What is the importance of compliance for startups?

Starting a business is relatively an easy task than keeping it successful over a long time. And it is because of the sheer will and creativity of an entrepreneur that a startup becomes successful. But as the business journey progresses, an entrepreneur has to keep up with the legal side of the business as well. Here, business compliance’s come into play. With the advent of the internet and several government initiatives promoting business, there has been a massive rise in the number of new businesses. Because of this, the Indian compliance landscape has grown over the years. The legal system involving businesses has become interoperable and transparent.

What are Compliance Services?

Compliance services refer to the rules set up by the government a company has to keep up with to run smoothly. And adherence to these rules and regulations is crucial for the ethical and successful running of a startup. Compliance establishes a standard for businesses to live up to. Additionally, they provide a framework of the dos and don’ts of an organization and its employees. Startups, as they grow, need a compliance mechanism to deal with the legal side of the business. Failing to keep up with these rules and regulations leads to legal liabilities like penalties and may also bring closure to business in extreme cases.

Importance of Compliance for startups

Often overlooked by the lack of business knowledge, compliance lets startups function smoothly in the market. So, it is essential for startups to be compliant with the rules, laws, and regulations set forth by the government. Several government programs like ‘Make in India’ and ‘Startup India’ have encouraged a large-scale increase in the establishment of new businesses, also providing comparatively simplified compliance services for startups.

For Instance: After being registered with the Ministry of Labour and Employment, startups are allowed to self-certify their compliance with various labor laws and are also exempt from inspection under the same.

Compliance services help in building a positive brand image. But having non-compliance-related issues and legal problems, business reputation gets affected, resulting in a loss of trust among the general public and hence profits.
So, it is important for startups to be compliant as following the social responsibility helps maintain a positive image while building consumer loyalty.

Few Important Compliance for Indian Startups:

• Compliance under Companies Act, 2013
• GST Compliance
• Compliance under Income Tax Act, 1961
• Compliance under Labour Law

Compliance under Companies Act, 2013

Companies incorporated in India must ensure compliance with the Companies Act,2013. It regulates the appointment of directors, their qualifications, remuneration and retirement, the appointment of auditors, other basic requirements like having PAN and TAN, bank account, etc., after the incorporation.
So, businesses are expected to comply with the Companies Act,2013 to avoid the penalty that may be incurred in case of non-compliance.

GST Compliance

It is a turnover based compliance under the CGST Act, 2017. As per the act, any business entity having a turnover exceeding Rs 40 lakh in goods and Rs 20 lakh in services in the previous financial year needs to get registered in the GST regime.

Registered dealers need to be compliant with certain rules. Taxpayers failing to fulfil these GST compliance requirements will be considered an offender under the act and liable for a penalty.

Compliance under Income Tax Act, 1961

Under this act, every business is liable for filing income tax returns and other procedural liabilities. Penalties are levied for various defaults committed by the taxpayer, some of them being mandatory, and a few are at the discretion of the tax authorities.

Compliance under Labour Laws
Labour Laws compliance is primarily focused on safeguarding the protection of the rights of employees and regulating companies, workers as well as trade unions.

Many acts are included in Compliance with labour laws. A few of them are:
• Trade Unions Act, 1926
• Industrial Employment Standing Order Act, 1946
• Factories Act, 1948
• Minimum Wages Act, 1948
• Equal Remuneration Act, 1976

Annual Compliance For Private Limited Company In India

Companies registered as Private limited firms have to comply with several compliances on an annual basis. Being non-compliant with these rules leads to penalties and may also bring closure to business in extreme cases.
Here is the list of a few mandatory annual compliances For Private Limited Company

• Appointment of Auditor (E-form ADT-1)
• Board Meeting
• Annual General Meeting (AGM)
• E- Forms Filing Requirements
• Directors’ Report
• Statutory registers and books of accounts

To read in detail, click Annual Compliance For Private Limited Company In India.

If you are a startup confused about your legal side and need help in fulfilling compliance requirements, you can either establish an in-house legal department or can stay compliant by using TheStartupLab’s compliance services.
We have a team of experts that can help your stay compliant and provide you with hassle-free professional guidance to complete the compliance filing process.