8 Small Business Laws in India Every Business Owner Should Know

Small business laws in India

There are a thousand things to worry about when starting up but one of the most important things is to operate legally in the country. Here is a list of small business laws all SMEs should know of when operating in India.

It’s always good to have basic legal knowledge when running a business. Here are some major law categories that you need to take care of regardless of the type of business you are running.

Company Formation Laws

While starting up, you need to choose what type of a company you want to run. Will it be a company with limited liability or will it be a public company? Will you be a small time sole proprietorship or is it a family business?

The Indian Companies Act, 2013 states laws for each type of company. There are various pre and post incorporation requirements that you need to complete while setting up your business, starting with registering your company with your regional Registrar of Companies (RoC).

Business Finance Laws

Largely, there are three types of funding – equity financing (investors have shares in your company), debt financing (you take out a business loan) or self-financing.

If you are getting equity funding from Venture capital firms or angel investors you need to have documents like – letter of intent, share subscription agreement and shareholders agreement – chalked out.

If you are getting debt financing (borrowing a loan from a bank) you need to get application for loan sanction papers, sanction letter, loan agreement letter and collateral documentation in place.

Check out ways to raise money for your business, here.

Tax and Accounting Laws

A business has to pay different kind of taxes – central, state and local. However, a lot is going to change with the onset of Goods and Services Tax (GST). The GST is all set to be rolled out in the month of June 2017.

To understand and pay your tax liability, you need to maintain books of accounts for your business. Also, maintaining accounts is a legal requirement in India.

Securities Laws

Did you know that you can list your small business on the SME stock exchange, regulated by the Securities and Exchange Board of India, without having to launch an Initial Public Offering (IPO)?

There are several conditions to the law that you might want to read up on.

Labour / Employment Laws

If you plan on hiring people or have people working for you, you must have employee agreements and abide by the labor laws. This includes employee privacy rights, federal regulations, disability, and discrimination acts etc.

Intellectual Property Laws

If your business is involved in creating something new – code, products, design etc – you might want to put your name on it. In other words, you should copyright, patent or put your trademark on it. Doing this will help you avoid intellectual property theft and also give your profitability a boost via royalties!

Information Technology Laws

Technology stands at the core of any business today. You might be using and exploring all sorts of tech to improve business. As powerful as technology is, it is also vulnerable. Therefore, the government of India has introduced the IT Act – cyber laws that help protect online privacy and identity.

Dispute Resolution & Contract Laws

All of the above points thrive on contracts. You are signing an agreement where both parties are agreeing to a certain condition. Sometimes, if not communicated rightly, agreements can quickly turn into disagreements and result into a dispute.

There are several contractual and dispute resolution laws that can help you protect your business and run it smoothly.

Need legal advice for your business? Instamojo’s App store has several legal and tax services that can help you!

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  1. It is very important to know the small business laws otherwise we can face different problems regarding our business. Thank you Rapti Gupta for this nice blog post regarding the small business law.

  2. Good to see your blog on Indian business laws, startup knowledge and related informations.

    Business oriented people will connect us regarding cloud-based bookkeeping software and GST ready business accounting software for small and medium enterprises.

    Thank for sharing.

    Regards,
    AlignBooks

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