Most of the start-ups in India go for Private Limited Companies. According to studies, 95% Start-ups in India register as a Private Limited Company. Due to its various benefits such as ease of raising equity funds, clear definition between the management and owners of the company, Stock Options for Employees, etc.
Before you register your company, you need to understand that compliances that you will have to face throughout the year. Based on that you can take a decision. Limited liability partnership and simple partnership firm has a smaller number of compliances as compared to private limited company. But when you compare other benefits of it. You will realize that it is the best suited entity type for a stat-up which has expansion and growth plans.
What are the mandatory compliances for a Private Limited Company Start-up?
For startups registering for a private limited company, they will have to face compliances which are categorized by Accounting, Secretarial Compliance.
Most of the compliances are based on the nature of business and type of registrations and licenses the company has acquired. For starters we can say that GST Registration is mandatory only if the company’s turnover exceeds 20 Lakh rupees per annum or the company is doing interstate transactions. Only in these cases the company will have to take the GST registration. (There are few more factors to this we will discuss this in future posts).
Accounting, Secretarial compliances will further be divided into Monthly, Quarterly and Annually compliances.
Mandatory Accounting Compliances
Bookkeeping: Every company or firm needs to maintain the books of accounts, where each and every transaction need detail needs to mentioned. Such as money flowing inside and outside of the company. You can maintain the books of accounts physically or you can use a software to do that such as tally.
Monthly GST Filings: Every company who has a taken a Goods and Service Tax Registration needs to file GST returns every month after the Company registered under GST. NIL returns to be filed even if the company does not have any transactions in that particular month. They have to file the Nil Returns.
Monthly Payment and Quarterly TDS Returns: Every company has to deduct Tax at Source as per the provisions of Income Tax Act, 1961 at applicable rates for the payments made by the company and the same has to be deposited with government in the next month. The Company has to file Quarterly TDS returns and issue Form 16/16A (as applicable to the Deductees).
Monthly PT Filings: Every Private limited company who has more than 1 employee needs to take Professional tax registration (some states do not have professional tax). And every month professional tax from the employee’s salary needs to deducted and filed the government for the same.
Quarterly GST Filings: Companies and firms who has GST registration under composition scheme needs to file for GST returns every quarterly.
Annual ITR filing: Private limited companies after completion of a financial year needs to file for Income Tax returns. This is a mandatory compliance for all kinds of Entities.
Annual Statutory Audit: Every private limited company need to appoint a chartered accountant as auditor of the company to conduct audit of books of accounts and give an audit report on the financial statements of the company for that financial year.
Tax Audit: Tax Audit is mandatory for those Private limited companies whose annual turnover is more than 10Cr subject to the condition that the cash transactions don’t exceeds 5% of the total turnover otherwise 1Cr.
Mandatory Secretarial Compliances
Quarterly Board Meetings: four board meetings are supposed to be held by private limited companies every financial year such that the gap between two consecutive board meetings isn’t more than 120 days.
Annual DIR3 KYC: Every Director needs to complete the Directors KYC every year, declaring the current address, phone number, email address, etc.
Annual Filings with ROC: Every company has to conduct an Annual General Meeting for each financial year and has to file the Annual Reports along with the Statutory Auditors’ Report approved by the Members of the Company with Registrar of Companies (ROC) of concerned state with which the company is registered.
Annual Filing of e-form MGT-7: This form is issued by the ministry of corporate affairs (MCA) to all the companies to fill their annual return details. Every company registered as a private limited company must file this form.
Annual Filing of e form AOC-4: This form is meant to file for financial statement of each financial year. This form needs to filed with the Registrar of companies (ROC). Every company registered under the companies act 2013 needs to file this form.
There are number of compliances under various laws and regulations that you need to follow when you operating a start-up. It is advised to follow and file necessary forms in a timely manner for the compliances to keep the companies record clean and to avoid hefty penalties from the government and Regulatory.
However, list of compliances varies from business to business depending on the nature of business and nature of entity, and scale of the business.
If you need any help with filings the above compliances feel free to write to us at firstname.lastname@example.org we will be happy to help.