The earliest form of running a business is sole proprietorship and I think still it is the most common type of business venture. When such a sole proprietor hires people on regular basis to run the business, there arises a substantial employer-employee relationship with mutual rights and obligations called as the contract of employment and such hired people automatically become his employees and the hire or reward periodically paid to them for their services is called as salary or wages.
Sole proprietorship is a legally recognized form of business entity and as such, so long as people are employed, it is not exempted from the Labor Laws by virtue of its constitution. Besides, his sole proprietorship status can not empower him to convert the contract of service entered into with his employees as a contract for service. Only your Lawyer friend should explain his contention!
10th December 2018 From India, Salem
10th December 2018 From India, Kolkata
With all appreciation to the reply from Mr. Umakanthan, I would like to mention that the intention of your lawyer friend i to hire the persons as "consultant" and pay them "Professional Fees" with the intention to avoid any unforeseen liability in terms if employer -employee relationship like ESIC, and providing you ease of operating for easy and smmth termination of their engagement, in case required.
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11th December 2018 From India, Mumbai