Is your startup compliant?

Is your startup compliant? Whether you are a giant corporation or a startup, to be successful, it is important to analyse if you are compliant and are following certain laid-down protocols. It's imperative to keep a close eye on the laws in the city or state you operate in, failing which you are likely to overlook compliance responsibilities and face damaging penalties and lawsuits that could severely impede the progress of your business entity. Many organizations show a great deal of promise. However, because they bypassed important compliance procedures they have had founders step down, executives replaced, and employees lost. A business entity that is compliant is automatically trustworthy to its clients and investors. All businesses, particularly startups, should follow certain compliance protocols. [caption id="attachment_418" align="alignnone" width="600"] Is your Startup Compliant?[/caption] This article will give you a lowdown on all compliances. 1) Choosing the right business entity: The first major challenge faced by any entrepreneur is choosing the right business vehicle for their venture. This choice will in the near and long term affect the startup's viability, visibility, sustainability, suitability, and profitability. Your long-term goals, vision, and objectives will decide whether the startup will be established as a private limited company, public limited company, partnership firm, or a limited liability partnership. Each of these categories has a different set of compliance procedures and laws. To avoid any backfiring in the form of legal hassles or otherwise, it is better to be aware of all these formalities right at the inception stage. 2) Statutory Compliances: The credibility of any business highly depends on its compliance with all the applicable laws. For a Company and LLP, the mandatory compliances with the Registrar of Companies (RoC) are the most essential of all. Some of the important provisions include appointment of Auditor, conducting board and shareholder’s meetings, filing statutory annual returns, and maintenance of statutory registers. These criteria should be met and will be verified by the investors.

• Appointment of Auditors The First Auditors of a Company should be appointed within one month of its incorporation and shall shall hold office till the conclusion of the first annual general meeting. Thereafter, an auditor shall be appointed who can hold office for a period of consecutive five years.
• Conducting board meetings: At least one meeting should be conducted in every three calendar months. Four such meetings should be held every calendar year. The Chairman of the said meeting signs the minutes of the meeting.
• Filing Financial Statements and Annual Returns: Private Limited Companies are required to file its Annual Accounts and Returns disclosing details of its shareholders, directors etc. to the Registrar of Companies. Such fillings are required to be made once in a year, usually before 30^th September.
• Maintaining Statutory Registers and Records: A Private Limited Company has to maintain various statutory registers and records as required by the Company law such as Register of shares, Register of Members, Register of Directors etc. Besides, Incorporation documents of the company, Resolutions of the meetings of the Board of Directors, Minutes of the Board Meetings and Annual General Meeting etc are also required to be preserved by the Company.

3) Audit Compliances: The purpose of a statutory audit is to determine whether an organization is providing a fair and accurate representation of its financial position by examining information such as bank balances, bookkeeping records and financial transactions. Compliances related to audit include appointment of the Statutory Auditors of the Company and finalizing annual accounts with the Auditors of the Company. 4) Payroll compliances: When you start an organization, it is obvious that you will have employees working for you. There will be employees, independent consultants and contractors as well. Such professional relationships are governed by various labour legislations. For instance, A business with an employee strength of over 20 needs to comply with ESI and PF regulations. 5) Taxation: A business has to pay taxes to the Central/State government or local bodies. Thus, every new entrepreneur should have the know-how of the aspects of taxation. Tax laws vary with sector and any recent changes should be within an entrepreneur's radar. Tax compliance measures vary with the kind of business and the nature of services. A company selling goods would need to comply with the state VAT laws. Similarly, businesses working as service providers need to obtain service tax registration, make service tax payments, and file service tax returns on time. The business should also comply with relevant income tax rules and regulations.   The Comparison chart will give you a clear distinction between the compliance requirements of all the three forms of business.

Factors of Comparison	Private Limited Company	One Person Company	Limited Liability Partnership	Partnership/ Proprietorship
Statutory Compliances	Mandatory	Mandatory	Compulsory	Not Applicable
Maintenance of Books of Accounts	Mandatory	Mandatory	Mandatory	Required for Income Tax
Annual General Meetings (AGM)	Mandatory	Not Applicable	Not Applicable	Not Applicable
Annual Tax Filings	Mandatory	Mandatory	Mandatory	Mandatory
Statutory Audit	Mandatory	Mandatory	If turnover > 40 lakhs or contribution > 25 lakhs	Not Applicable
Tax Audit	If turnover > 1 Crore	If turnover > 1 Crore	If turnover > 1 Crore	If turnover > 1 Crore
Taxation	Profits Taxed at 30%	Profits Taxed at 30%	Profits Taxed at 30%	Partnership – 30% Proprietorship – Individual Slab Rates

VenturEasy strongly believes that Compliance should be viewed as more than just a process. It should become a part of your startup culture! This article was first published in YourStory