Mandatory Compliances for Startups in India
There are different kinds of business structure, and each type has different compliance. However, if you're a start-up, then according to the experts' advice, you must opt for Private Limited Company Registration.
The foremost and pretty crucial thing after the incorporation of a business entity is to follow up with its compliances. Hence, before you register your company, you should know whether you would be able to comply with its compliances or not. But how would you figure out? For the same, you need to find out the compliances of the business entity you have chosen to register with. So, before moving forward it’s important to discuss the right type of business structure.
What will be a suitable Business Structure for Startups in India?
There are different kinds of business structure, and each type has different compliance. However, if you're a start-up, then according to the experts' advice, you must opt for Private Limited Company Registration. It is so because compliances of a private limited company are less and easy to follow as compared to other forms of business. Therefore, in this blog, we will talk about various compliances of the private limited company and will understand why start-ups should go with this business form. So let's get started without stretching the things any more.
What are the Mandatory Compliances for Startups under Companies Act 2013?
All the start-ups registering their business as a private limited company has to follow-up with the following compliances described below as per the provisions of Companies Act, 2013:
· Annual General Meeting (AGM)
There should be one AGM every year and there must be a maximum gap of 15 months between 2 AGMs. Approval of financial statements, declaration of dividends, the appointment of auditors, etc. are the principal objective for this meeting.
The annual general meeting needs to be held in the city where the registered office of the company is located.
· Board Meetings
The first board meeting of the Board of Directors should be held within 30 days of the incorporation of the company. There should be a minimum of two meetings one in each half calendar year. Plus, there should be a gap of at least 90 days between two meetings.
Apart from that, four board meetings are supposed to be held every financial year such that the gap between two consecutive board meetings isn’t more than 120 days.
· Appointment of Auditor (E-Form ADT-1)
The first Statutory Auditor is supposed to be appointed within 30 days of the company’s incorporation in the first board meeting. However, the subsequent auditors could be appointed for 5 years in AGM.
Being an applicant, you need to file form ADT-1 for a 5-year appointment. After that, shareholder endorses the auditor every year in AGM, but there’s no need to file ADT-1.
· File e-Form MGT-7
MGT-7 is an electronic form issued by the Ministry of Corporate Affairs (MCA) to all the companies to fill their annual return details. The Registrar of Companies (ROC) maintains this form via electronic mode and on the basis of the statement of accuracy provided by the company. Every company registered as the private limited company must file the form MGT-7 every year.
· File e-Form AOC-4
Form AOC-4 is meant for filing the financial statements for each financial year with the Registrar of Companies. Generally, the main means of communication between the shareholders and the Board of Directors is through the financial statements. Hence, every company registered under the Companies Act, 2013 is supposed to file the form AOC-4.
· Filing Directors’ Report
As per the provisions of the Companies Act, 2013 every company needs to prepare a board report in which details of the state of the company, operations during the year, dividend declaration, net profit, and its compliance with a set of financial, accounting, and corporate social responsibility standards contain. In a nutshell, Directors’ Report should be filed covering all the details required for Small Company under Section 134.
The report must be signed by the chairperson authorized by the board, where he/she isn’t so authorized by at least 2 Directors.
· Form MBP-1
The form MBP-1 needs to be filed by every director of the company in the first meeting of the Board of Director in every financial year where they would disclose their interest in other entities.
Fresh MBP-1 must be filed, whenever there’s a change in the director’s interest from the earlier given MBP-1.
· Form DIR-8
Every director of the organization in every financial year must file form DIR-8 with the Company Disclosure of non-disqualification.
· Statutory registers and Books of Accounts
There are certain registers that are mandatory to maintain. They are:
1. Minutes book;
- Board meeting minutes book, and
- General meeting minutes book that could be EGM, AGM, Creditors Meetings, Debenture holders Meetings, and Postal Ballot.
2. Statutory Registers;
3. Books of Accounts or Financial Statements (as per Section 44aa)
4. Register of Directors Attendance at Committee or Board meetings.
· Circulation of Financial Statement and other relevant docs
The company will send the Financial Statement, Director’s Report, and Auditors’ report to the members of the company at least 21 clear days before the Annual General Meeting.
Essential GST Compliances for Startup
All the taxpayers registered under Goods and Services Tax (GST) laws have to file GST returns monthly and quarterly except those following in the below-described categories:
a) Composition dealer;
b) Input Service Distributor (ISD);
c) Exporters exempted from tax;
d) Small taxpayers whose turnover is up to Rs. 5 crores in the last financial year;
e) Non-Resident Registered person (NRI);
f) The person responsible for deducting or collecting tax under CGST Act.
Vital TDS compliances for Startup
TDS means the tax deducted at the source. As per the provisions of the Income Tax Act in India, filing TDS returns is obligatory. Additionally, the assessee who has deducted the tax at the source must file the returns quarterly by producing TDS along with details such as PAN, TAN, payment type, deduction amount, etc.
TDS returns are filed on a quarterly basis. The due dates of the same are given below:
What are the additional compliances?
Apart from the above-described compliances, the newly-registered businesses are also supposed to comply with the compliances as follow:
- Assessment of advance tax liability and payment of the advance tax should be done periodically.
- Filing of Income Tax Returns (ITR) where the payable tax would be at a flat rate of 30% plus Education Cess.
- Filing of Tax Audit Report.
- Regulatory Assessment of business under different acts of law that could be Environment and Protection Act, Competition Act, Factory Act, Money Laundering Act, etc.
Undoubtedly, there are numerous compliances that you need to follow while operating a business. But you are supposed to follow all of them strictly or you would have to pay hefty penalties in case of non-compliance.
However, the compliance requirement varies from a case to case basis depending upon nature of the business, product or service provided, the volume of turnover, and more.
If you face any trouble handling the compliances of your company, then you can contact Enterslice. Our team will handle all your compliance issues and will execute at the required time. Assign us the work and forget everything. We will take the utmost care of everything.
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