Start-up compliances in India

Startup overview

India's startup scene has been around for over 40 years and has played a big role in developing different industries and boosting the economy through various changes. Lately, India has become a key player on the global startup stage, with countless entrepreneurs launching new businesses in all sorts of fields. The Indian government has worked hard to create a friendly environment for startups with initiatives like Start-up India, which aims to cut down on red tape, provide tax breaks, and open up funding options.

Challenges in startup compliance 

Even with this lively and supportive atmosphere for startups in India, entrepreneurs still face serious challenges when it comes to navigating legal, financial, and regulatory rules. Not following these rules can lead to heavy fines, damage to reputation, or even shutting down the business.

What startup compliance involves

Startup compliance starts when the business is set up, and continues as it grows and seeks funding. 

Here’s a quick look at what compliance involves:

1. Picking the right legal structure, like a private or public limited company, limited liability partnerships (LLPs), one person companies (OPCs), or partnership firms. Each type of structure has its own rules and perks.
2. Obtaining company registration and necessary licenses like a permanent account number (PAN), goods and services tax (GST) registration, and other approvals based on the industry.
3. Ensuring compliance with tax laws. Startups must deal with various tax laws. Some important taxes include corporate tax, GST, income tax, and tax deducted at source (TDS).
4. Following labour laws for the following items: payroll, employee provident fund (EPF), employee state insurance (ESI), bonuses, and gratuity rules.
5. Protecting intellectual property, like trademarks, patents, and copyrights.
6. Meeting specific regulatory requirements – for example, Fintech startups must follow Reserve Bank of India guidelines, and healthcare startups must adhere to the Drugs and Cosmetics Act.
7. Keeping up with ongoing compliance requirements, such as filing annual returns, holding board meetings, maintaining legal books, and submitting financial statements to the authorities.

The role of compliance advisors

Chartered accountants and company secretaries play a vital role in helping startups succeed in India. From the beginning of the business and through ongoing growth stages, these professionals offer expertise in governance, legal compliance, tax laws, financial management, and investor relations. By helping startups stick to legal rules, they lower risks, build investor trust, and keep the business running smoothly.

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Ajit Kumar is a Law Graduate and a Fellow Member of ICSI. With over 16 years of experience he is currently heading the Group’s Transaction & Regulatory Advisory Services department. He has dealt with all kind of matters, such as Corporate Laws, Due Diligence, Merger/ Amalgamation/Takeover.