Online business is getting popular with the advancement of new technologies and high-speed internet. The number of online businesses in India is increasing day by day. It is projected that, by 2025 there will be around 350 million online shoppers in India. This makes India one of the largest online market globally. However, every online business must follow the rules and regulations of the country.
Here are some of the major legal aspects an entrepreneur should consider before starting their online business in India.
1. Business Structure and Registration
The first step in initiating an online business is to choose a suitable business structure. Common structures include sole proprietorship, partnership, Limited Liability Partnership (LLP), and private limited company.
Once you’ve chosen the structure, you will need to register your business with the appropriate authorities. During registration, you need to submit various documents such as Memorandum of Association (MoA) and Articles of Association (AoA), etc.
2. GST Registration
Goods and Services Tax (GST) registration is mandatory for businesses with an annual turnover exceeding INR 40 lakhs (INR 20 lakhs for special category states). Even if your turnover is below this limit, getting registered under Goods and Services Tax can be beneficial as it allows you to claim input tax credits, which can increase the trustworthiness of your business.
To apply for GST, you should visit the GST portal where you have to enter various details such as the PAN of your company, address proof, bank account details, etc.
3. Importer Exporter Code (IEC)
If your business involves import or export activities it is mandatory to have an Importer Exporter Code (IEC) from the Directorate General of Foreign Trade (DGFT). The IEC is a ten-digit unique number that is required for customs purposes and other foreign trade transactions. To get IEC, you need to file an application online along with various documents such as PAN, bank account details, copy of your business registration certificate etc.
4. Data Protection and Privacy Laws
Online businesses deal with large amounts of individual user data. To protect the consumer’s privacy, the government has laid down various data protection and privacy laws. Every online enterprise operating in India is required to follow these laws. This means coming up with a strong privacy policy that clearly outlines how you collect, use, store or protect user data.
In India, the Information Technology (IT) Act, 2000 and the IT (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 govern data protection.
5. Terms and Conditions
To avoid future conflicts in your company’s operations, it is very important to have a well-defined terms and conditions agreement. This agreement covers various elements such as user responsibilities, payment terms, shipping and delivery policies, return and refund policies, limitations of liability, etc. Ensure that terms & conditions on your website are easily visible and make sure that users view them before they can carry out any transactions.
6. Intellectual Property Rights
It is really important to protect your Intellectual properties like logos, design, text etc. to prevent unauthorized access. Register your business name, logo, and other trademarks with the Trademark Registry to prevent others from using similar marks. This registration provides legal protection and allows you to take action against infringement.
Also, consider copyrighting original content, such as website text, images, and software code. You can also use patents to protect your intellectual properties like inventions, formulas etc. These registrations provide legal protection and allow you to take action against unauthorized access.
7. Compliance with Consumer Protection Laws
Consumer protection is a big part of running an online business. The Consumer Protection Act, 2019 defines the rights of consumers and the obligations of businesses. Make sure your business complies with these laws by providing accurate product descriptions, and transparency in pricing, warranties and guarantees.
8. Payment Gateway Integration
Payment gateways are used to process online payments to your site from credit cards, debit cards, net banking, etc. To integrate a payment gateway you need to enter into an agreement with a payment gateway provider.
The agreement will cover transaction fees, settlement periods and security measures. Make sure the payment gateway complies with the Payment Card Industry Data Security Standard (PCI DSS) to protect card sensitive information. Also, provide a smooth and secure checkout experience to build customer trust.
