Legal, Registration & Compliance

The email that ruined Ankita's Tuesday

It's 10 PM on a Tuesday. Ankita is sitting cross-legged on her bed in Dehradun, editing Instagram Reels for her pahadi food brand. Orders are good — she shipped 340 jars of bhurani raita last month. Her phone buzzes. An email from a law firm in Delhi.

"LEGAL NOTICE: Violation of Food Safety and Standards Act, 2006. Our client has purchased your product bearing the brand name 'Pahadi Zaika' and it does not display a valid FSSAI license number on the label. Your FSSAI Basic Registration expired on 15th March. Under Section 63 of the FSS Act, operating without a valid license is punishable with imprisonment up to six months and a fine up to ₹5 lakh..."

Ankita's heart is pounding. She opens her laptop and checks the FSSAI portal. The notice is right — her registration expired five months ago. She had set a reminder but dismissed it during Diwali rush season. She never renewed it.

She calls Priya at 10:30 PM, nearly in tears. "Priya, meri FSSAI lapse ho gayi. Legal notice aa gaya hai. Kya hoga?"

Priya, who went through her own compliance nightmare when she forgot to file her startup's annual return with the MCA, says: "Breathe. It's fixable. But Ankita — this is the stuff that can kill a business faster than bad sales. You need to take compliance seriously. Not as a one-time thing. As a monthly habit."

Ankita's story is not unusual. Across India, thousands of small businesses run into legal trouble — not because they're doing anything wrong, but because they forgot a renewal date, didn't know they needed a license, or assumed "small businesses don't need all that."

They do. And the good news is: most of it isn't complicated. It's just paperwork. This chapter will walk you through every registration, license, and legal requirement you're likely to need — with actual steps, actual costs, and actual websites.

Think of legal compliance as insurance. You pay a little time and money upfront, and it protects you from disasters that could shut you down.

Business Structures: Choosing Your Legal Form

Before you register anything, you need to decide what kind of legal entity your business will be. This decision affects your taxes, your liability, your ability to raise funds, and how much compliance paperwork you'll deal with every year.

Let's look at each option through the eyes of our characters.

1. Sole Proprietorship — The Simplest Path

Pushpa didi's chai-maggi shop near Triveni Ghat in Rishikesh is a sole proprietorship. She didn't formally "register" a company. She got a Shop & Establishment license from the Rishikesh Nagar Palika, opened a bank account in her name with a GST certificate, and started selling chai.

What it is: You are the business. There's no separate legal entity. Your business income is your personal income. Your business debts are your personal debts.

Pros:

• Easiest to start — no registration with MCA, no MOA/AOA
• Lowest cost — just local licenses and a PAN card
• Full control — all decisions are yours
• Tax benefit — taxed as individual (slab rates), not flat 30%

Cons:

• Unlimited liability — if the business owes ₹10 lakh to a supplier, your personal savings, your house, your scooter — all can be seized
• Hard to raise external funding — investors don't invest in proprietorships
• No continuity — the business dies with you (legally)
• Limited credibility for bigger contracts

Best for: Small shops, freelancers, individual service providers, early-stage solo businesses. Pushpa didi, a tutor, a freelance designer, a small kirana store.

2. Partnership Firm — When Two or More People Team Up

Neema and Jyoti run their homestay in Munsiyari together. They split the investment 60-40 (Neema owns the property, Jyoti manages operations). They created a partnership deed that spells out who does what, how profits are split, and what happens if one wants to exit.

What it is: Two or more people agree to run a business together, sharing profits and losses. Governed by the Indian Partnership Act, 1932.

Two types:

• Unregistered partnership — you can operate, but you can't sue your partner in court if there's a dispute. Not recommended.
• Registered partnership — registered with the Registrar of Firms in your state. Costs around ₹1,000-2,000. Takes 15-30 days.

Pros:

• Easy to set up — just draft a partnership deed and register
• More capital available — multiple partners pool money
• Shared responsibilities and skills

Cons:

• Unlimited liability for all partners — if the business fails, each partner's personal assets are at risk
• Flat 30% tax rate (plus cess) on firm's income — can be expensive for smaller profits
• Partners can create binding obligations — if Jyoti signs a contract, Neema is also bound by it
• Disputes can be ugly without a clear deed

The partnership deed must include:

• Names and addresses of all partners
• Nature of business
• Capital contribution by each partner
• Profit/loss sharing ratio
• Roles and responsibilities
• Rules for admitting new partners or removing existing ones
• What happens on death or retirement of a partner
• Dispute resolution mechanism

Best for: Family businesses, professional firms (CAs, lawyers), businesses where two people bring complementary skills. Neema and Jyoti's homestay.

3. Limited Liability Partnership (LLP)

What it is: A hybrid between a partnership and a company. Partners get the flexibility of a partnership but with limited liability — your personal assets are protected.

Key features:

• Registered with MCA (Ministry of Corporate Affairs) at mca.gov.in
• Each partner's liability is limited to their capital contribution
• Minimum 2 partners, no maximum
• Must have at least 2 designated partners (like directors)
• Needs a DPIN (Designated Partner Identification Number) and Digital Signature Certificate

Registration cost: ₹3,000-8,000 (including government fees and professional charges)

Compliance:

• Annual return (Form 11) — due by 30th May
• Statement of Account & Solvency (Form 8) — due by 30th October
• Income tax return filing
• If turnover exceeds ₹40 lakh (or ₹10 lakh for service LLP), audit is required

Tax: Flat 30% + cess (similar to partnership firm). But from FY 2025-26, LLPs with turnover up to ₹60 lakh can opt for presumptive taxation.

Best for: Professional services, consultancies, businesses where partners want limited liability without the heavy compliance of a company.

4. One Person Company (OPC)

What it is: A company with just one member (shareholder) and one director. Introduced in 2013 to give solo entrepreneurs the benefit of limited liability.

Key features:

• Only one person needed — but you must nominate another person as a nominee
• Limited liability — your personal assets are protected
• Registered with MCA
• Annual compliance: board meetings, annual return, financial statements, income tax return

Registration cost: ₹5,000-10,000

Tax: 25% (plus surcharge and cess)

Threshold: If your turnover crosses ₹2 crore or paid-up capital crosses ₹50 lakh, you must convert into a private limited company.

Best for: Solo entrepreneurs who want limited liability but don't have partners. A single founder starting a product business.

5. Private Limited Company

Priya registered her agri-tech app as a Private Limited Company from day one. She knew she'd need to raise funding from angel investors and VCs, and investors almost never invest in anything other than a Pvt Ltd company. It cost her ₹12,000 to incorporate, and the compliance costs about ₹30,000-50,000 per year (CA fees for filings). But when she raised her seed round of ₹40 lakh, the legal structure was already in place.

What it is: A separate legal entity, distinct from its owners. Shareholders own the company, directors manage it. Governed by the Companies Act, 2013.

Key features:

• Minimum 2 directors, 2 shareholders (can be the same people)
• Shares cannot be traded publicly (unlike a public limited company)
• Limited liability — shareholders are only liable up to their share capital
• Perpetual existence — the company continues even if founders leave or die
• Can raise equity funding from investors

Registration process:

1. Get DSC (Digital Signature Certificate) for all directors — ₹1,500-2,000 each
2. Get DIN (Director Identification Number) — free, through SPICe+ form
3. Reserve company name through RUN (Reserve Unique Name) service
4. File SPICe+ form on MCA portal — includes MOA and AOA
5. Receive Certificate of Incorporation — takes 7-15 days

Total cost: ₹8,000-15,000 (government fees + professional charges)

Annual compliance (non-negotiable):

• At least 4 board meetings per year
• Annual General Meeting (AGM) within 6 months of financial year end
• Filing of annual return (Form AOC-4 and MGT-7) with MCA
• Income tax return
• Statutory audit by a CA (mandatory regardless of turnover)
• Various event-based filings (change of directors, address, etc.)

Cost of compliance: ₹30,000-60,000 per year (CA and CS fees)

Tax: 25% + surcharge and cess (effective rate ~25.17% for companies with turnover up to ₹400 crore)

Best for: Businesses planning to raise investment, high-growth startups, businesses that need strong credibility. Priya's agri-tech app.

6. Section 8 Company (Non-Profit)

What it is: A company formed for promoting charitable objects — education, art, science, health, social welfare. Profits cannot be distributed to members; they must be reinvested in the organization's objectives.

Key features:

• No minimum capital required
• Income tax exemption available under Section 12A and 80G
• Must apply to the Central Government for a license before incorporation
• Same compliance as a private limited company

Best for: NGOs, social enterprises, trusts working for community development. If someone in your area is running a women's self-help group or a rural education initiative, this might be the right structure.

7. Cooperative Society

What it is: An autonomous association of people united voluntarily to meet common economic, social, and cultural needs through a jointly-owned enterprise.

Registered under: Multi-State Cooperative Societies Act, 2002 (if operating in multiple states) or respective State Cooperative Societies Acts.

Relevant for Uttarakhand: Farmer cooperatives for apple marketing, dairy cooperatives, handloom cooperatives. If Rawat ji and other apple farmers want to pool resources for cold storage and direct marketing, a cooperative society is ideal.

Best for: Groups of farmers, artisans, or workers who want to collectively bargain, market, and share resources.

Comparison Table

Bhandari uncle's take: "I've run my hardware shop as a proprietorship for 22 years. It's simple. But if my son wants to expand and open a second branch, we'll probably register an LLP. Limited liability matters when the stakes get bigger."

Essential Registrations Every Business Needs

Regardless of your business type, there are certain registrations that almost every business in India needs. Let's go through each one.

1. PAN Card (for the business)

What: Permanent Account Number — your business's tax identity.

Who needs it: Everyone. If you're a sole proprietor, your personal PAN is used. For partnerships, LLPs, and companies, you need a separate PAN for the entity.

How to get it:

• Apply online at onlineservices.nsdl.com or utiitsl.com
• Fee: ₹107 (including GST)
• Documents: Identity proof, address proof, proof of date of birth
• Timeline: 15-20 days

For companies/LLPs: PAN is automatically allotted during incorporation through SPICe+ form.

2. Aadhaar for Business

If you're a sole proprietor, your personal Aadhaar is sufficient. For other entities, the authorized signatory's Aadhaar is used for various registrations (GST, Udyam, etc.).

3. GST Registration

What: Goods and Services Tax registration gives you a GSTIN — a 15-digit identification number.

When is it mandatory?

• Annual turnover exceeds ₹40 lakh (for goods — ₹20 lakh for special category states including Uttarakhand)
• Annual turnover exceeds ₹20 lakh (for services — ₹10 lakh for special category states)
• You sell inter-state (even ₹1 of inter-state sale requires GST registration)
• You sell on e-commerce platforms (Amazon, Flipkart, your own website with payment gateway)

This is critical for Ankita — she sells online across India. She needed GST registration from day one, regardless of turnover.

Voluntary registration: Even below the threshold, you can register voluntarily. Benefits:

• You can claim Input Tax Credit (ITC) on purchases
• Bigger businesses prefer dealing with GST-registered suppliers
• Gives your business more credibility

How to register:

1. Go to gst.gov.in
2. Click "New Registration"
3. Fill Part A: state, PAN, email, mobile
4. You'll get a TRN (Temporary Reference Number)
5. Fill Part B: business details, bank account, upload documents
6. Documents needed: PAN, Aadhaar, address proof of business, bank statement, photograph
7. Complete Aadhaar authentication (or visit GST Seva Kendra for biometric verification)
8. GSTIN issued within 7 working days (usually 3-5)

Cost: Free. No government fee for GST registration.

Composition Scheme: If your turnover is up to ₹1.5 crore, you can opt for the Composition Scheme — pay a flat 1% (for manufacturers/traders) or 6% (for restaurants/service providers) and file quarterly instead of monthly. But you can't claim ITC and can't sell inter-state.

4. Udyam Registration (MSME Registration)

What: The government's registry for Micro, Small, and Medium Enterprises. Replaced the old Udyog Aadhaar.

Why you absolutely should do this: It's free and unlocks a massive list of benefits:

• Priority sector lending from banks (easier loans)
• Lower interest rates on loans
• Collateral-free loans under CGTMSE scheme (up to ₹5 crore)
• Protection against delayed payments from big buyers
• Subsidy on patent/trademark registration
• Eligibility for government tenders (some reserved for MSMEs)
• Subsidy under various schemes (PMEGP, Stand-Up India, etc.)

Classification (based on investment + turnover):

How to register:

1. Go to udyamregistration.gov.in
2. Enter Aadhaar number and name
3. Validate with OTP
4. Fill business details, PAN, bank account, activity type
5. Submit — you'll get your Udyam Registration Number instantly

Cost: Absolutely free. Do not pay any agent. Do it yourself in 10 minutes.

Pushpa didi got her Udyam registration done by walking into the District Industries Centre (DIC) in Rishikesh. The officer there helped her fill the form online. It took 15 minutes. She's now classified as a Micro Enterprise, which helped her get a ₹2 lakh loan under PMEGP at subsidized interest.

5. Shop & Establishment Registration

What: Every shop, commercial establishment, restaurant, or office must register under the Shops and Establishments Act of the respective state. In Uttarakhand, this is the Uttarakhand Shops and Commercial Establishments Act.

How to get it:

• Apply at the local municipal body (Nagar Palika / Nagar Nigam / Panchayat)
• Documents: ID proof, address proof of premises, rental agreement (if rented), photographs
• Fee: ₹200-1,000 (varies by municipality and area)
• Timeline: 7-15 days
• Must be renewed annually or as specified

Why it matters: This license is needed to open a current account, apply for GST, get other licenses. It's the most basic proof that your business exists at a physical location.

6. Trade License

What: Permission from the local municipal body to carry out a specific trade or business at a particular location.

Different from Shop & Establishment? Yes. Shop & Establishment is about the workplace (employee hours, conditions). Trade License is about what you do — it ensures your business type is permitted in that zone.

How to get it:

• Apply at the Municipal Corporation / Nagar Palika
• Fee: ₹500-5,000 (depends on the nature and size of business)
• Renewed annually
• Usually processed in 15-30 days

Sector-Specific Licenses

Now let's get into the licenses specific to your type of business. This is where most people get caught — like Ankita did.

Food Business — FSSAI License

If you make, sell, store, distribute, or transport food in any form, you need an FSSAI license. No exceptions.

Three types:

Ankita's situation: She started with Basic Registration (₹100/year) when her turnover was small. But once she crossed ₹12 lakh annual turnover and started shipping across state lines, she should have upgraded to a State License. She also needed to display the valid license number on every product label — the 14-digit number starting with the license type digit.

How to apply:

1. Go to foscos.fssai.gov.in
2. Create an account and log in
3. Choose the appropriate license type
4. Fill the application form — business details, food category, production capacity
5. Upload documents: photo, ID proof, address proof, food safety management plan (for State/Central)
6. Pay the fee online
7. For Basic Registration: approval within 7 days (often instant)
8. For State License: inspection may be required, approval in 30-60 days
9. For Central License: inspection required, 60 days

Renewal: Must be done before the expiry date. You can renew up to 1 year in advance. Late renewal incurs a penalty of ₹100 per day.

Eating House License: If you run a restaurant, dhaba, or any place where people come and eat on the premises, you also need an Eating House License from the local police. This is separate from FSSAI. It involves a police verification of the premises and the owner's background.

Homestay and Tourism — Neema & Jyoti's Requirements

Neema and Jyoti were surprised by how many permissions they needed for their homestay in Munsiyari. "We thought we just need to clean up the rooms and list on Airbnb," Jyoti said. "Turns out there's a whole checklist."

Required registrations:

1. Uttarakhand Tourism Department Registration

   • Apply at the District Tourism Office or online at uttarakhandtourism.gov.in
   • Homestays are classified by the state — different categories get different benefits
   • Fee: Nominal (₹500-1,000)
   • Benefits: Listed on the state tourism portal, eligible for tourism subsidies, official recognition

2. Municipal NOC (No Objection Certificate)

   • From the local Nagar Panchayat or Gram Panchayat
   • Confirms the property can be used for commercial/tourism purposes
   • Fee: ₹500-2,000

3. Fire Safety Certificate

   • From the Fire Department
   • Mandatory for any establishment with guest accommodation
   • Requires basic fire safety equipment: extinguishers, smoke detectors, emergency exits
   • Fee: ₹1,000-5,000 depending on size
   • Renewed annually

4. Police Registration

   • All hotels and homestays must register guests with the local police (Form C for foreign guests)
   • In Uttarakhand, this is now done digitally through the SAATHI portal

5. GST Registration

   • If turnover exceeds the threshold (₹20 lakh for Uttarakhand)
   • Hotel rooms below ₹7,500 per night: 12% GST
   • Hotel rooms ₹7,500 and above: 18% GST

6. Shop & Establishment License

   • Yes, even for a homestay

Agriculture — Rawat ji's Licenses

For selling fresh produce:

• APMC License / Mandi License — if selling through a mandi. In Uttarakhand, the market committee issues this. Fee: ₹200-500/year.
• Direct sale: Under recent reforms, farmers can sell directly to buyers, FPOs, or through e-NAM (electronic National Agriculture Market) without needing an APMC license.

For processed food (juice, pickles, jams):

• FSSAI License — mandatory (State or Central, depending on turnover)
• BIS Certification — for certain processed food categories
• Packaging and labeling compliance under FSS (Packaging and Labelling) Regulations

For organic certification:

• PGS (Participatory Guarantee System) — group certification, easier and cheaper for small farmers. Done through Regional Councils under pgsindia-ncof.gov.in. Free for small farmer groups.
• Third-party certification — more credible for export, costs ₹30,000-1 lakh per year through agencies like APEDA-recognized certifiers
• Jaivik Kheti Portal — jaivikkheti.in — for selling organic produce directly

Rawat ji is part of a farmer producer organization (FPO) of 35 apple growers in Ranikhet. The FPO got PGS organic certification as a group — each farmer's cost was under ₹1,000. They now sell their apples as "PGS Organic" and get 20-30% premium over regular apples.

Manufacturing — Factory License and Pollution Control

If you set up a manufacturing unit — even a small one:

1. Factory License — under the Factories Act, 1948. Required if you employ 10+ workers (with power) or 20+ workers (without power).

   • Apply at the State Labour Department
   • Fee: Based on number of workers (₹500-5,000)
   • Renewed annually

2. Pollution Control NOC — from the Uttarakhand Pollution Control Board (UKPCB)

   • Consent to Establish (CTE) — before setting up the unit
   • Consent to Operate (CTO) — after setup, before starting production
   • Fee: ₹5,000-25,000 depending on category (green/orange/red)
   • Renewed every 5 years (green) or annually (red/orange)
   • Apply at ueppcb.uk.gov.in

3. BIS Certification — for products covered under mandatory BIS standards (electrical goods, cement, steel, certain food items, etc.)

4. Weights and Measures / Legal Metrology — if you sell packaged goods, you need to comply with Legal Metrology (Packaged Commodities) Rules and declare MRP, net weight, manufacturer details, etc.

Technology — Priya's Startup Registration

Priya registered her agri-tech startup under the Startup India initiative. "The DPIIT recognition was the single most useful thing I did in year one," she says. "It gave me a tax holiday, self-certification for labour laws, and most importantly — credibility when talking to investors."

Startup India / DPIIT Recognition:

Eligibility:

• Entity must be incorporated as a Pvt Ltd company, LLP, or Partnership firm
• Age of the entity: less than 10 years from date of incorporation
• Turnover: not exceeded ₹100 crore in any financial year
• Working towards innovation, development, or improvement of products/processes/services

How to apply:

1. Go to startupindia.gov.in
2. Register and create an account
3. Apply for DPIIT recognition
4. Upload: Certificate of Incorporation, brief description of business, and supporting documents
5. Recognition is usually granted in 2-5 working days

Benefits of DPIIT Recognition:

• Tax holiday: Exemption from income tax for 3 consecutive years out of the first 10 years (Section 80-IAC)
• Angel Tax exemption — investments from angel investors not treated as income
• Self-certification for 6 labour laws and 3 environmental laws
• Fast-track patent application (80% rebate on patent filing fee)
• Easy winding up — company can be wound up in 90 days vs the normal lengthy process
• Access to government tenders without prior experience requirement
• Access to Fund of Funds for Startups (₹10,000 crore corpus)

Intellectual Property: Protecting What You've Built

Trademark — Protecting Your Brand Name

Ankita spent two years building the "Pahadi Zaika" brand. Then she discovered someone in Lucknow was selling cheap pickle under the exact same name. On Amazon. With a similar logo. She was furious — but without a registered trademark, there was very little she could do quickly. The legal fight took 8 months. If she had registered the trademark early, she could have sent a cease-and-desist letter backed by law.

What a trademark protects: Your brand name, logo, tagline, or any distinctive mark that identifies your business.

Why it matters:

• Legal monopoly over your brand name in your category
• Can file police complaint against counterfeiters
• "TM" becomes the powerful "R in circle" symbol
• Asset value — a registered trademark can be sold, licensed, or franchised

How to register a trademark:

1. Search first — go to ipindia.gov.in and use the trademark search tool to check if your desired name is already taken in your class of goods/services
2. Choose your class — there are 45 classes (e.g., Class 29 for packaged food, Class 30 for spices, Class 43 for restaurants/hotels). You register per class.
3. File application at ipindiaonline.gov.in
   • Government fee: ₹4,500 per class (₹9,000 for large entities)
   • For MSMEs/Startups with Udyam/DPIIT recognition: ₹4,500
4. Examination — trademark examiner reviews within 1-3 months
5. Publication in Trademark Journal — if no objection, your mark is published. Anyone can oppose it for 4 months.
6. Registration — if no opposition, registration certificate is issued
7. Total timeline: 8-12 months (if no opposition)
8. Validity: 10 years, renewable indefinitely

Cost breakdown:

• Government fee: ₹4,500 per class
• Agent/lawyer fee: ₹2,000-5,000 (optional, but recommended)
• Total: ₹6,500-10,000 per class

Copyright

What it protects: Original literary, artistic, musical, and dramatic works. Also software code, databases, and creative content.

Relevant for: Ankita's product photography, recipe booklets, website content. Priya's software code. Any written content, designs, or creative work.

Key point: Copyright exists automatically upon creation. You don't need to register it. But registration helps in court — it's prima facie evidence of ownership.

Registration: File at copyright.gov.in. Fee: ₹500-5,000 depending on the type of work. Takes 2-4 months.

Patent

What it protects: New inventions — a product, process, or method that is novel, non-obvious, and useful.

Relevant for: Priya's unique algorithm for matching farmers with buyers. A new food processing technique. A novel agricultural tool.

Cost: ₹1,600 for individuals/startups (with rebate), ₹4,000 otherwise. Plus patent attorney fees (₹20,000-50,000+). Process takes 2-4 years.

Practical advice: Most small businesses don't need patents. Trademarks are far more relevant. Focus on trademark first.

Contracts and Agreements

A handshake is not a contract. Well, technically it can be — but try enforcing it in court. Every important business relationship should be documented in writing.

Partnership Deed

We covered the contents above. Get it drafted by a lawyer, registered with the Registrar of Firms, and keep copies with all partners. Cost: ₹5,000-15,000 including stamp duty and lawyer fees.

Rental / Lease Agreement

Bhandari uncle's shop in Haldwani has been on rent for 22 years. For the first 15 years, he operated on a verbal agreement with the landlord. "Never again," he says. "When the old landlord died, his son claimed the rent was ₹5,000 more than what I was paying. I had no proof. It took months to sort out."

What it should include:

• Names and details of landlord and tenant
• Property description and address
• Monthly rent and security deposit
• Rent escalation clause (usually 5-10% per year)
• Duration of agreement
• Lock-in period
• Maintenance responsibilities
• Termination and notice period
• What happens to fixtures and improvements when you leave

Registration: Any lease for more than 11 months must be registered with the Sub-Registrar. Stamp duty varies by state (in Uttarakhand: 2-5% of annual rent). Unregistered leases beyond 11 months are not admissible in court.

Cost: ₹2,000-5,000 for stamp duty + ₹1,000-2,000 for drafting.

Employment Contract / Offer Letter

If you hire anyone — even one employee — put it in writing:

• Job title and responsibilities
• Salary, payment schedule, and components (basic, HRA, etc.)
• Working hours and leave policy
• Notice period for both sides
• Confidentiality clause (if relevant)
• Termination conditions

Vendor / Supplier Agreement

Rawat ji sends his apples to 3 different traders in Delhi. With two of them, it's all verbal — "I'll send, you sell, you pay me after." With the third, he has a written agreement specifying: quantity, quality standards, payment timeline (within 14 days of delivery), penalty for late payment, and who bears the loss if apples are damaged in transit. Guess which trader pays on time?

Every supplier agreement should include:

• What's being supplied, in what quantity, at what price
• Payment terms (advance, on delivery, credit period)
• Quality standards and rejection criteria
• Delivery timeline and penalties for delay
• Dispute resolution mechanism

Franchise Agreement

Vikram's franchise agreement with the national food chain is 47 pages long. "I had a lawyer go through every line," he says. "Good thing I did. There was a clause saying they could terminate the franchise with 30 days notice for any reason. My lawyer got that changed to 90 days with specific grounds. That one change could save my entire ₹18 lakh investment someday."

Key clauses to watch in any franchise agreement:

• Franchise fee and ongoing royalty percentage
• Territory exclusivity — can they open another franchise nearby?
• Term and renewal conditions
• Training and support obligations
• Exit conditions — what happens when you want to leave?
• Non-compete clause — can you open a similar business after leaving?
• Renovation and upgrade requirements (and who pays)

Labour Law Basics

If you have employees, you have obligations. Here are the key ones:

EPF (Employees' Provident Fund)

• Mandatory if: You have 20 or more employees
• Voluntary: You can opt in even with fewer employees
• Contribution: 12% of basic salary from the employer + 12% from the employee
• Register at: epfindia.gov.in
• Monthly filing: ECR (Electronic Challan cum Return) by 15th of every month

ESI (Employees' State Insurance)

• Mandatory if: You have 10+ employees AND any employee earning up to ₹21,000/month
• Contribution: 3.25% from employer + 0.75% from employee
• Register at: esic.gov.in
• Benefit: Employees get medical care, sickness benefits, maternity benefits

Minimum Wages

• Every state notifies minimum wages for different categories of employment
• In Uttarakhand, minimum wages are updated periodically by the Labour Department
• Currently (2024-25): ₹10,000-12,000/month for unskilled workers, ₹12,000-15,000 for semi-skilled, higher for skilled
• Non-compliance penalty: Fine up to ₹50,000 and/or imprisonment

Shops & Establishments Compliance

Once registered, you must comply with:

• Working hours limits (typically 9 hours/day, 48 hours/week)
• Weekly holiday (at least 1 day)
• Overtime rates (usually double the normal rate)
• Leave policy (annual leave, sick leave, casual leave as per state rules)
• Record-keeping (attendance register, wage register)
• Display the registration certificate prominently in the shop

Insurance for Your Business

Most small business owners insure their life and health but completely ignore their business. A single fire, flood, or lawsuit can wipe out years of hard work.

Fire Insurance

• Covers damage to your premises, stock, furniture, and equipment due to fire
• Who needs it: Everyone with physical premises. Bhandari uncle with ₹15-20 lakh of stock? Absolutely.
• Cost: 0.05-0.15% of the insured value per year. For ₹20 lakh coverage, that's ₹1,000-3,000/year
• Add-ons: Earthquake, flood, riot, terrorism coverage (especially relevant in Uttarakhand for earthquake risk)

Stock / Inventory Insurance

• Covers your inventory against theft, damage, or natural disasters
• Critical for businesses with high inventory value
• Can be bundled with fire insurance as part of a Standard Fire and Special Perils (SFSP) policy

Liability Insurance

• Public liability: Covers claims if a customer is injured on your premises (a guest slips at Neema's homestay)
• Product liability: Covers claims if your product causes harm (a customer has an allergic reaction to Ankita's product)
• Professional liability: Covers claims of professional negligence
• Cost: ₹5,000-15,000/year for small businesses

Keyman Insurance

• Life insurance on a key person in the business — if that person dies, the business gets the payout to survive the disruption
• Relevant for businesses that are highly dependent on one person (most small businesses are)
• The premium is a business expense (tax deductible)

Real cost of NOT having insurance: In 2023, a hardware shop in Haldwani lost ₹8 lakh of stock in a fire. No insurance. The owner had been paying ₹1,500/year for fire insurance for 10 years, then stopped to "save money." Total saved: ₹1,500 x 3 years = ₹4,500. Total lost: ₹8 lakh. Do the math.

Common Legal Mistakes (and How to Avoid Them)

Here are the mistakes our characters have seen — or made themselves:

1. Not registering at all "Chalta hai, chota business hai" is the most dangerous attitude. Even a ₹5,000/month business needs basic registrations. The cost of a notice or penalty is always more than the cost of compliance.

2. Operating on expired licenses Ankita's FSSAI disaster. Set calendar reminders 60 days before expiry. Keep a compliance calendar (we'll give you a template).

3. No written partnership agreement "Hum dost hain, trust hai." Until there's a disagreement about money. Even family partnerships need a written deed.

4. Ignoring GST registration when selling online If you sell on Amazon, Flipkart, Meesho, or your own website to customers across India, GST registration is mandatory regardless of turnover. Many online sellers get caught years later with back-tax demands.

5. Not separating personal and business finances If your business is a proprietorship and you mix personal and business money in the same account, it becomes a nightmare during tax filing or a legal dispute. Open a separate current account for the business.

6. Using someone else's brand name "That name sounds nice, let me use it." Check the trademark registry first. A cease-and-desist letter from a big brand's lawyer can cost you lakhs.

7. Not reading contracts before signing Vikram read his franchise agreement line by line. Many people don't. A bad contract clause can trap you for years.

8. Ignoring annual compliance for companies/LLPs MCA charges penalties for late filing. Directors can be disqualified for non-compliance. Companies can be struck off the register. ₹100-200 per day penalty adds up fast.

9. Not maintaining proper records Keep every receipt, every invoice, every contract, every communication. The law cares about documentation, not verbal promises.

10. Waiting for trouble to hire a lawyer By the time you need a lawyer urgently, the problem is already expensive. Get legal advice during setup — it's an investment, not an expense.

Compliance Calendar: What's Due When

Priya's tip: "I created a Google Sheet with every compliance deadline. Each row has the task, due date, who's responsible (me or my CA), and the status. Every Sunday, I check what's coming up in the next 30 days. It takes 5 minutes. It's saved me from multiple penalties."

When to Hire a CA vs a Lawyer

This confuses a lot of people. Here's a simple guide:

Hire a CA (Chartered Accountant) for:

• Business registration (GST, PAN, Udyam)
• Tax filing (income tax, GST returns)
• Company incorporation and annual filings with MCA
• Bookkeeping and accounting
• Tax planning and optimization
• Financial audits
• Responding to tax notices

Hire a Lawyer for:

• Drafting partnership deeds and MOA/AOA
• Reviewing franchise agreements and other contracts
• Trademark and patent filing
• Property lease/rental agreements
• Labour law disputes
• Any legal notice you receive
• Court matters and litigation
• Regulatory compliance issues

Hire a Company Secretary (CS) for:

• Company law compliance (board meetings, minutes, statutory filings)
• Annual returns for companies
• Changes in directors, registered office, capital structure
• FEMA compliance (if dealing with foreign investment)

Cost guide:

Bhandari uncle's lesson: "For 15 years, I used the same CA just because he was nearby and cheap. He filed my returns but never told me about Udyam registration, never mentioned I could save tax with the presumptive scheme, never reviewed my insurance. When I switched to a young CA who actually explains things, my tax went down by ₹40,000 in the first year. A good CA isn't a cost — it's a profit center."

Action Items: Your Legal Checklist

Before you move to the next chapter, check where you stand:

• Decided your business structure (proprietorship, partnership, LLP, Pvt Ltd?)
• Got PAN (personal for proprietorship, entity PAN for others)
• Registered for GST (if applicable)
• Completed Udyam Registration (free — no reason not to)
• Got Shop & Establishment license
• Got Trade License from municipality
• Applied for sector-specific licenses (FSSAI, tourism, factory, etc.)
• Filed trademark application for your brand name
• Drafted key contracts (partnership deed, rental agreement, supplier agreements)
• Set up a compliance calendar with all renewal dates
• Hired a CA (or at least identified one for when you need them)
• Reviewed your insurance needs (fire, stock, liability)

In the next chapter, we talk about something every business owner thinks about but rarely does well: pricing. How does Pushpa didi decide that chai should be ₹20 and not ₹15 or ₹25? How does Ankita price her pahadi chutney for Instagram customers who compare everything with Amazon? How does Vikram make sure his franchise margins work after paying royalty? Pricing isn't guessing — it's a science with a bit of art.