What Is A Compliance Procedures for New Businesses ?
A new Business, defined as a company in its initial ten years of incorporation, must adhere to various compliance requirements mandated by statutes and regulations. These encompass a range of obligations, such as regular tax filings and returns, among others. These compliance procedures can be classified into two categories:
- registrar-related compliance
- non-registrar compliance.
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How Y/our Lawyer helps in understanding startup compliances ?
Our consultant will discuss the issue over a 24X7 helpline .
Step 1
Our consultant will discuss the issue over a 24X7 helpline .
Step 1
A detailed analysis of your case will be done by an experienced lawyer.
Step 2
You will be able to track your case with a personal account
Step 3
Overview
Compliance procedures for new businesses are a crucial aspect of starting and operating a company. These procedures ensure that businesses adhere to applicable laws, regulations, and industry standards, promoting ethical practices, protecting consumers, and minimizing legal risks.
compliance procedures may vary depending on the nature of your business, industry, and jurisdiction. It is highly recommended to seek professional advice from attorneys, accountants, or compliance specialists to ensure you meet all legal requirements and mitigate risks associated with non-compliance.
Government's Eligibility Guidelines for Start-Up Recognition
The start-up entity must be registered as a private limited company, partnership firm, or limited liability partnership (LLP). Its turnover should not exceed Rs. 100 crores in any of the preceding financial years. A start-up status is applicable for the first ten years following its incorporation. Additionally, it must obtain certification from the dedicated Inter-Ministerial Board responsible for this purpose.
The start-up should primarily focus on enhancing or innovating existing products, services, and processes, while demonstrating the potential to generate employment opportunities and economic growth. However, it is important to note that a company formed through the division or reconstruction of an existing company does not qualify for the “start-up” designation.
Essential Legal Considerations and Regulations for Entrepreneurs
(I) SELECTING THE APPROPRIATE BUSINESS ENTITY STRUCTURE.
To commence any business, the initial action is to ascertain the appropriate legal structure from options such as sole proprietorship, private limited company, public limited company, partnership, or limited liability partnership (LLP).
(II)COMPANY LAW-DRIVEN COMPLIANCES MEASURES
In order to run a business, it is imperative to obtain a variety of approvals from different authorities in the form of permits and licenses, as the absence of these necessary documents can result in detrimental consequences such as unfavorable judgments, multiple penalties, and fines imposed by the respective authorities.
According to the Companies Act, 2013, all start-ups that register as private limited companies must adhere to the following compliances:
A) ANNUAL GENERAL MEETING (AGM): The AGM involves approving financial accounts, declaring dividends, appointing auditors, and discussing special business agendas.
B) BOARD OF DIRECTORS MEETINGS: Within 30 days of incorporation, the Board of Directors should hold their first meeting. Subsequently, a minimum of two meetings per half calendar year with a 90-day interval is required.
C) AUDITOR APPOINTMENT: The first Statutory Auditor is appointed in the initial board meeting within 30 days of incorporation. Successive auditors are appointed in the AGM for a five-year period.
D) ADDITIONAL REQUIREMENTS: Filing e-Form MGT-7 Annual Return data to ROC based on the company’s accuracy statement.
III) TAXATION COMPLIANCES: Compliance with indirect (Income Tax) and direct (Sales Tax) taxes such as GST, Excise duty, and Customs duty is necessary based on the nature and operations of the business.
IV) COMMERCIAL LICENSING: Various permits and licenses are essential for operating a business, ensuring compliance with authorities to avoid penalties, fines, and unfavorable judgments. The required legal documents differ based on business nature, industry, and company size.
V) INTELLECTUAL PROPERTY RIGHTS (IPR) COMPLIANCES: Start-ups focusing on technology-driven innovation and commercialization should assess and prioritize relevant IP Rights. Timely registration, non-disclosure agreements, trade secret protection, and preventive measures are crucial. The ‘Scheme for Start-ups Intellectual Property Protection’ (SIPP) under the Start-up India initiative can be utilized.
VI) LABOR LAW COMPLIANCES: Regardless of size, businesses must comply with labor regulations, including minimum wages, PF payment, gratuity, maternity benefits, and protection against sexual harassment.
VII) CONTRACTUAL OBLIGATIONS: Ensuring compliance with work contracts, particularly with employees and freelancers, is essential for smooth operations. Non-Disclosure Agreements are crucial for protecting sensitive information.
Prioritizing compliances enhances data security, boosts client confidence, and increases the likelihood of positive recognition for businesses.