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Startup Zone
Legal Compliances For Startups In India
Legal Compliances For Startups In India
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Legal Compliances For Startups In India. India has one of the world's third largest startup ecosystems, with the vast majority of startups emerging in the technology sector. Thriving start-ups are driven by passionate entrepreneurs who are committed to creating one-of-a-kind solutions that provide complete customer satisfaction. However, with the increasing complexity of technology and the multifaceted and global nature of transactions, it is critical for new and emerging businesses to have a solid legal foundation in order to survive. Before establishing a start-up, it is essential to have a thorough understanding of the legal requirements of a start-up as well as compliance with all applicable laws and regulations. The development of start-ups has increased significantly in recent years. Numerous start-up companies have emerged in the Indian corporate structure and are working hard to establish their brand on a global scale. Legal compliances and regulations are essential for the growth of any start-up business, and it is important to follow them tirelessly. Eligibility Criteria For Startups Though no comprehensive definition for start-ups has been provided under Indian laws, the Government of India (GoI) defines start-ups under its start-up schemes promoted by DPIIT (Department for Promotion of Industry and Internal Trade), Minister of Commerce and Industry as: A Startup is referred to an entity that meets all of the following criteria: If it is incorporated or registered under any of the following names: Private Limited Company registered under Companies Act, 2013. One Person Company as defined in the Companies Act, 2013. Partnership Firm registered under Partnership Act, 1932. Limited Liability Partnerships registered under the Limited Liability Partnership Act, 2008 As long as such an entity is not formed by splitting up or reconstructing an existing business. It has not reached the ten-year mark since incorporation/registration, as stated above. Its turnover has never exceeded INR 100 crore in any of its fiscal years. It meets any of the following criteria: Its goals are as follows: Product/process/service/process innovation creation of new products/processes/services Enhancement of current products/processes/services It is a scalable business model with the following advantages: Employment generation or Wealth creation Legal Factors and Compliances That Every Startup Should Know The primary goal of any new business is to maximize profits. While doing so, they frequently disregard mandatory legal requirements, which can have a negative impact on their business in the long run. Legal compliance is an important wheel that keeps a business's ongoing needs in check. The following are the documents and formalities that a startup must complete in order to become legally compliant: 1. Incorporation related compliance Each structure has its own set of rules and regulations that determine whether or not registration is required, how much tax a company must pay, and what kind of licenses are required. For example, sole proprietors are exempt from registration, whereas registration is optional for Partnership Firms but required for LLPs and Private Limited Companies. Companies in India are required to register under Indian law. A business organization can be registered as a legal entity under the following categories: a) The Companies Act of 2013 - for Private, Public, Non-Profit, and One-Person Companies . b) Indian Partnership Act, 1932 c) Limited Liability Partnership Act, 2008 Various companies also choose to register their businesses under various government schemes and laws in order to take advantage of the benefits and concessions provided by the laws. Companies may be registered under the MSME Act, the GST Act, or the Start-up India Scheme, depending on the nature of their business. 2. Obtaining business licenses Licenses are required for the operation of any business. Start-ups may be required to register their business under various licenses applicable under different statutes in India, depending on the nature and size of the business. The Shop and Establishment license, which is applicable on all premises where trade, business, or profession is carried out, is a common license that applies to many businesses. Other business licenses differ depending on the industry. Various environmental, food and safety, labour and employment laws, import-export laws, FDI Policy, FEMA, SEBI/RBI regulations in India all have an impact on license procurement. For example, an e-commerce company may require additional requirements such as VAT registration, Service Tax Registration, Professional Tax, and so on, whereas a restaurant may require licenses such as a Food Safety License, Certificate of Environmental Clearance, Prevention of Food Adulteration Act, Health Trade License, and so on, in addition to the aforementioned licenses. 3. Requirements for documentation Many new businesses do not pay much attention to formalizing the structure of contracts and basic incorporation documents. This can lead to a slew of legal issues if a dispute arises or when raising capital at any stage of a startup's development. The following are some basic documents that every startup should have: Drafting incorporation documents for registered companies under the Companies Act of 2013, such as the Shareholder's Agreement, Memorandum of Association, and Articles of Association, among others. Contracts such as Non-Disclosure Agreements (NDAs), Confidentiality Agreements (CAs), Memorandums of Understanding (MoUs), Letters of Intent (LoIs), and others. Work agreements, such as employment agreements, lease/rent agreements, service agreements, consulting agreements, and so on. Technical agreements, including Technology Assistance Agreements, Licensing and Assignment Agreements, Outsourcing and Hosting Agreements, and others. Company policies, such as the Sexual Harassment Policy, the Employee Grievance Management Policy, the Data Privacy and Protection Policy, the Whistleblower Policy, and others. Intellectual Property Management - Registration of intellectual property such as copyrights, patents, trademarks, and so on in India and internationally, as well as licencing and assignment agreements relating to their intellectual property, among other things. 4. Company Legal Compliances Certain mandatory compliances must be completed for start-ups registered under the Companies Act of 2013. Among the compliances are: Annual General Meeting (AGM) There should be one AGM per year, with no more than 15 months between AGMs. The primary goal of such meetings is to approve financial statements, appoint auditors, declare dividends, and so on. The Annual General Meeting must be held in the city where the company's registered office is located. Board Meetings The first board meeting of the Board of Directors should take place within 30 days of the company's incorporation. Aside from that, four board meetings are supposed to take place each calendar year, with no more than 120 days between two consecutive Board Meetings. Compulsory filing of forms a) Appointment of an auditor (E-Form ADT-1) The first Statutory Auditor should be appointed at the first Board Meeting within 30 days of the company's incorporation. However, following auditors could be appointed for a 5-year term at an AGM. For a 5-year appointment, an applicant must submit Form ADT-1. Following that, shareholders must endorse the auditor in the AGM each year, but there is no requirement to file ADT-1. b) e-Form MGT-7/7A MGT-7 or 7A is an electronic form issued by the Ministry of Corporate Affairs (MCA) to companies to complete their annual return details. Every private limited company must file the MGT-7/ 7A form every year. c) e-Form AOC-4 Form AOC-4 is used to file the financial statements for each fiscal year with the ROC. In general, financial statements serve as the primary means of communication between shareholders and the Board of Directors. As a result, every company registered under the Companies Act of 2013 is required to file form AOC-4. d) Directors' Report In accordance with Section 134 of the Companies Act of 2013, every company is required to prepare a Board Report containing details about the company's state, operations during the year, dividend declaration, net profit, corporate social responsibility standards, and so on. e) MBP-1 form The form MBP-1 is required to be filed by the company's directors at the first meeting of the Board of Directors in each fiscal year to disclose their interest in other entities. When the director's interest changes from the previously submitted MBP-1, a new MBP-1 must be filed. f) DIR-8 form Every director is required to file form DIR-8 with the Company Disclosure of non-disqualification every fiscal year. g) Mandatory Maintenance of Specific Registers Minutes Register; Board Meeting Minutes Book; and General Meeting Minutes Book (which could be EGM, AGM, Creditors Meetings, etc.) Debenture holder meetings and postal ballot Statutory Registers; Books of Accounts or Financial Statements Attendance of Directors at Board Meetings or Committee Meetings 5. Tax-related Compliances Filing Income Tax Returns, Tax Audit Reports, TDS Returns, and determining tax liability are all required under the Income Tax Act of 1961. GST Act, 2017 - Establishment registration under the GST Act, filing of monthly, quarterly, and annual returns Aside from legal compliance, new businesses in India can take advantage of various tax breaks. Three years of tax exemption in seven years Section 80IAC of the Income Tax Act allows any startup established after 1 April 2016 to claim a 100% tax rebate on profits for three years within a seven-year period. The tax rebate is not available, however, if the company's annual turnover exceeds Rs 100 crore. Long-term capital gains are exempt from taxation (LTCG) Start-ups are exempt from LTCG tax under Section 54EE of the Income Tax Act. This is only applicable if the capital gains invested in are a part of a fund notified by the Government of India within 6 months of the asset's actual transfer. Tax breaks for investments worth more than their fair market value If an eligible start-up makes an investment, the government waives the tax on the portion of the investment that exceeds the fair market value. Individual/HUF tax exemptions on LTCGs derived from equity shareholding Individuals and HUFs are exempt from tax on LTCGs if they sell their property and then invest the proceeds in a minimum of 50% or more of an existing start-up. According to the MSME Act of 2006, the enterprises must be small/medium sized. Conclusion Legal compliance is critical for any organization; knowledge and compliance with applicable laws is the first step to ensuring smooth business operations. Compliance with the relevant laws in the location where the startup is doing business is critical for the successful establishment and efficient growth of startups. Compliance ensures that no penalties are imposed on a start-up at any stage of its development and assists it in avoiding any other potential risks/difficulties. One can conclude that the legal foundation of a stable determines its longevity.
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Grow Your Business
GST Registration
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Shop & Establishment Registration
Startup India Registration
ESI/PF Registration
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Startup Consultation
Appoint Virtual CFO
Angel Funding/ VCs
Virtual Office Service
Due Diligence of Company
Business Development
Protect Your Business
Trademark Registration
Trademark Objection
Trademark Hearing
Trademark Opposition
Trademark Infringement
Trademark Renewal
Trademark Assignment
Trademark Withdrawal
Trademark Monitoring
Logo Design Service
Copyright Registration
Patent Registration
Exit Your Business
Close Company
Fast Track
Close LLP
Close Firm
GST Cancellation
Change Services
Change Company Name
Change LLP Name
Change Company Object
Change LLP Object
Increase Authorised Capital
Increase Paid-up Capital
Increase LLP Capital
Transfer of Shares
Alteration in MoA & AoA
Resignation of Auditor
Appointment of Director
Resignation of Director
Change in Designation of Director
Shifting Registered Office of Company
Shifting Registered Office of LLP
Dormant Status of Company
Mandatory Compliances
Appoinment of Auditor
Annual Filings of Company
Annual Filings of LLP
Annual DIN/DPIN KYC
Annual Return of Deposits
Half Yearly MSME Return
Statutory Registers & Minutes
XBRL Filing of Companies
eStamping of Share Certificates
Dematerialisation of Shares
RBI FEMA Compliance
GST Returns Filing
ESI-EPF Returns Filing
TDS Returns Filing
Change in Structure
Proprietorship to OPC
OPC to Private Limited
Private Limited to OPC
LLP to Private Limited
Private Limited to LLP
Partnership Firm to LLP
Private Limited to Public Company
Public Company to Private Limited
Trust/Society to Section 8 Company
Existing Company to Section 8
Existing Section 8 to Company
Services
Accounting & Book Keeping
GST Compliance
Valuation Services
Corporate Litigation
Company Law Advisory
Services For Banks
Drafting & Vetting Services
Startups Funding
Business Loans
Get in Touch
NBFC
NBFC Company Registration
NBFC Micro-Finance Registration
NBFC P2P Lending Registration
NBFC Core Investment Company
NBFC ROC Compliance
NBFC RBI Compliance
NBFC License Restoration
NBFC Business Plan
NBFC Acquisition
NBFC Consultancy
NBFC Compliance Calendar
NBFC Independent Director
ISO
ISO 9001:2015
ISO 14001:2015
ISO 13485:2016
OHSAS 18001:2007
HACCP Certification
CE Marking
GMP Certification
CMMI Level 3 Certification
ISO 22000:2005
ISO 27001:2013
FSSAI
FSSAI Registration
FSSAI State License
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FSSAI Registration Renewal
FSSAI License Renewal
FSSAI Returns Filing
FSSAI Compliances
FSSAI Consultancy
ITR
Salaried Person
Firms/LLPs
Companies
NGOs
Income Tax Notice
Income Tax Planning
Income Tax Litigation
Charity
Section 8 Company
Trust Registration
Society Registration
80G & 12A Registration
FCRA Registration
NITI Ayog Registration
CSR-1 Registration
CSR 2 Report
CSR Services
NGO Consultancy
NGO Handholding
Govt Grants Support
Partnership
Angel Investors
Venture Capitalists
Co-Working Spaces
Banks and NBFCs
Incubation Centres
Government Wings
Institutional Bodies
Software Companies
CA/CS/CMA/Lawyers
Press & Media Houses
Overseas Ventures
Other Startup Enablers
Contact Us