Legal Requirements for Businesses in India

Successful business persons are those who feel life is not always fair. They inherently understand what may be the consequences if the legal obligations are not met. The compliance of law reduces the chances of arbitraries along with biased and dishonest decisions. Austin says that “law is a command which obliges a person or persons to a course of conduct. It is laid down by a political sovereign and enforceable by a sanction”. From registering a name for the business to safeguarding intellectual property, one should be aware of the legal responsibilities. So here are a few things you may be interested in if you are thinking of commencing a business.

• Company Formation Laws
• Business Finance Laws
• The GST
• Intellectual Property Law
• HR Management

Company Formation Laws

From the concept to commencement of business, it is mandatory to follow each type of company law for a business person who wants to start a business. Starting a new business is a challenging as well as an exciting process.”

Indian Companies Act

The New companies Act 2013 empowers Govt. of India with all the administrative buttons. National Company Law Tribunal under this act adjudicates issues relating to Indian companies.

Registering Companies With Regional Registrar Of Companies (RoC)

Section 609 of this act enumerates the Registration Offices and RoC (Registration of Companies). Currently, there are 22 Registrar of Companies (Roc) operating from various parts of India.

Ascertainment Of Your Business Structure

• Company Formation Laws
• Business Finance Laws
• The GST
• Intellectual Property Law
• HR Management

One Person Company – You And Only You

When there is only one founder/promoter for the business is available; one can go for this business structure. The person should be an Indian resident. Section 2(62) of the Companies Act 2013defines“One Person Company” means a company that has only one person as a member. Section 3(1)(c) of the Companies Act says that a single person can form a company for any lawful purpose. It further describes One Person Company as a private company.

Limited Liability Partnership – Limit To Focus

Companies are to be registered under the provisions of the limited liability partnership act 2008. The advantage of this business structure is, it gives benefits to limited liability companies and flexibility of a partnership. One partner is not obliged for the wrongful or unauthorized business transaction done by another partner.

Private Limited Company – Puff Up To The Exposure

Private limited companies are the most adorable type of business structure in India. Here a minimum of 2 shareholders and directors are necessary and a maximum of 15 directors are allowed and among them, one has to be an Indian resident. Private limited company registration is administered by the Companies Act, 2013 and the Companies Incorporation Rules, 2014.

Public Limited Company – Offering The Ownership

This business (also under Companies Act 2013) structure has limited liabilities and offers shares to the general public primarily through Initial Public Offering (IPO) or secondarily through two stock exchanges of India in the Indian market i.e. Bombay Stock Exchange and National Stock Exchange. Due to the limited liability, its growth and expansion possibilities are higher among all the business structures.

Business And Finance Law

The basic equation is that “The money makes Money”. A successful business always encompasses the financing volcanos in it. The more secure and flexible financing options enable businesses to hit a new high in each accomplishment.

Empty Your Pocket First

Yes, it’s your pocket which should be empty first. It gives the owner of the business structure supreme control to do what he/she wants to do. In this option collateral is the personal assets of the owner of the business structure.

Debt Loan – Borrow And Repay

In this category of financing option for operating needs and/or to purchase capital business structure borrows money to pay back with some interest within a specified time period. The payback could be made in regular intervals i.e. monthly, quarterly, Half-yearly, Yearly, or at once at the termination of the agreement.

Broadly a business structure can avail two types of Debt options. One is Secured and the Other is unsecured. In the case of a secured loan, some assets of the business structure may be attached as a security to make it happen which will become the lenders’ property if the business structure cannot pay back the debt. So, it can distinctly derive from that, a secured loan is always beneficial for the debt provider.

You And Your EQUITY Fellows

Co-Investment business structures are in the trending zone these days. As it offers access to funds, better assets, etc to the business. Equity financing is a way to raise capital by selling shares of a business structure. When an owner of a business is interested in equity financing, he/she have to relinquish control of the ownership from it.

The government takes a crucial role with its policies for equity financing. Equity financing can be done from Initial Public Offering (IPO) and without IPO which is governed by Ministry of Finance, SEBI, and RBI guidelines. Department of Economic Affairs (Capital market division) under the ministry of finance that is prominently responsible for formulating the policies related to methodical growth and development of the market is under the following regulations:

• Depositories Act, 1996
• Securities contract regulation Act, 1956
• Security Exchange Board of India, 1992

The ESOP – Your Employees Your Partner

Employee Stock Ownership Plan (ESOP) is a common method of raising funds through equity with its own advantages of creating an enthusiastic & dedicated working environment in the structure.

As in equity financing, burdens like interest payment and service charges are not a concern once an equity purchase transaction is completed there is no extra cost to be bearable by an owner except an attorney’s fee (which is also bearable by the equity buyer in some cases). This makes equity investment more attractive.

Vigorous Angelic Investors For The Stepping In To The Floor

There are countless parameters that need to be taken into account if a business person needs funding. It is redundant to mention here that from a newly commenced start-up to a bloated organization needs money in every phase of their growth.

Angel investors are those individuals who render funds to a business structure on reciprocity with intend to procure convertible debt or ownership equity. They usually reinforce business structures at their embryonic stages, where risks of failure are high, and prepare them to receive funds from potential investors.

What IT Says

Coming from a legal perspective, the business structures need to pay angel tax according to section 56(2)(viib) of the Income Tax Act, 1961 vide the Finance Act, 2012. According to it, the amount which will get excess of ‘fair market value ‘raised by an unlisted business structure will be treated as income and would be taxed at 30%. Introduction of the above section was made at Finance Act, 2012 in the parliament for augmenting obligations to maintain transparency in diminishing of generation and use of unaccounted money.

Venture One’s Fortune From Outset To Right Around The Development

Unlike Angel investors, Venture Capitalists are a division of an organization and usually consist of a group of financial experts instead of an individual with the objective of visionary entrepreneurs. In the last few years, several successful start-ups have taken it on trust.

Venture Capital funds govern and regulated by SEBI Act, 1992 and SEBI (Venture Capital Fund) Regulations, 1996. According to section 14, Chapter IV of Securities and Exchange Board of India (venture capital funds) regulations, 1996 no venture capital fund shall issue any document or advertisement inviting offers from the public for the subscription or purchase of its units.

Discretion Of The Board

The Board may at anytime call upon the venture capital fund to file reports as desired within stipulated time and conditions for observing activities carried on by the venture capital funds. Further, it may appoint one or more persons as inspecting or investigating officers to take on inspection or investigation of instruments related to venture capital funds.

CROWDFUNDING – The Joy Of Donation

In recent years, this new concept has been remarkably evolved. It is based on the power and wisdom of the crowd. It not only creates new jobs and enhances the country’s economy but also stimulates the investors to invest. Several social media and websites accelerate the investment by these pooled investors out with traditional investors i.e. entrepreneur’s family, friends, and relatives as well as angel investors and venture capitalists.

The GST – Conqueror Of The Taxation System

Goods and Services Tax (GST) is an indirect tax imposed on the supply of goods and services w.e.f. 01.07.2017. It has eradicated many of the indirect taxes i.e. Central Excise, Service Tax, Value Added Tax, Entertainment Tax, Luxury tax, etc. It is a transparent system of tax administration. As GST merged all the previous taxes, business structure need only GST registration along with uniformity, simplification, and centralized registration.

Easy Registration

Gst.gov.in provides easy hassle-free registration within no time. The entire process is online. The business structures having branches in many states all over India need not have to enroll themselves with every state’s tax laws rather than complying with a uniform GST law.

Getting A Loan

IT return along with GST filing enables a firm to get a loan from any commercial bank comfortably.

Collecting Tax From Customer

The primary benefit is of collection of tax legally and passing on to the suppliers is possible with the help of GST registration.

Tenders Matter

GST enabled firms to easily can apply for tenders of State and Central Government.

Intellectual Property – Key Aspect Towards New Things To Happen

The modern industrialized nations are gradually converting into branded civilizations with distinctive recognitions. The said conversion is evident in this commercial arena, where the goods and service providers are categorizing themselves as brands. The brand provides identity to a commodity or service and ensures the uniqueness of a good or service. It generates a pledge on behalf of a company to render equivalent quality of goods and services each time.

Intellectual Property is basically non-physical and based on human creation and hence it should be encouraged. Copyrights, patents, trademarks, and trade secrets are the most common categories.

What Is The Need Behind This

In the case of tangible property, anyone can protect it easily with some shield or making boundaries, etc, or consulting with a security advisory body.

Broadly there are four types of Intellectual Property that can protect your idea i.e.Trade Secrets, Trademarks, Copyrights, and patents.

Trade Secrets – It’s Worth To Value Information

It can include any valuable information whose confidentiality should be cherished by its owners like customer lists, recipes, and formulas, methods, formulas, techniques, business plans, research, and development information, etc.

Trademarks – Identity Of Brilliance

This refers to a distinctive type of sign, design, or expression produced or provided by an individual or by a company.

Copyright – A Right Given To The Actual Creator

When the absolute right to be provided to the creator of any innovative work, Copyright comes into play. It basically stays alive in original literary, dramatic, artistic, or musical forms. The copyright act 1957 came to effect in January 1958. Under the control of the Registrar, a copyright office has been established.

Patents – A Path To Measure Inventions

This type of intellectual property restrains others to make, use, sell or import an invention and help the inventor for a limited period of time. In every country, there exists a patent law that comes under civil law. In India, The primary objective of patent law in ancient times was to encourage inventors to reveal their secrets vis-à-vis investments.

HR Management Laws – Alternative To Fizzle Out

Article 16 of the Indian Constitution guarantees equality of opportunity for all citizens in matters of employment or appointment to any post under the State. No citizen shall, on grounds only of religion, race, caste, sex, descent, place of birth, residence, or any of them, be ineligible for, or discriminated against in respect of, any employment or office under the State.

HR management plays a vital role to grow a business inefficiently manner. The onus is on the HR managers in each phase like recruitment, training, appraisal, and grievance redressal.

Payment of Wages Act 1936, Payment of Bonus Act 1965, Employees Provident Funds 1947, etc deals with the pay, compensation, and rewarding of the employees. While The Factories Act 1948, Maternity Benefit Act 1961, Sexual Harassment Act 2013, etc deal with the health and safety of the employees.

Child Labor Regulation Act deals along with Article 24 to Prohibition of employment of children from the workplace.

These several laws help HR managers to comply with the legal requirements of a business structure which smoothens the process of grievance redressal and creates a significantly amiable environment in a workplace to generate revenues for it.

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