There are many things to consider when starting your small-sized business. However, an important aspect is to be legally operating in the nation.
It’s always beneficial to be aware of the basics of law while running your business. Here are the most critical areas of law for small companies which you should keep in mind regardless of what type of business you run.
Companies Form Laws
When starting out, you must decide the type of business you’d like to run. If you are aware of the kind of long-term profits you anticipate, as well as the size of the business you’d like to manage, then you can choose a legal entity for your company.
The legal structure and form of the company will determine the amount of tax you have to pay, the documents you’ll need, and your capacity to raise money.
Here are the various legal frameworks you should be aware of before starting a company:
- Sole Proprietorship
- Limited Liable Company
Different legal structures are subject to other corporate formation laws. The Indian Companies Act 2013 provides laws applicable to all types of businesses.
There are several prerequisites for incorporation, both before and after. It would help if you met when creating your company, beginning with registering your business at the Ministry of Corporate Affairs.
If you’re a new startup with an innovative concept, You can also register for Startup India from home.
Tax and Accounting Laws
Since you are a citizen of India, companies must know the different tax classifications it’s into. If your company has an annual turnover of more than Rs 40 Lakh, you must register first for Goods and Service Tax.
Based on the structure of your business, You will also need to pay taxes. The current tax structure is a simplified tax structure that combines various taxes into one single tax.
Business Finance Laws
There are three kinds of financing:
- Equity financing: investors hold shares in your business
- Credit financing is when you take out an enterprise loan
Suppose you’re looking to receive equity financing from Venture capitalist firms or angel investors. In that case, you’ll require documents such as an expression of intention, a share subscription agreement, and a shareholder agreement written out.
If you’re obtaining debt financing (borrowing money from an institution), you should submit an application form for sanction documents and a sanction letter. You also need to have an authorization letter and collateral paperwork in the correct place.
Information Technology Laws
Technology is at the heart of all businesses in the present. You may be using and researching all sorts of technologies to boost the efficiency of your business. However, as powerful as technology can be. However, it’s also vulnerable.
Thus, the Government of India has introduced the IT Act 2000 – cyber laws to protect privacy online and identity.
Employment Laws / Employment Laws
If you intend to employ individuals or have employees who work for you, you should sign employee agreements and be bound by employment laws.
It includes employee privacy rights, federal privacy regulations, disabilities rights, discrimination laws, etc.
Intellectual Property Laws
Suppose your company is involved in the creation of something brand new – code or products, designs, etc. You may want to trademark it. That’s why you must use patents, copyrights, or your name.
By doing this, you can prevent the theft of intellectual property and will also boost your profits through royalty payments!
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Have you heard that it is possible to place your small business on the SME stock exchange in the Indian stock market, which is regulated by the Securities and Exchange Board of India, without needing to start the process of an initial public offering (IPO)?
Dispute Resolution & Contract Laws
All of the points above are based on contracts. The contract is in which both parties agree to a specific clause. In some cases, if they are not adequately communicated, the agreements can quickly become disputes and lead to an argument.
There are many types of disputes that arise with companies in India like property disputes, contract disputes etc. To resolve this there are many lawful contracts and dispute resolutions which can safeguard your company and ensure that you ensure it runs smoothly.