Compliance For Startups – A Mandatory Choice

‘Startups: Laying your own road to your destination’.

The Start-up Rush

Recent times have seen that the craze for startups is on the rise. The industry is booming and forces many others to jump on the bandwagon. Startups really have a tough time deciding what their products are, who their customers are, and how to make money. Nevertheless, it doesn’t fail to pull the masses.

A report by NASSCOM states that India ranks third globally in the number of startups.
According to the Economic Survey 2015-16 report, we have more than 19,000 technology-enabled startups, led by consumer Internet and financial services startups.
Close to 100 deals with startups are signed every month and total funding for Indian venture capital-backed companies amounts to Rs 82,500 crore.

So what’s pushing people towards entrepreneurship? Maybe the perks of:

• Bringing ideas to life
• Financial independence
• Gaining personal fulfilment
• Creative freedom
• Creating a legacy and impacting lives

What Next?

Building your dream right from scratch is an art in itself. It involves much toss and turn at night, spending long hours planning your goals, hiring the right team, and lots more. Start-ups, for whom every step is a big milestone, are not less bothered about compliance. Indeed, they have to perform each compliance activity with a higher degree of caution and severe effort. Learn about all the compliance activities for your start-up and steer clear of any confusion.

Legal Compliance For Startups

• Spend time to decide which form of business ownership will suit you. It consists of sole proprietorships, partnerships, Private Ltd., Public Ltd., LLP’s, and co-operatives.
• Pre-incorporation formalities include obtaining a Director’s Identification Number (DIN) and Digital Signature Certificates (DSC) for the proposed authority of the company.
• File an online application for the approval of the company’s name by the RoC (Registrar of Companies).
• After the certificate of incorporation has been issued by the RoC, file an application to obtain a permanent account number (PAN) and tax deduction account number (TAN) in the company’s name.
• Other legal compliance activities include conducting annual general meetings every year, maintaining all the secretarial records at the registered office of the company, and maintaining statutory registers, minutes books, etc. the company in compliance with the Companies Act.

Regulatory Compliance For Startups

• Employees are obliged to maintain sensitive company data in a confidential manner. It is important that a written confidentiality agreement between the two parties at the beginning of the employment relationship is signed.
• Ensure that the human resources practices and procedures are in compliance.
• Employee policies such as overtime, ethical code of conduct, vacations, sick leave, benefits, workplace harassment, etc. fall under regulatory compliance.
• Vendor compliance: monitor if all your service/technology providers strictly follow the compliance laws.
• Ability to identify non-compliance and perform corrective and preventive actions.
• Issue your share certificates with the proper common seal to the members of the company, and the same should be properly stamped.
• Appoint your auditor in the first board meeting through form ADT 1.

Tax Compliance For Startups

• Estimate the amount of advance tax to be paid by your company.
• All tax withholdings have to be deposited with the government every month.
• For salary payments to the employees, an annual certificate Form 16 has to be issued.
• Issuance of a withholding tax certificate showing the details of tax withheld and deposited on behalf of the payees
• File the annual corporate tax returns by September 30* listing details of profit or loss to the company
• If you provide taxable services, obtain a service tax number and file service tax returns on a half-yearly basis.
• Registration under Professional Tax Legislation is a state-specific requirement and has to be obtained for certain professional services.
• If you operate in multiple states and also have local sales, don’t forget to obtain the VAT and CST number from the State Commercial Tax Officer.

Statutory Compliance For Startups

• If your company size exceeds 20 employees, then you have to register under the Employees’ Provident Fund Organisation (EPFO) to pay the employee and employer’s contribution to the government.
• You have to register under the State Commercial Tax Department to pay professional tax, which is deducted from employees.
• Employee State Insurance (ESI), a mandatory insurance scheme, is applicable if your company size is 10 or more employees.
• All labour laws about employees, employers, and the trade union have to be strictly followed.

No Compliance, No Business

Better said than done. Stressing the importance of compliance has been persisting for ages. Can your business pull through without compliance? Definitely a big no. The compliance activity has to be in tandem with your business and its benefits include :

• Reduction in organisational risk
• Helps in realizing the startup’s vision
• A transparent and hence profitable business
• Complete, accurate and timely documentation of activities and expenses
• Enhances relationships with regulators and other stakeholders
• Attracts and retains talent in the organisation

As the founder of a startup, you will certainly be running around the clock. Neglecting compliance means pushing your business the wrong way on a slide. Let your startup climb the ladder of success with a steady compliance policy.

At Relativity, we provide end-to-end solutions for a better compliance quotient. We offer a host of compliance activities like statutory compliance, tax compliance, Q-ETDS compliance, and end-to-end management with 100% accuracy. We are fondly called as the ‘Compliance Experts’. Your startup is in safe hands when your compliance is with us.