Introduction
India has more than 63 million informal Businesses— ranging from street vendors and kirana shops to gig workers and home-based craftspeople. These businesses are the lifeline of the Indian economy, making critical contributions to urban and rural employment and services.
But while most of these enterprises function outside the formal legal system, this constrains their access to capital, government assistance, and opportunities for growth. Informality also implies greater risk of closure in the event of crises such as pandemics, lack of legal protection, and limited scope for expanding or partnering.
In this blog, we will see 7 strong legal measures that can assist in elevating informal businesses and bringing them into India’s formal economy. Whether you are a street food stall owner or a small home business, it is important to know these legal measures in order to grow your enterprise.
Why Legalizing Your Informal Businesses Matters
Legalization is not only a ceremony — it’s your key to development, safeguarding, and trust. Here’s why becoming an official business is a good idea:
Access to government schemes and subsidies
- Most state and central government programs provide subsidies, rebates, and direct funding — but only for registered companies.
Quick funding and loans from banks
- Banks and NBFCs find lending to officially registered businesses with proper documents and business histories easier.
Increased trust with customers and suppliers
- A legal identity establishes customer trust and enables you to work with larger suppliers and online marketplaces.
Legal protection against penalties or shutdowns
- Submersion in labor, food, or tax laws shields you from unexpected inspections, penalties, and enforced shutdowns.
Legal compliance also enables you to scale, franchise, or sell online, giving your hustle a genuine business future.
Every informal businesses has the potential to grow with the right compliance
Step 1: Udyam Registration for MSMEs
If you’re a micro, small, or medium enterprise, Udyam Registration (earlier called Udyog Aadhaar) is your very first legal milestone. It’s a scheme by the Ministry of MSME, aimed to provide formal identity to small enterprises.
Whaee, fully online, and instant Udyam registration that generates an instant recognition certificate.
Step 2: Shop Act License – For Local Recognition
If your business operates from a fixed location — even a small stall or shop — you’ll need a Shop and Establishment License, issued by the Labour Department of your state.
Who Needs It:
- Kirana stores
- Beauticians or tailors
- Food vendors
- Service providers like mechanics or tuition classes
Why It’s Important:
- Establishes your local legitimacy
- Helps in opening a business bank account
- Required during inspections or while applying for other licenses
- Supports adherence to employee welfare norms and regulated working conditions.
Every state has a different portal and rules, and LEGAL DALAL can advise you depending on your locality and business size.
Step 3: FSSAI License – For Food Businesses
If you are in the food industry — no matter how small your venture is — the FSSAI license is necessary. Whether you are operating a home tiffin service, juice kiosk, bakery, or spice packaging facility, FSSAI makes your food safe and hygienic.
Types of FSSAI Licenses:
- Basic (for turnover less than ₹12 lakh)
- State (₹12 lakh to ₹20 crore)
- Central (more than ₹20 crore or inter-state business)
Benefits:
- Creates consumer trust with a prominent license number on packaging
- Compulsory for food aggregators such as Swiggy, Zomato, Amazon, etc.
- Saves you from hefty fines from unexpected FSSAI inspections
- Gains believability when promoting your brand or selling online
Step 4: GST Registration – For Tax Compliance
When your business expands, you might exceed the GST threshold level or wish to sell online, in which case GST registration is compulsory.
Thresholds:
- 20 lakh turnover limit for services (₹10 lakh in select states)
- Goods suppliers must register under GST after ₹40 lakh turnover (₹20 lakh in some regions)
Why It’s Helpful Even Below Threshold:
- Claim Input Tax Credit on purchases and services
- Needed by B2B buyers and e-commerce sites
- Makes pricing more clear to your customers
With GST, you can grow without worry of surprise notices or exclusion from large orders or online platforms.t You Need:
- Aadhaar number of owner
- PAN and GST (if you have them)
- Simple information regarding your business activities
Benefits:
- Access to collateral-free loans under the Credit Guarantee Scheme
- Priority sector lending by banks
- Protection from delayed payments by clients or buyers (under MSME Act)
- Priority in government tenders and schemes such as PMEGP and SFURTI
Step 5: Business Bank Account and PAN
Do not commingle your business and personal finances. A separate business bank account and PAN card facilitate transparent financial accounting, easy audits, and creation of credit history.
Documents Required:
- Proprietor/business PAN card
- Udyam or Shop Act certificate
- Address proof
Why It Matters:
- Separates business and personal money
- Facilitates easy loan applications, UPI installation, and payment gateways
- Facilitates filing of tax returns and auditing
Even freelancers, digital content creators, or gig workers can take advantage of a professional account setup.
Step 6: Trademark and Brand Protection
Your business name, product label, stall design, or even slogan reflects your unique brand — and it deserves protection. A trademark keeps your brand from being duplicated or misused.
What Can Be Trademarked:
- Logo or brand name
- Taglines or product names
- Packaging designs or colors
- Distinctive store or stall identity
Advantages:
- Exclusive rights to use throughout India
- Prevents brand theft or lookalikes
- Keeps your competition out of the game
- Adds brand value for future growth or franchising
- Increases credibility when approaching investors or platforms
Trademark registration is usually underappreciated but an important long-term asset.
Step 7: Compliance and Renewals
Legalization is not a process you do once and forget. Periodic compliance keeps your business valid and secure. Depending on the licenses you possess, make sure timely:
- Annual GST filings and returns
- Renewal of FSSAI license
- MSME update or re-registration
- Keeping employee records under the Shop Act
- Renewal of trademarks every 10 years
Pro tip: Delays in renewals may result in fines, suspension of licenses, or disqualification to take loans or schemes. With professionals like LEGAL DALAL, you receive timely reminders and full assistance.
How LEGAL DALAL Can Help
At LEGAL DALAL, we have made thousands of small and informal businesses legal and grow with confidence. Our professionals make everything simple — from Udyam and FSSAI to GST and trademark registrations.
Whether you’re unsure of what to apply in your case or don’t know where to start, we guide you through each step.
Why Choose Us:
- In-house team of 12–15 professionals
Under one roof, experienced legal experts and documentation specialists.
- 4500+ clients served across India
From tea stalls and boutiques to exporters and franchises — we’ve done it all.
- Transparent process and pricing
Clear pricing, hassle-free process, and genuine guidance — every step of the way.
We know the pain points of informal businesses and provide customized legal solutions at a price you can afford and fits your requirements.
Final Words: Embrace Growth Through Legalization
Your hustle matters. By taking these legal steps for informal businesses, you unlock the door to:
- Bank loans and financial backing
- Government schemes
- Expansion to online and global market
- A protected and dignified identity
Don’t let the “informal” tag limit your potential. The future belongs to those who are prepared — legally, financially, and structurally.
Take the first step with LEGAL DALAL — Your Growth. Our Mission
