative and qualitative characteristics of 
a certain sphere of social life. The aforementioned 
factors have enabled the interpretation of the  

capabilities of artificial intelligence in a business  
model, which is technologically represented by 
a corresponding startup with a specific goal and means 
(Laun, 2023). The researcher's reasoning appropriately 
highlights the need to ensure accountability, 
confidentiality, fairness and standardisation of rules, 
clear legal standards and ethical principles within 
such a model as a means of increasing trust in artificial 
intelligence technologies and minimising potential 
legal conflicts, which serves as a significant prerequisite  
for the successful implementation of the startup  
created on this basis.

The following conclusions are drawn on the 
basis of the results of the study of the experience of 
implementing British startups inspired by sustainable 
development (SIBS) in the creative industry, using the 
example of fashion and gifts. Firstly, it is evident that 
the aforementioned industries are among the most in 
demand, and therefore require entrepreneurs to have 
a variety of business models in order to attract as many 
consumers as possible. This is a prerequisite for the 
creation and implementation of startups as innovations. 
Secondly, it is necessary to ascertain the significance 
and function of business drivers or business models 
as the foundation for established initiatives in the 
mechanism of emergence and implementation of the 
content of the product of innovative activity in the form 
of a startup. Thirdly, the startup models in the form of 
SIBS are guided by the motivation of the founder, who 
seeks to incorporate aspects of sustainable development 
in his own business activities. This is in opposition 
to the classic startup model, which is mediated by 
the movement of money and the fixation of profit.  
Fourthly, in comparison with energy companies, 
where startups clearly correlate with certain financial  
strategies, for SIBS models such an approach is  
completely leveled. This gives reason to talk 
about a certain uncertainty for a longer period 
of implementation of such a product. Fifthly, the  
success of SIBS as a startup model in the early stages 
is contingent on the awareness and implementation  
of two financial aspects, namely financial literacy and 
financial significance (De Lazzari, 2018).

Accordingly, a nascent enterprise is regarded as 
a technological creation of an innovative nature in the 
context of entrepreneurial activity. It is conceived to 
ensure the most optimal and effective utilisation of 
available and accessible resources, which are inherently 
limited in the modern existence of humankind.  
The economic category in question is characterised 
by a robust technological foundation, a high level 
of innovative capacity, the capacity to facilitate  
accelerated economic growth, a relatively circumscribed 
operational span, and the presence of diversified 
resource capital, including human, research, and social 
capital. In the context of the economic prerequisites 
for the emergence and development of a startup, it is 



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essential to consider the effective implementation of 
the formula "small investments – significant profit". 
Furthermore, the possibility of an intensive transition 
from small to large-scale projects must be taken 
into account, as well as the attraction of additional  
resources in the form of so-called incubators.

3. International and National Legal Regime  
of Startups in Modern Conditions

The legal framework governing startups in 
contemporary national and international legislation 
is characterised by a substantial dispositive element, 
a phenomenon that is inherently justified by the 
extensive scope of application of such a construct – 
entrepreneurial activity.

Thus, within the framework of Ukrainian legislation, 
according to the Regulations on the competitive 
selection of projects for state incentives for the creation 
and use of inventions (utility models) and industrial 
designs, approved by the Order of the Ministry 
of Economic Development and Trade of Ukraine  
"On Approval of Regulations on Competitive  
Selection of Projects for State Incentives for the  
Creation and Use of Inventions (Utility Models) 
and Industrial Designs" dated December 12, 
2018 No. 1879 (The Order of the Ministry of Economic 
Development and Trade of Ukraine "On Approval of 
Regulations on Competitive Selection of Projects for 
State Incentives for the Creation and Use of Inventions 
(Utility Models) and Industrial Designs"), a startup 
is defined as a project related to the creation and/or 
use of inventions, utility models, industrial designs, 
know-how and other results of intellectual, creative 
activity. A system-structural analysis of the regulatory  
provisions of the provision in question indicates the 
perception of a startup as a type of project, which 
is essentially a form of innovative activity that can 
be implemented with the creation for this purpose 
of a certain business entity, within the framework 
of an existing business entity or by concluding and 
implementing the content of an agreement on joint 
activities with a corresponding investment purpose.  
It is important to note that the broadened  
interpretation of the phrase "and other results of 
intellectual, creative activity" is applicable to other 
forms of such results, including those that are subject  
to copyright protection. It is also noteworthy that the  
latter can be represented in the content of objects 
of intellectual property law directly defined by 
this regulatory act, for example, industrial designs, 
trademarks, and so forth. According to a divergent 
approach, a startup is regarded as an element of 
the national innovation system, distinguished by 
the corresponding legal personality within the 
framework of the specified type of activity. At the 
same time, a startup, as a subject of economic activity 

of the corresponding type, is fully identified with 
the legal personality of an individual entrepreneur, 
a private enterprise, a limited liability company or, 
even, a structural unit of a certain economic entity  
(Hlibko, Georgievsky, 2018). This position is fully 
consistent with the definition of innovative activity 
as one that is aimed at the use and commercialisation  
of the results of scientific research and development 
and leads to the release of new competitive goods and 
services to the market, as contained in Article 1 of the 
Law of Ukraine "On Innovation Activity" (The Law of 
Ukraine "On Innovation Activity"). The aforementioned 
definition of 'innovative activity' is distinguished 
from the content of art from the perspective of its  
expression. Article 325 of the Ukrainian Commercial 
Code, which deals with long-term scientific and  
technical programmes and scientific and technical 
achievements in the context of such activities  
(The Commercial Code of Ukraine). Conversely, 
the utilisation of long-term for a startup is somewhat 
constrained due to its comparatively brief operational 
(production) cycle, which dictates its classification 
among other forms of innovation. Furthermore, the 
characteristics of a startup as an innovative product are 
in alignment with the provisions outlined in Article 
16 of the Law of Ukraine "On Innovative Activity". 
According to this Article, an innovative enterprise is 
defined as an enterprise (association of enterprises) in 
which the proportion of innovative products and (or) 
innovative products in monetary equivalent exceeds 
70 percent.

According to Article 14 of the law under 
consideration, an innovative product in all its variations 
is the implementation of an intellectual property 
object (such as an invention, utility model, industrial 
design, topography of an integrated microcircuit or 
selection achievement), which provides an increase 
in the scientific, technical and technological level and 
is endowed with novelty and higher technical and 
economic indicators. Its creation during the period of 
the existence of the information society is therefore 
designed to reproduce the corresponding achievements 
in the IT sphere, as explained by the above statistics 
on the emergence and development of startups.  
It is submitted that this should also be the case in  
relation to the fundamental nature of innovative 
products in the context of startup activities.

From the point of view of considering a startup 
as a form of entrepreneurial activity, it is proposed 
to define the following characteristics: 1) high 
adaptability; 2) high probability of achieving 
set innovative goals focused on market needs;  
3) minimal resource expenditure by the startup authors;  
4) high speed of project implementation; 5) maximum 
efficiency of project implementation in terms of the 
ratio of costs incurred to benefits received; 6) the 
ability of such a project to scale up through repetition 



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and expansion; 7) short cycle of operational activities 
within the project. Concurrently, a prerequisite for 
the implementation of such a form of investment 
and entrepreneurial activity is proposed to recognise  
the need for effective and prompt implementation  
of an innovative project as opposed to a more capacious 
and longer period of its implementation within  
the activities of large corporations (Kornukh, 
Makhanko, 2014).

In the context of nascent entrepreneurial endeavours, 
the probability of attaining the stipulated innovation 
objectives, which are oriented towards addressing 
market necessities, is a salient factor. It is noteworthy 
that this pursuit is concomitant with a significant 
likelihood of project failure in its nascent stages. This 
phenomenon is widely characterised as "permanent 
uncertainty, lack of stability, and high risk of failure even 
in the early stages" (Demchyshak, 2021). The synthesis 
and examination of the somewhat contradictory 
opinions regarding the considered feature of a startup 
indicates that the risk of project "failure" is indeed 
present, since the entrepreneurial activity in question 
is characterised by increased risk in terms of achieving 
the result and in forming the optimal ratio of resources 
spent and results obtained for the implementation of 
the project. Furthermore, in comparison with other 
forms of innovative activity, a complex combination 
of means of achieving the set goal and the probability 
of forming the defining features of the startup (speed, 
resource constraints, novelty, innovation) is the 
most effective. Consequently, within the paradigm 
of a nascent enterprise, it is pertinent to deliberate on 
the likelihood of its implementation in consideration 
of societal demand, whilst acknowledging its defining 
characteristics.

It is evident that a nascent enterprise is distinguished 
by its pioneering spirit and originality. These 
characteristics are identified through the undertaking 
of entrepreneurial endeavours within a specific 
domain of social activity (Zelisco, Solomka, 2021). It 
is evident that, in consideration of the aforementioned 
points, such an opinion should be provided with full 
support, with the following observations. Innovation, 
defined as an activity aimed at the utilisation and 
commercialisation of the outcomes of scientific  
research and development, and culminating in the 
introduction of novel competitive goods and services 
to the market, reflects the generic characteristic of 
the remaining forms of innovative activity previously 
discussed. However, given the classic structure of 
a startup as an economic category, it is worth paying 
attention to the features that are specific to this form 
of innovative activity. The most important of these are 
the short production cycle and maximum efficiency,  
which are reflected in two algebraic indicators:  
1) the ratio of costs to benefits received (minimal costs 
and maximum benefits); and 2) a high probability  

of achieving an innovative result compared to other 
forms of such activity.

As previously mentioned, a distinguishing feature of 
a startup is the minimal resource contribution of the 
participant (author) of the project, but a high level of 
investment due to the interest of external investors in 
its economic essence and the implementation of the 
given algebraic formula. The economic model under 
discussion is of a geometric progression nature, which 
is conducive to the implementation of the project 
during the growth stage. This progression combines the  
project's launch and expansion stages, thereby 
constituting the investment nature of the given 
phenomenon. In such circumstances, it is logical 
to differentiate a comprehensive list of investment 
sources, including a venture fund, business accelerator, 
crowdfunding, business incubator, and so forth 
(Davydenko, Volkov, 2022). In the context of the 
content of the Law of Ukraine "On Investment Activity", 
investment activity is interpreted as a set of practical 
actions undertaken by individuals and legal entities 
with a view to investing various types of property and 
intellectual values in objects of entrepreneurial and 
other types of activity. The result of such actions may 
be the creation of profit or the achievement of a social 
and environmental effect. Indeed, the investment 
component of a startup is a defining feature of this form 
of entrepreneurial activity. This is ensured by the wide 
involvement of resources from various sources, which 
are crucial in achieving the result determined by the 
author of the project.

The assertion that the array of functions, 
methodologies, strategies, and means for developing 
and promoting a particular project idea (marketing) 
to the market is pivotal in the execution of a startup is 
valid. In such circumstances, it is possible to conclude 
that a significant proportion of startups are successfully 
implemented, provided that the most optimal and 
effective marketing strategy is employed (Polyakova, 
2023). It is evident that the term refers to the legal 
entity itself, its organisational and legal form, and 
the boundaries of its legal personality. The content  
of the latter, and the form of its implementation, 
must also be related to the socio-economic and legal 
instrument that ensures the achievement of the goal set 
within the project.

In continuation of the aforementioned, it is proposed 
to perceive a startup as a recently created company 
that represents an innovative form of entrepreneurial 
activity, endowed with limited resources and plans 
to implement such legal personality on the market 
(Chazov, 2013). It is evident that attention is directed 
towards distinctive features, including the brief period 
of existence and the incorporation of the constituent 
documents of this innovative activity into the  
content. This incorporation serves to delineate the 
hypothetical nature of the given form of innovativeness 



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by establishing the corresponding objective.  
It is evident that such reasoning must be appealed 
to, given that there is no necessity to restrict the form 
and content of innovative activity within the scope  
of startup activity. Moreover, the delineation of 
hypothetical aspirations within the constituent 
documents relating to the commercialisation and 
implementation of the results of intellectual, creative 
activity and other scientific and technical achievements 
within the startup may be appropriate only in the 
case when dealing with a special legal personality  
of a legal entity, which is personified by the considered 
type of innovative activity. Concurrently, the 
aforementioned features should be fully perceived  
in the content and forms that personify the legal 
personality of a legal entity, namely in the decisions 
of management bodies and the contractual practice 
of such a startup as a subject. Furthermore, it is the 
contract that determines the implementation of the 
content of the legal personality of a startup, which is 
accordingly differentiated in the possible directions  
of its activity. Concurrently, within the ambit of 
contractual instruments that facilitate the establishment 
of legal personality in a nascent enterprise, extant 
literature has a point when it identifies the author's 
contract as a foundational legal instrument for the 
governance of relationships between the originator 
of the project (work) and the founders of the startup 
(Boyarinova, Kopishynska, 2017).

Finally, with regard to the organisational and  
legal form of a startup, it is pertinent to cite 
I.M. Kucherenko, who, based on an analysis of extant 
developments, termed the organisational and legal form 
of legal entities a specific characteristic of legal entities, 
the basis of the allocation of which is a set of certain 
features determined by the legislation, which engender 
grounds for distinguishing one legal entity from  
another in external manifestation. At the same time, 
she identifies the presence or absence of the founders' 
property rights, the type of liability, and the right of 
participants to receive property after the liquidation 
of the legal entity, as well as the imposition of such 
property obligations, as features that distinguish 
between different organisational and legal forms. 
Concurrently, the purpose, type, methods of achieving 
the purpose, features of the formation and disposal 
of the property of a legal entity, in her opinion, in no 
case can be taken as a sign of distinguishing one or 
another organisational and legal form as such, which 
are not civil law in their essence. This finding aligns  
with the prevailing perspective that specific 
characteristics of legal entities are indicative of 
their organisational and legal structure, with others 
reflecting the intricacies of their operational activities 
(Kucherenko, 2004). Concurrently, the proposal has 
been made to distinguish three organisational and 
legal forms of a startup as a type of innovative activity: 

individual entrepreneur, private enterprise, and  
limited liability company (LLC) (Boyarinova, 
Kopishynska, 2017). In consideration of the 
aforementioned points, it can be concluded that the 
most accurate interpretation of such forms would  
be as types of startup, rather than as organisational 
and legal forms of a legal entity. Concurrently, it is 
imperative to expand this list, taking into account the 
nature of the remaining organisational and legal forms 
of legal entities and the features of the manifestation  
of the startup features analysed above.

The constraints imposed by the proposed forms 
of startup are attributable to the founders' limited 
resources and the prioritisation of marketing tools in 
the implementation of the project and the achievement 
of its defined goals. Thus, in support of the LLC as an 
organisational and legal form of a legal entity, which 
corresponds to the essence of a startup by nature, the 
following advantages are expressed: limited liability 
only by the participants' contributions; simplicity 
of profit distribution between the company's 
participants; and an unlimited number of founders 
of different origins. Furthermore, the text goes on 
to highlight certain disadvantages of a startup in the 
form of a legal entity represented by an LLC. A study 
of the experience of foreign countries regarding the 
activities of startups in the form of legal entities 
concluded that the implementation of this particular  
model of startup implementation at the initial stage 
of project implementation is appropriate (Hlibko, 
Georgievsky, 2018).

From the perspective of the organisational and 
legal form of legal entities in which a startup can be 
implemented, opinions are expressed regarding the 
priority of entrepreneurial companies due to the 
entrepreneurial nature of the implementation of such 
a project (Zelisco, Solomka, 2021). Concurrently, 
entrepreneurial activity and innovative activity in 
the form of a startup are occasionally distinguished 
as discrete approaches to business (Levchuk, Oprya, 
2023). This assertion is refuted by the considerations 
previously outlined concerning the extensive array of 
startup procedures that can be conducted within the 
framework of a contract, an extant legal entity, or its 
constituent unit. This reasoning is similarly employed  
in scientific works (Polyakova, 2023).

In the Republic of Azerbaijan, the regulatory  
framework governing startups is enshrined in 
the provisions of the country's Tax Code and the 
subordinate regulatory legal acts adopted to develop 
its content. Thus, according to Art. 13 of the Tax Code 
of the Republic of Azerbaijan, a startup is recognised 
as an entrepreneurial activity carried out on the basis 
of an innovative initiative. It must meet the criteria  
established by the designated relevant executive body 
and support the development of micro-entrepreneurship 
and small and medium-sized businesses. The person 



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carrying out such an activity will be issued with a  
'Startup' certificate by the specified body or institution 
(The Tax Code of the Republic of Azerbaijan, as 
amended on July 11, 2000, No. 905-IQ).

The administration of the registration of startups  
and the issuance of a corresponding certificate is  
provided for by the Resolution of the Cabinet of 
Ministers of the Republic of Azerbaijan dated January 
29, 2021 (No. 21). The Agency for Innovation 
and Digital Development, which is under the ju 
risdiction of the Ministry of Digital Development 
and Transport of this country, is identified within the 
aforementioned Resolution as the operator of such 
a register. The functions of administration and state 
management in the matter of identifying technological 
products as startups and ensuring their legal protection 
are performed by the Agency (Rules for maintaining 
a register of innovation projects open to the public and 
issuing a Startup certificate: by the Resolution of the 
Cabinet of Ministers of the Republic of Azerbaijan as 
amended on January 29, 2021, No. 21).

Concurrently, the criteria that are presented to the 
initiators of obtaining a "Startup" certificate and to the 
product that is declared as a startup are highlighted.  
It is particularly noteworthy that the initial list  
includes the following stipulations: the categorisation 
of the individual in question as a micro or small  
business entity, the stipulation that the share of 
founders belonging to medium or large business entities  
should not exceed 49 per cent, and the stipulation of the 
individual's legal status as a resident taxpayer. Secondary 
criteria include: creation of a product within the 
framework of entrepreneurial and innovative activity; 
creation of added value through the reorganisation 
of existing production and service processes; 
creation of added value through the introduction 
of new technological solutions; an appropriate level 
of competitiveness; increased demand in the short 
term; it must be new and not identical to an existing 
product in the relevant field (On approval of "Criteria 
for determining a startup": by the Resolution of the 
Cabinet of Ministers of the Republic of Azerbaijan as  
amended on January 29, 2021, No. 20).

It is evident that Azerbaijani legislation 
comprehensively delineates the nature of a startup as 
a form of innovative activity associated with the pursuit 
of profit, the resolution of a technological problem 
at a qualitatively novel level, and the introduction of 
a novel method (form) of achieving a cost-effective 
outcome, constrained by specific temporal and resource 
limitations. Concurrently, the entity responsible for 
implementing the startup is determined, a process  
that is facilitated by the relevant registration procedure, 
which results in the issuance of a legitimation document.

The study of the nature of startups and their legal 
basis in Brazilian legislation is of particular interest  
and relevance. In this study, an attempt is made to 

determine a startup from a technical and legal point 
of view based on the analysis of the positive law of this 
country (Pimenta, Lana, 2022). It is proposed that 
a startup be regarded as an innovative solution, which 
has the following features: scalability, repeatability, 
flexibility, efficiency, repeatability in different segments 
of the economy, a high risk on the way to achieving  
the goal, non-standardity in solving the task.

It is evident that a nascent entity within the national 
and international legal regime is reflected in the  
context of the implementation of a certain innovative 
initiative. Moreover, the entity that ensures the 
implementation of this form of innovative activity 
in its own management is also of significance. In this 
case, the first approach is upheld, and only indirectly  
is there a delineation of the legal status of the  
entities involved in such activity in view of their 
organisational and legal form in the context of its 
substantive elements.

4. Conclusions
To conclude the preceding deliberations on the 

economic and legal prerequisites for the operation of 
startups in contemporary society, as observed within 
the context of both international and national legal 
frameworks, the following observations are warranted.

In the economic sense, a startup is perceived as 
a technological product of an innovative nature in 
entrepreneurial activity. It is designed to ensure 
the most optimal and effective use of available and 
accessible resources, which are limited a priori in the 
modern existence of mankind. The economic category 
in question is characterised by a robust technological 
foundation, a high level of innovative capacity, the 
capacity to facilitate accelerated economic growth, 
a relatively circumscribed operational span, and the 
presence of diversified resource capital, including 
human, research, and social capital. In the context of 
the economic prerequisites for the emergence and 
development of a startup, it is essential to consider 
the effective implementation of the formula "small 
investments – significant profit". Furthermore, the 
possibility of an intensive transition from small to  
large-scale projects must be taken into account, as well 
as the attraction of additional resources in the form of 
so-called incubators.

A startup is defined as a form of innovative activity, 
characterised by a distinct operational production cycle 
and a focus on optimising efficiency (as measured by 
the ratio of costs to benefits received) in comparison 
to other forms of innovative activity. A complex 
combination of means of achieving the set goal and 
the probability of forming the defining features of 
a startup (operationality, resource limitations, novelty, 
innovation) is the most effective when compared  
with other forms of innovative activity.



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For nascent enterprises, the investment procedure 

is a highly effective mechanism that facilitates  
exponential growth, albeit at the expense of various 
sources unrelated to the project's originator and the 
constituents of the pertinent legal entity, which is the 
form of its implementation.

The contract thus represents the foundational 
instrument through which the content of the legal 
personality of a startup is implemented, with the startup's 
potential activities being delineated accordingly.

A startup is a business entity which is entirely 
synonymous with the legal personality of an individual 
entrepreneur, a private enterprise, a limited liability 
company, or even a structural unit of a certain business 
entity.

Empirical evidence has demonstrated that the 
organisational and legal structure of a startup is 

predominantly implemented through one of the 
types of business companies, where priority is given 
to those that limit the contributions of participants.  
Conversely, in instances where a nascent project is 
executed within the ambit of a structural unit of a legal 
entity, the latter may not be applicable to business 
associations.

The legal prerequisite for the functioning of a  
startup is the need to determine the legal status  
of the subjects of this type of innovative activity in 
terms of both the object nature and ensuring the 
implementation of their powers in view of the needs  
of society and the individual.

This study has the potential for further development 
in the context of investigating the nature of a startup  
as one of the primary products and subjects of the  
digital environment. 

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Received on: 14th of June, 2025
Accepted on: 30th of July, 2025

Published on: 13th of August, 2025