Business law is an essential factor that regulates the interaction of people and businesses in society. It has
been put in place to create discipline, order and fairness in the markets. It is often considered that the
difference between winning and losing in the business world often depends upon the ability to make good
choices from a legal perspective.
 
Laws affect almost every function at every stage of a business, which includes the following: 
● Setting up a business from scratch 
● Obtaining investments 
● Developing products and services 
● Hiring employees 
● Entering into contracts for procurements 
● Providing warranties 
 
At any stage, compliance with laws is imperative for the success and growth of a company. 

 
Indian legislative bodies have passed several statutes or enactments over the past years that currently guide 
the processes that enable trade in the country. 
 
Major laws regarding this are as follows: 
● Indian Contract Act, 1972 
○ Forms the basis for all commercial transactions 
○ Defines which contracts are legal and enforceable and which ones are not 
● Laws regarding the setting up of businesses under different legal structures 
○ Companies Act, 1956 and 2013 
○ Partnership Act, 1932 
○ Limited Liability Partnership Act, 2008 
● Securities and Exchange Board of India Act, 1992 
○ Regulates the public trading of shares 
● Foreign Exchange Management Act, 1999 
○ Governs foreign currency exchange 
● Income Tax Act, 1961 
○ Governs direct tax collection from businesses and individuals 
● Goods and Services Tax Acts, 2017 and 2018 
○ Governs indirect tax collection 
● Competition Act, 2002 and 2009 
○ Prevents unfair business practices in the market and promotes healthy competition in India 
● Consumer Protection Act, 1986 
○ Protects the interests of consumers in India 
● Laws for protecting intellectual property 
○ Copyright Act, 1957 
© Copyright 2020. UpGrad Education Pvt. Ltd. All rights reserved
 ○ Trade and Merchandise Marks Act, 1958 
○ Patents Act, 1970 
 
Following is a list of the several government bodies and agencies that are entrusted with the duty of enforcing 
these laws: 
● Judicial courts 
● Registrar of Companies 
● Central Board of Direct Taxes 
● Central Board of Indirect Taxes and Customs 
● Securities and Exchange Board of India 
● Competition Commission of India 
● Indian Patent Office 

 
There are several legal entities that can be set up in India and each has certain unique features. 
 
When deciding a legal structure for a new venture, following are the basic points to be considered: 
● Ease of doing business 
● An owner’s personal liability 
● Tax liabilities 
● Ease of raising funds 
● Future plans of the business 
 
In a ​sole proprietorship, ​the proprietor has full ownership of the business and can take decisions on their own. 
Proprietors also have ​unlimited liability​, i.e., they will be responsible for paying off all liabilities and 
recuperating the losses out of their own pocket. 
 
When multiple professionals can come together to create a ​general partnership, ​they will own the 
partnership together and share profits as per mutually agreed terms set forth in their partnership deed. This 
structure also poses unlimited liability to the partners. 
 
A ​limited company ​structure avoids the problem of unlimited liability. The shareholders are only liable for the 
amount they have invested in the company. 
 
A limited company can be private or public, depending upon whether it wants to raise funds from the general 
public by trading on the stock markets. 
 
Setting up a limited company requires complying with many more legal compliances as compared with the 
previous structures. 
 
Setting up and running a limited company is not always an attractive option for small- to medium-level 
businesses.  
 
Complying with legal requirements needs a lot of time, effort and money in terms of legal fees and additional 
employees, which is not possible for a new business. 

© Copyright 2020. UpGrad Education Pvt. Ltd. All rights reserved

To overcome this challenge, the government has established provisions for ​Limited Liability Partnerships 
(LLPs)​.​ ​An LLP is a new legal entity, which combines the flexibility of a partnership and the advantages of 
limited liability available to companies at a low compliance cost. 
 
 
 

 
Regardless of the legal structure of the business, every company has certain key roles that are held 
responsible for implementing the requirements of the law within the organisation: 
● Shareholders ​are the owners of a company. 
● Shareholders elect the ​Board of Directors​ from a set of inside employees of the company: 
○ Inside directors who are also on the management team ​(CXOs) ​are called ​Executive Directors​. 
○ The board will also have ​non-employee directors ​appointed by the shareholders to protect 
their interests in the company. 
○ Public limited companies are additionally mandated to have ​independent directors ​to 
represent the public shareholders. 
○ The Board of Directors elects a ​Chairman ​who acts as the face of the company. 
● The ​Management Team ​consists of the CXOs and the heads of business functions who are responsible 
for executing the day-to-day operations of the company and maximising the shareholders’ profits. 
● Another important position mandated in large companies is the role of a ​Company Secretary: 
○ A Company Secretary is responsible for maintaining and filing all required legal documentation 
and ensuring that the company’s activities are within the guidelines stipulated by law. 
 
 
 
 
 
 
 
 
 
 
 
 
 
Disclaimer: All content and material on the upGrad website is copyrighted, either belonging to upGrad or its bonafide 
contributors and is purely for the dissemination of education. You are permitted to access, print and download 
extracts from this site purely for your own education only and on the following basis: 

● You can download this document from the website for self-use only. 
● Any copy of this document, in part or full, saved to disk or to any other storage medium may only be used for 
subsequent, self-viewing purposes, or to print an individual extract or copy for non-commercial personal use 
only. 
● Any further dissemination, distribution, reproduction, copying of the content of the document herein or the 
uploading thereof on other websites, or use of the content for any other commercial/unauthorised purposes in 

© Copyright 2020. UpGrad Education Pvt. Ltd. All rights reserved

 any way which could infringe the intellectual property rights of upGrad or its contributors, is strictly 
prohibited.  
● No graphics, images or photographs from any accompanying text in this document will be used separately for 
unauthorised purposes.  
● No material in this document will be modified, adapted or altered in any way. 
● No part of this document or upGrad content may be reproduced or stored in any other website or included in 
any public or private electronic retrieval system or service without upGrad’s prior written permission. 
● Any right not expressly granted in these terms is reserved. 

© Copyright 2020. UpGrad Education Pvt. Ltd. All rights reserved