8 Small Business Laws in India Every Business Owner Should Know

Small Business Laws in India
(Last Updated On: October 27, 2020)

There are 1000 things to worry about when setting up your small business 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 small business 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 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 an application for loan sanction papers, sanction letter, loan agreement letter and collateral documentation in place.

Also read: Looking to raise funds? Check out this guide 

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 labour 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 in a dispute.

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

LEGALWIZ – Your perfect advisor for anything legal 

Are you tired of reading up on various small business laws without being able to execute it easily? We have an idea about where you can start. We collaborated with LegalWiz, a leading business professional services provider in India, to help businesses get acquainted with expected day-to-day interaction with business law.


  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. i have to be a dealer by procuring the chemical from indian manufacturer and give it to a pharma company in U.K

    They pay me and i supply to them , there delegate will come and collect the chemical the deal is good , since i am not into any of the business , i have come across this deal from my friend the U.K who is working in the same pharma company

    Transactions is in around $60lakhs , how to deal legally without any conflicts

  3. hii,
    can u please explain followings act in detail
    1) Indian Contract Act ,1872
    2)Indian Sale Of Goods,1930
    3)Negotiable Instrument Act,1881
    4)Consumer Protection Act 1986

    Thank you

  4. Its a very insightful blog post.Thanks for the share!
    I too have a blog post on basics of setting up a business in India-policies. Give it a read too! Thanks for the wonderful post.

  5. 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.


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