It is a dream for many to run a small business of their own. Let us also not forget the challenging journey associated with it, especially the compliance aspect. Whether you run a small catering business or an online parlour service, you need to make your business comply with the relevant laws governing small businesses. By doing this, you’ll be making the operation of the business run smoothly and protect it from any legal issues in the long run. Operating a small business requires complying with all the laws, whether on the centre or state levels. Understanding various laws and keeping with the changing laws can be an overwhelming task. Therefore, below are the tips you can follow to keep your business compliant with ever-changing regulations.
14 Compliance Steps for Businesses and Start-ups
Here’s the list of some mandatory compliance tips for small businesses that can help your business run smoothly and efficiently:
Choose your business structure
Selecting the business structure is important as it will influence your day-to-day functioning. You can select a business structure with the help of business counsellors, or consultation with an attorney or accountants. The business structure also affects your tax obligations. You should know what kind of business you want and then start registering it. Different types of business structure are:
- Sole proprietorship- In a sole proprietorship, there is only one owner. The liability in such a business is unlimited. It is a simple way of business as there is a lack of government regulations. There is a personal tax only. Registration is not mandatory in a sole proprietorship firm.
- Partnership- It is a formal agreement between two more people. The liability here is shared between partners equally unless the partnership is limited. The tax here is self-employment and personal tax except for limited partners. Registration is not mandatory according to the Indian partnership Act 1932, except in Maharashtra.
- Limited liability company- The LLC involves one or more people. In this kind of business owners are not personally liable. If the business gets dissolved, bankrupt, or sued the personal assets are not at risk. The taxes involved here are self-employment tax, personal tax, and corporate tax. Registration is required in LLC.
Register your business
You need to get your business registered. You need to follow and comply with legal requirements. The steps are: –
- Acquire a digital signature- The first step is to acquire a digital signature. This digital signature will help in conducting and doing various online transactions, for example, E-transactions, tax filing, annual return filing, E-tenders, etc. It is one of the important steps for every business owner or company. A person can prove his identity or sign important documents electronically. In India, only a licensed certifying authority (CA) can assign a digital signature. A certifying authority is a licensed person who has been authorized to grant a digital signature certificate under Information Technology Act, 2000.
- Acquire Director Identification Number (DIN)- You can give an application for getting a DIN number online and it takes only a day to get access to DIN. Indian citizen needs to have a PAN card and foreign citizen should have a passport for this. You can also get a provisional DIN number immediately.
- Acquire company name- You need to choose a name for your company or business. The name should depict its business objective and brand. You need to keep in mind that the name should be unique and have not been taken or previously registered. you can find the option of giving a name in form INC-29.
- Prepare Memorandum of Association (MOA) and Article of Association (AOA)- The next step is to add and prepare MOA and AOA along with Form INC-29. MOA and AOA is an important document that needs to be prepared and filed with attention and carefulness. These documents specify the name, object, liability, share capital, registered office, turnover, etc.
- Filing of INC-29 and acquiring of incorporation letter- You need to affix all the documents along with the INC-29 form. All the documents should be submitted and ready, you cannot make errors as it will result in a resubmission of the application. After the proper filing of the INC-29 form, you will be granted an incorporation certificate from ROC.
- Acquire Permanent Account Number (PAN)- PAN can be acquired by an authorized agent selected by National Securities Depository Ltd (NSDL) or the Unit Trust of India (UTI) Investors Services Ltd as contracted by the Income Tax Department.
- Open a Current Account- You should open a current account. Having a bank account is important in business as it will help in the regulation of business smoothly. Opening the account will help you in easy payment of the bills, salaries, and do other business transactions. It will also enable you in calculating and making a balance statement.
- Acquire MSME Udyog Aadhaar Registration- This can be acquired online. This Udyog Aadhaar Memorandum is an initiative by the ministry of government that will make registration procedures for new businessman entrepreneurs easy and will also help in promotion.
- Acquire TAN number- You can receive this number from Income Tax Department. It is an essential number required for tax filings.
- Acquire service tax registration number- The government has made the service tax registration number mandatory for any individual or business that is administering taxable service of over rupees 9 lakh. This number helps the service tax department in calculating and analyzing all the service taxes properly. you need this number to deposit service tax, service tax return filings, and maintaining compliance with the service tax laws.
- Acquire Shops and Establishment Act License – In India this license is legislated by the State to manage the conditions of work. It adds the statutory obligations of the employers and rights of the employees in the unorganized sector of employment. You need to register under the Act within 30 days of starting the work irrespective of the employees.
- Acquire GST Registration- After the amendment, in Goods and Service Tax, every new business needs to do their GST registration.
- Acquire Professional Tax Registration- This is a compulsory requirement for every business. You need to register within thirty days of employing staff in the business.
- Acquire IEC Code- The full form of IEC is Importer exporter code which is a ten-digit number. You need to obtain this license if one is engaged in foreign trading. You can also apply to the regional authority of the directorate of general foreign trade. In manufacturing, the compliance would be a manufacturing license, and in the case of the export-import business, an Import Export Code (IEC) is necessary.
- Acquire NOC from Pollution Control Board- You need to verify whether their business needs this or not if they need it. If your business falls under the white category then you need to get NOC from the pollution control board. Some examples of the environmental laws are The Water (Prevention & Control of Pollution) Act, 1974, The Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003, and The Air (Prevention & Control of Pollution) Act, 1981.
- Acquire FSSAI registration- If your business is related to food, then the compliance would be food safety and standards authority of India registration or license (FSSAI).
- Acquire AGMARK registration- If your business is of agricultural products, then you need to get this certification mark.
- Acquire Property Rights Registration- Usually, start-ups have their USP in the market for which they need protection. Therefore, it must be registered for a trademark, patent, or copyright. This is essential so that no other person or business can copy their original work or steal their creativity or branding.
Keep a centralized system for communication
Communication is important. To ensure compliance you need to make the course that will help in effective communication. You can use technology like an app or software to centralize communication. There are various applications like Slack, Basecamp, Redbooth, and Glip which are available for this purpose. You need to keep in mind to use a single software, suppose if you are using Slack then use this software only for all the communications. This will protect sensitive information from risks.
Be aware of constantly changing laws
You need to keep yourself updated with the changing laws. You cannot ensure business compliance if you are not current with the upcoming laws and courses as it will result in legal issues, penalties, and fines. You can take the service Professional Employer Organisation (PEO) that will help you updated and informed. An example of such relevant law is Labour laws. Labour laws are a very important business segment, whether small or large. Therefore, it is vital to understand laws like the:
- Industrial Disputes Act 1947
- Trade Union Act 1926,
- The Building and Other Constructions Workers’ (Regulation of Employment & Conditions of Service) Act, 1996.
- The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979.
- The Payment of Gratuity Act, 1972.
- The Contract Labour (Regulation and Abolition) Act, 1970.
- The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
- The Employees’ State Insurance Act, 1948.
Keep categorizing documents
Management of the business is not easy as it involves a lot of documents, information, and proper governance. As an owner, you are liable for its compliance and proper functioning. You need to categorize your documents in an organized manner it will minimize the chance of any compliance mistake.
Use updated software
You can use accounting software to manage all the documents, bills, papers. Entering the details and copying and pasting manually can be a challenging task. If not properly done can result in fraud, crime, and errors which is not good for the business. So, you can use software like Xero, MYOB, and QuickBooks Online for ensuring compliance.
Keep conducting regular audits
You should conduct regular audits to know whether the business laws, procedures, and courses are current and compliant. Regular auditing will help you in finding the gaps and problems and also keep you out of the financial mess. You should conduct these audits at least twice a year to ensure compliance. If you think you do not have enough information and understanding you can also hire an accountant for auditing.
Keep recording all your expenses
It is important to keep a record of all your expenses irrespective of whether it is of small or big nature. Keeping a record of every transaction the payables and receivables help in ensuring compliance.
Reinforce with training
You can ensure compliance by conducting regular training. This training will help employees in knowing what they need to do and how they need to do it. In this way, they will be compliant with the company courses and policies and will result in the chances of fewer mistakes.
Automate tasks and use HR tech for compliance
HR techs will help in compliance as it will look that you have access to all important information on employment verification forms like I-9s or tax forms like W2s. HR tech also helps in compliance through features that make sure that you have certification up-to-date to keep the team secure and compliant.
Prepare a compliance checklist
This checklist will help in improving existing HR and compliance laws. It covers general HR tasks like hiring, rewards, benefits, payroll, and company compliance. You should start with a well-developed checklist for the purpose.
Acquire an SSL certificate for the business
You should get an SSL certificate especially if you are running an e-commerce website. As we know customers are important for the success of any business so an SSL certificate will protect customers from any kind of data hacking, theft, cyber-attacks and secure all the communications which are important and confidential. This will ensure compliance.
Encrypt and secure your important files
Every business deals with personal facts and confidential information. This information must be secured for the growth and functioning of the business. To secure the information and documents one needs to keep these things in mind:
- You need to encrypt your files so that no wrong person gets hands on them.
- If one is sharing files then they must be shared in a secured manner on can use DropBox, Off the Record (OTR), and Resilio sync for securely sharing files.
- Always keep a backup of your files for the safety and protection of the documents.
- Create a safe document management system
Laws related to winding up the business
Of course, you will not want your business to shut down, but if it does, you should be well-versed with the laws of it. Legally speaking, there are three ways to wind up your business. First is the fast-track exit mode, the court or tribunal route, and lastly, voluntary closure. Usually, startups prefer fast-track exit mode as it allows the businesses to shut down at a lower cost and in a short time.
Governing and managing a small business is a challenging task. You need to work hard and be committed to it. A business is all about risks and requires attention, efforts patience, and time. Compliance is important for the proper and smooth growth and functioning of the business. You have to keep the laws and regulations in mind, communicate well, do proper research, be updated with upcoming facts for ensuring compliance. All these tips and steps will help you in being compliant with the industry and get success.