Are you finally prepared to implement your business idea? Before really beginning a firm, a substantial amount of planning is necessary. It is never simple to become an entrepreneur the journey is fraught with ups and downs. Creating a business strategy and securing money are typical things on an entrepreneur’s startup to-do list whereas, entrepreneurs should add reviewing common business laws that may have an impact on their enterprise.
Beginning a new business is not an easy undertaking. It entails a variety of elements, of which every entrepreneur should be aware of the fundamental startup rules and the essential company laws that will aid them on their long trip. While there is no alternative for specialist knowledge, a framework of fundamental principles serves as a quick reference for the issues entrepreneurs confront on a daily basis.
Entrepreneurs must be concerned with a multitude of issues, the most essential of which is the legality of the business in the country, in order to avoid the potential failure that can result from costly litigation.
Business Laws
There are two primary categories of business laws, which are the regulation of commercial entities and the regulation of commercial transactions. Business laws is the area of law that governs what happens with commercial concerns. Over the course of several centuries, laws have developed and morphed in response to advances in both society and technology.
Types of Business Laws
The following are some of the most prevalent types of business laws:
1. Employment law
Especially in the contemporary workplace, it is essential for any business with even one employee to remain current on employment legislation. Are you required to provide health or workers’ compensation insurance? Has your company discriminated against an employee or stood by while another employee engaged in sexual harassment? There are numerous situations in which your organisation could incur significant financial liability, not to mention reputational damage, if employees are treated unfairly.
2. Immigration law
Immigration law becomes an issue in modern enterprises an increasing number of times. Temporary employees, permanent employees, and event workers may be foreign nationals. When working with international workers, you must be aware of your legal compliance.
3. Sales of retail products
In the United States, financial transactions are governed by the Uniform Commercial Code. Contracts, fraud, leasing, and secure transactions are all covered under the Code. In spite of its ambitious goal to condense the laws in one location, the Code is surprisingly complex. Lawyers invest a significant amount of time researching how to apply the UCC to actual business practise and can provide organisations with guidance on how to remain compliant with the law while maintaining productivity.
4. Drafting/Negotiations/Litigation of contracts
Contracts, whether for a home lease or a product sale, ensure that the parties to a transaction are on the same page. When your firm enters into a contract, attorneys can ensure that your best interests are represented.
5. Antitrust
Antitrust laws aid in ensuring that all enterprises in a market operate on a fair playing field. Some organisations utilise unfair or deceptive techniques to increase their market share, and it may be challenging to spot unfair activity within your own organisation. A business attorney can help you ensure that your company operates ethically and defend you from unfair activities by other businesses.
6. Industrial property
Patenting may be necessary for businesses to defend their distinctive items in the marketplace. Otherwise, anyone could sell the goods that your business laboured so hard to create. Copyright laws protect creative works, and if your company’s logo is unique, you will need to file for protection.
7. Taxes
Businesses may be required to pay or calculate the following types of taxes:
- Taxes on the company’s profits.
- Sales tax on products and/or services.
- Property tax on all business-owned real estate.
- Self-employment taxes.
- Including FICA taxes for Social Security and Medicare as well as workers’ compensation taxes, employment, or payroll taxes.
- Dividend taxes on corporate shareholders.
- Excise taxes on various things your business consumes, including fuel.
8. Bankruptcy
Occasionally, factors outside the control of a firm drive it into a precarious scenario. There are numerous possibilities, each with distinct filing requirements and conditions. The advantages and disadvantages of each approach will be familiar to business attorneys, who can help identify the optimal solution to seemingly insurmountable problems.
Business Laws that every Startup Entrepreneur should know
There are top legal obligations and acts that are split into five legal points for the efficient operation of every firm. These include:
1. Organisational structure formalisation
There is a requirement to comprehend and implement the correct business structures since different company structures have varying business applications during business operations. Additionally, there are various types of business structures, including sole proprietorship, partnership, limited liability partnership, and limited liability company. Also, there are various fundamental legal details, including registration, legal status, taxation, member obligation, permitted membership count, etc.
2. Licensing business
Every business requires licences based on the sort of business conducted. Before creating a firm, the proper licencing issuance process must begin to avoid legal conflicts at the outset. All licences differ from company to company. For instance, if an e-commerce business is to be established, VAT tax, service tax, registration fees, and professional taxes would be imposed. The Shop and Establishment Act of 1953 governs the licencing requirements for the majority of enterprises.
3. Tax and accounting statutes
Launched by the Indian government, the startup scheme provides numerous tax breaks for startups. According to the tax and business structure in place, different tax policies must be implemented for various businesses. The first seven years of a new company’s existence are eligible for tax exemptions. The organisation must be registered as a business with limited liability. The total annual revenue for the initial years cannot exceed 25 crores.
Every company or business must keep accurate records and undergo tax audits to comply with the country’s taxes regulations.
4. Labour laws
As every business has employees or labour that contribute to its everyday operations in a proper and efficient manner. There are many laws pertaining to labour, such as the minimum wage act, gratuity, Provident funds payment, paid holidays to workers, maternity benefits, workplace harassment, bonus payment, etc.
Even the government has exempted startups from labour inspections if they consistently comply with the nine most important labour rules of the country.
- 1947’s Industrial Disputes Act
- 1926’s Trade Unit Act
- The Inter-State Migrant Workmen (Regulation of Employment and Service) Act was enacted in 1979.
- 1972’s Payment of Gratuity Act
- 1952 Act on Employees’ Provident Funds and Other Provisions
- 1948’s Employee State Insurance Act.
- The Building and Other Construction Workers (Regulation of Employment and Working Conditions) Act of 1996
- 1946’s Industrial Employment Act enacted the Standing Orders.
- 1970 Act on the Regulation and Abolition of Contract Labor
Proper employee and worker rules may aid in enhancing the morale and productivity of the workforce.
5. Protection of intellectual property rights
Startups frequently generate novel and unconventional ideas that can be protected in this environment through the use of certain rules. Our inventive product, process, or method for producing anything in a more efficient manner can be considered our innovative property rights.
There is a relation between the startup plan for intellectual property rights and the Startup India initiative. This plan would ensure the protection and monetization of intellectual property, as well as manage the trademark, copyright, and designs associated with the establishment of a business. Under these restrictions, the government has decreased patent costs for new businesses by 80%. The panel would also be responsible for informing market participants about the filing process for patents and other forms of intellectual property.
Winding up of business
Because no one can predict when the worst may occur, business owners must be aware of the regulations governing liquidation. The winding-up procedure is a methodical procedure that includes three forms of winding-up: fast-track exit, court or tribunal route, and voluntary liquidation.
1. In the fast-track exit, the firm must have no remaining assets or liabilities, no prior business must be entertained during the winding-up process, and its name can be deleted from the registrar of companies (ROC).
2. In a voluntary liquidation, all accounts must be resolved by the company, i.e., the shareholders and creditors must be in line.
3. The closure of a court or tribunal involves protracted court proceedings and a frenetic procedure involving the parties involved.
The Insolvency and Bankruptcy Bill of 2015 is also utilised for efficient and simple business liquidation. In order to efficiently supervise the bankruptcy resolution process, the Ministry of Corporate Affairs has announced sections 55 to 58 of the Insolvency and Bankruptcy Code of 2016, and according to government policy, the fast-track process requires a startup.
Conclusion
Legal compliance is vital for any organisation. If you are an entrepreneur interested in starting a small business in India, you must understand and abide by all applicable rules to ensure the business’s smooth operation and running. Obtaining professional guidance and services is the greatest way to safeguard your business and avoid legal issues.
FAQs
1. What are Business Laws?
Ans: Business laws ensure that both employees and employers are protected and that specific rules are followed to maintain fairness and balance. While there are numerous facets to company law, its primary objective is to ensure both parties’ fairness and safety.
2. Is it essential to have an attorney when dealing with anything that falls under “Business Laws”?
Ans: Yes, it is always important to have a qualified attorney on your corner. Business attorneys are familiar with the intricacies and most recent developments in business laws. Whether you are an employer or an employee, you need an attorney with this knowledge.
3. Which party benefits more from Business Laws, the employer or the employee?
Ans: Since the purpose of business laws is to ensure the security and safety of both parties, it is not always advantageous to either. However, if one party is in the wrong or has neglected business laws in some way, it will certainly benefit the opposing side, particularly in court disputes or litigation.
4. What is the definition of a startup in India?
Ans: A startup is a new business founded by a single person or a group of people. There could be two motives for starting a business:
1. To provide a novel idea or product for which no one else has before held the copyright/patent.
2. To invent new ways to redevelop existing products or facilities
