This article is written by Parthesh, pursuing a Diploma in Business Laws for In House Counsels from Lawsikho.
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What commercial laws should small-scale entrepreneurs equip themselves with?
Entrepreneurs or small business owners should know the basics of everything including accounting, marketing, advertising, governmental policies, laws, and others. Also, they should know the basics of business law to avoid failure relating to contract management or litigation. In this article, I will be explaining why the business or commercial laws are important for entrepreneurs. Also, I will be taking examples of some laws just to explain why they are important to learn and how they can be used by entrepreneurs for their own benefits.
Why should small or single entrepreneurs learn about business laws?
In order to promote the business, the government always updates the rules and regulations for businesses from time to time as it helps the community as a whole to grow together. Accordingly, it is important to know about modernized governmental policies and rules. Therefore, if any business wants to work without any hurdles then an entrepreneur should be up to date with your governmental laws.
For the beginners in the business industry, in order to learn, as a fresher or a beginner, the entrepreneur must have to visit numerous websites relating to business law and understand the basic knowledge of business law from them and it would be a great start for fresh or new entrepreneurs. To achieve a successful business, entrepreneurs should be aware of professional guidelines. In most cases, the regulations are obligatory by the governments on businesses which are mostly classified into three categories: Taxes, relations with employees, and trade-related regulations which can be national or international. The list of certain things to keep in mind while conducting business in different countries:
- Have some basic understanding of the general rules, regulations, and governmental policies of doing business in that particular state or country.
- Need to have proper license and paperwork to conduct business.
- Hire local business lawyers to be aware of a particular law to ensure that an entrepreneur is not violating any laws or committing any unlawful activities but is costly tough in small or single entrepreneurs.
- There should be a customer representative to handle their problem.
- Business conduct include that the company is up to date with the country business laws and ensure all business practices are legitimate and lawful
Hiring a legal advisor is not possible for everyone, especially amongst single and small entrepreneurs. Some small business law categories that small entrepreneurs need to take care of regardless of the type of business a person is running i.e. Company formation law, real estate, taxes, intellectual property law, insurance law, employment law, information technology law, dispute resolution & contract law, and others.
Company formation law
Before starting the company, the entrepreneur has to be aware of what company you want to run, basically what type of company you want to invest in.
- Limited liability
- Public company
- Small type-time sole proprietorship
- Family business
The Indian Companies Act, 2013 states laws for each type of company. There are various pre and post-incorporation requirements that an entrepreneur needs to complete while setting up a business, starting with registering the company with a regional Registrar of Companies (RoC)
Real estate law
Entrepreneurs should be aware of the legal aspect to validate the purchase of any real estate. Entrepreneurs must have a warranty deed or quitclaim deed. This deed transfers property from the old owner to the new owner in a legal way. Another deed that makes entrepreneurs free from the load is called a warranty deed. There are certain laws that divide their consideration, so entrepreneurs must be aware of them. When it comes to property-associated transactions and construction then there are different regulations in different states and districts within them like residential and commercial zones and these have their personal requirements which have to be complied with.
Tax law
Every entrepreneur’s primary financial concern would be regarding their tax payment and rebate. If any accidental misfortune arises on tax payment then it leads the entrepreneur to severe penalization. Therefore it is very important to get advice on tax payment and get familiarized with the tax law. Also, take support from professional law consultants to safeguard that claims and payments are all made in a proper way which gives approval to the entrepreneurs and law also.
Intellectual property law
Fundamentally, it refers to those ideas that are governed by ownership and these ideas cannot be borrowed, copied, or used without the approval of the proprietor or creator. Violating the rights of intellectual property is considered a disciplinary offense by law. The patent, trademark, and copyright usually protect intellectual property. Copyrights laws are those laws that protect intellectual property from being copied unlawfully. Books, articles, or other important pieces of information which are published are usually copyrighted and protect the owner and author over the intellectual property. Software, electronic goods, machinery, etc all are sheltered by parents. Trademarks are another important part of intellectual property. Commonly, trademarks are only extended within the scope of a single business field and it also defends the interest and brand individuality.
Insurance law
Commonly, Insurance is very beneficial or useful to enterprises but it often is mistaken to be financial liabilities over the businesses. Each and every entrepreneur must go with the number of insurance categories to save their businesses from any kind of sudden market change. There are many different types of insurance policies in which firms invest like property insurances to guard the office, equipment, and others. Health insurances for worker and employee, worker compensation insurances in the event that if an employee is injured during the job then he/she would receive compensation and business interruption insurance.
Employment law
Generally, the employment law differs from state to state but still, an entrepreneur should have basic knowledge of the labor standards rules and regulation i.e., an entrepreneur should know who comes under the definition of term labor and also which regulates minimum wage, child labor bans, overtimes rules, and recordkeeping requirements. Also, an entrepreneur should connect with a lawyer to make a standard agreement that every employee of the company should sign and comply with. The agreement must include employees’ salary, tenure, obligations, duties, termination, dispute resolution mechanism, and other important clauses. The agreement will help the entrepreneur in resolving any kind of dispute between employer and employee.
Privacy laws
In today’s time, privacy laws have a very major part to play as at present there is no specific act in India. A Personal Data Protection Bill (PDPB) has been in process since 2018 but in other countries of Europe and California, the Acts with more stringent restrictions have been introduced and also amended with the need of the hour, General data protection regulations (GDPR) and California Consumer Privacy Act. Once such a bill is introduced in India, every business has to comply with its regulation and in my personal opinion, the bill gives plenty of rights to consumers for their data protection as it restricts the business from using anyone’s information without their permission with some exceptions. The motto is to put the liability of maintaining consumer’s privacy on businesses or entrepreneurs. The one who holds all the information should have the proper means to protect the data from leaking it in the public domain as it is important to take care of privacy as it is one of our fundamental rights.
Why is learning about business laws favorable for entrepreneurs?
In today’s time, there are so many businesses and entrepreneurs who are struggling every day to comply with all the rules and regulations. As in India, it’s pretty complicated to comply with all the states and center’s laws. Also, take certifications such as e-waste and other environmental certifications are too expensive. Which results in the failure of the business model. To handle such legal issues an entrepreneur should and must hire a lawyer with expertise in business laws. Appointing a lawyer is an important thing to do as if they do not comply with the whole legal framework, then the business would be in some serious trouble. But if the business cannot afford to hire a legal lawyer then the other solution is every entrepreneur should prepare or train themselves with some basic legal knowledge.
Here are a few reasons as to why these laws are beneficial for every entrepreneur:
- To cut costs- Arming oneself with legal knowledge would extremely helpful in reducing legal costs. Thus, if there is any petty legal issue in business the entrepreneur can use his own learning to resolve the issue and save the cost of hiring an expensive lawyer.
- Law strengthens the business- Everyone has to agree that law provides a lawful recognition to business. If a business does not get legal recognition then the entrepreneur would be in great mess as if he/she cannot ethically claim. Basically, a law is a great instrument for every entrepreneur in this area of competition.
- Law is mandatory to learn and keep in mind – Entrepreneurs are the leader of a start-up and if the captain ignores problems then the start-up will start falling.
Lawyers are experts but only on legal matters. Professionally, a lawyer cannot stand in between the client and entrepreneurs and cannot assess the situation. Lawyers’ can only give advice to entrepreneurs but the decision has to be made by the entrepreneur as he also has to interpret the situation strategically. So, if the entrepreneur has some basic legal knowledge then only he can make the right and better decision.
Conclusion
Learning is important for every single business owner, entrepreneur, manager, or other professional, to have some basic knowledge or understanding of some laws which help them to make better judgments. Just as there are various laws that apply to people, there is a huge body of law that applies to business. Business needs these laws for the same reason that people do; to define unacceptable behavior, to provide certainty and stability, to protect the public, and to provide a mechanism for business.
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