Basic Legal Compliances for Small Businesses

Being the owner of a small business comes with its own set of problems. One of the biggest challenges is being aware of and following the laws, which are the basis of any business.

Compliance with the law is an important part of any business. It makes sure that the business runs smoothly, that it doesn’t get fined or sued for things that aren’t necessary, and that customer trust keeps growing.

First, here are the most basic rules that every business must follow:

Shops and Establishment Act,
Obtaining a Pan Card,
Opening a Current Bank Account or
Obtaining a Sale/Lease Deed of the business premises.

To get more specific, the legal requirements for a business can be broken down into:

Entity Specific Compliances
Trade Specific Compliances
Human Resource Compliances

Contents

1 Entity Specific Compliances for a Small Business
2 Trade Specific Compliances
3 Human Resource (HR) Compliances

Entity Specific Compliances for a Small Business

In a sole proprietorship, before a business can open, it needs to have a Shops and Establishment Act or a NOC from the Gram Panchayat. It also needs to meet ongoing requirements like making financial statements, filing income tax (IT) returns, and GST returns.
In the case of a Partnership Firm, a Partnership Deed along with registration at a local Registrar of Firm, regularization of IT Returns filing along with GST Returns (if necessary), and preparation of financial statements.
For a Limited Liability Partnership (LLP), an LLP Deed, the filing of incorporation forms with the Ministry of Corporate Affairs (MCA), and a Common Seal of the LLP would be needed first. Make sure to file financial statements, annual returns, forms based on events, and IT returns on time with the MCA.
For a Private Limited Company to be registered, incorporation forms, a Memorandum of Articles of Association, and a company seal would need to be filed with the MCA. Filing financial statements, annual returns, and event-based forms with the MCA on a regular basis. Putting in both IT Returns and GST Returns (if applicable). Board meetings every three months and general meetings every year would be required.

The Shop Act must be renewed every few years wherever it applies.

Trade Specific Compliances

Registration or a license from the Food Safety and Standards Authority of India (FSSAI) is a requirement for certain businesses, such as the food business.
Businesses that make things would have to have a Manufacturing License.
A business that exports or imports would need an Import Export Code (IEC).

Human Resource (HR) Compliances

Statutory compliance in Human Resource (HR) Policies means that a business follows the various Labor Regulations set up by the Government of India. There is a lot of time and money spent on things like payroll, attendance, and making sure that minimum wages, provident funds, and maternity benefits are paid.

When the number of employees is less than 10, the Shop Act Intimation is a very simple rule that must be followed.
If a business owner has between 10 and 20 employees, he or she might have to follow certain rules. These rules are based on the Shop Act Registration and allow the Employees State Insurance Corporation (ESIC) to work in the manufacturing sector, where the monthly salary is up to INR 21,000, there is a gratuity for workers who finish their jobs well, and the Provident Fund can be used (PF).
Filing monthly and yearly returns with the Employees Provident Fund (EPF) Office and keeping track of all salary and PF payments made to employees.
If a business has more than 20 employees, it must pay ESIC for each of them, except in the manufacturing sector, where the maximum monthly salary is INR 21,000.