• Anjali Jachak

LEGAL FACTOR AFFECTING BUSINESS 📷Legal Compliance & Sustainability of Business

Updated: Nov 16, 2019

Every business is built with knowledge, skill, market research, strategy, planning, and problem solving methods. Designing business, its model, marketing plans or market techniques are crucial parts for running business successfully. It is important to determine internal as well as external factors which could affect business type. Whoever the business belongs to such as manufacturer, wholesaler, trader, retailer, distributor or marketing experts, all these factors required to be considered. Internal factors are skills and determination of a person who plans, runs and manages business. External factors are surroundings of business such as Political, Economical, Social, Technological and Legal. Legal factors involve how flexible and adaptable the laws or legal rules could be that govern the business. Legal provisions may also contribute more or less to income, depending on environment of operation. It's all about setting mechanism of business by complying with legal factors. Purpose of observance of the factor is securing sustainability of the business.

To start, to run and to manage business, legal compliances are to be followed at each and every stage. There is checklist and it must be ticked.

Ø Starting of business: First step is to start business which attracts the question that what is business type and how is going to be handled. At this stage, provisions of Company law should be complied.

Structuring: It defines your business size and structure, accordingly the business would be recognized as Proprietorship, Limited Liability Company, Partnership, One Person Company, Trust, Corporation, etc.

As per business structure mentioned above, different and various laws come in to picture. It also depends on business type as manufacturer, wholesaler, trader, retailer, distributor, marketing experts, etc.

Registration under applicable laws​: After defining the business it has to be registered and get legal recognition. This provides benefits as separate entity besides business person’s own personality. Though registration of some kind of business structures are not mandatory, it is beneficial to get registration which can protect you while dealing with other businesses and fixing the liabilities of business. It also includes registration of agreements/contract which describes liabilities, rights and duties of businesses on one part and others businesses dealing with on second part. This would create evidential value for future arising legal disputes between contracting parties. Once business get separate existence.

After registration, next is provisions of Tax Laws. Registration with concern tax department is required, which is beneficial in determining tax liabilities to avoid penalties.

Licensing:​ For business, it must be confirmed that businesses are carried out with proper legal procedure. For this purpose, getting license is mandatory. The nature of license depends on product/services that business is dealing with and accordingly the concerned authorities would grant the license after compliance with prescribed procedure.

Ø Running:​ once business starts, the maintenance of business is next step. This is continuous stage throughout business’s existence. Periodic legal duties should be complied with.

Documentation: It includes maintaining record of business transactions, complying with regulations of concerned Ministerial departments who regulate the framework of law. These procedures provided by such Government authority need to be followed for smooth functioning of the business. It follows by keeping everything on record and filing various returns under various laws. Which describes overall business and create evidential value. E.g. under Company law, there is requirement of preparing Memorandum Of Article (MOA), Articles Of Association (AOA) at registration stage, it must be followed while running business, compliance of which could be proved by maintenance of documents. Also, Tax Laws requires to file returns periodically.

Following the procedure provided/given by laws of territory: It includes not only compliances but also the sustainability in the market.

Ø Managing:​ Businesses need to manage their business with legal way which can lead to good reputation, long term existence and quality. To abide by, business must obtain necessary permissions.

includes two things -Compliance with authorities and changes and checking requirement at every stage.

Compliance with authorities: Authorities handling and responsible for the functioning of different segments of business make businesses to comply with their ordinances published timely, which need to be complied with.

Changes and checking requirement at every stage: Business have to observe and follow the changing circumstances of affecting factors that if external factors like political, economic, environmental and social factor changes then the legal factor would also change accordingly, therefore the ordinances and amendment must be followed by businesses to ensure proper compliance observation.

Ø Disputing: If dispute arises, then the dispute resolving mechanism provides procedure to follow which would lead to binding effect of solutions. This stage is very crucial and to survive it, all the previously discussed procedures, compliances, registrations, contracts/agreements etc. should be documented and followed properly.

Ø Closing/winding up: Even ending up of business need to follow certain Law procedure. This is different segment which could be discussed in Separate article.

Adv. Anjali Savita Sopan Jachak

B.L.S., LL.B. LL.M.


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