3 Compliances that every startup should follow

Successful startups are driven by passionate entrepreneurs focused on building unique solutions that deliver customer delight. While a strong focus on customers and the market is significant, a good understanding of the fundamental laws, rules, and regulations applicable to the smooth running of the business is equally critical.

Many businesses opt for private or limited liability partnership registration in India as a first step to fulfilling the legal guidelines for starting a new business. But some other requirements must be met to avoid any scrutiny from regulatory bodies after incorporation.

Listed here are a few necessary compliments for each startup. Besides these, there is a long list of compliances, and applicability depends on many factors, such as business type, registration, and industry type.

1. Following Taxation Compliance

It is crucial to know the tax framework that applies to your business. Taxability will significantly impact your company performance, and you should, therefore, prepare accordingly. It will help if you become accustomed to taxation and accounting because it is essential to file all records and to comply with the laws of each authority annually. Know about GST as all indirect taxes are eliminated now. GST is listed under various tax burdens on specific goods and services.

According to GST regulations, monthly GST submission, quarterly and annual submission are vital. Taxation also requires a statement of tax liability at the time of incorporation for startups.

There are plenty of tax and benefit programs at national and state levels.

You can also check out the Startup India initiative by the government wherein the capital gains and investment above fair market value can claim a tax exemption for three years. However, ensure that certain requirements are met to use this initiative.

2. Manage cash and deposits

To meet day-to-day business requirements, startups must introduce capital and funds into the business. Make sure you put in the working capital for your startup. However, there are many ways to carry this support. You must keep a list of your finances on paper to understand your legal status. Most startups may not be familiar with auditing, as it is not important for every business to record every debit and credit of transactions. But it is always a good practice to ensure following the accounting compliance by maintaining books of accounts.

Accounting books are also another aspect here. Good hygiene in startups involves accurate account books and checks from time to time, which may require one to hire accounting and bookkeeping services. This ensures compliance with all relevant accounting and tax laws as failure to do so could lead to serious accounting divergences and annual compliance problems.

3. Ensuring Agreements 

The operational requirements will require startups to enter into agreements. This will require working policies in place for the parties involved, be it vendors, employees, contract workers, or clients. Having an agreement in place is one way to ensure your responsibilities and liabilities towards the third-party.\

The recent startup trends also prefer shareholders’ agreement and co-founders’ agreement. Such agreements specifically demarcate the roles and responsibility of the involved co-founders. Employee contracts will have details about salary, stock options, and even the scope of employees’ work. Having such detailed clarity from the start of the business will mitigate the risks and help a startup to scale up effectively.

While it is not part of compliance, even vendors need proper contract management. This helps protect the transactions through symbiotic relationships with third parties. Employee contracts are one of the most critical things to consider at the outset of an organization. Founders also partner with their trusted friends and while maintaining certain ease and productivity in their business activity. Therefore, it is advisable to formalize employee contracts with compensation information, the scope of work and inventory options (if available) for even the first few employees. This transparency from the beginning allows companies to develop risks at a later point.


Starting a new business requires knowing and following the customary company laws to function seamlessly. It will concentrate on the provisions specified for the respective transactions, procedures, and activities. We should not overlook the importance of legal requirements and processes that protect the business in essence.

If a startup does not want but does not want to shut down, it can be a ‘Sleeping Company’ that allows a business to stay afloat with minimal compliance. However, the dormant company is automatically aborted from the RoC post five years of being in a sleeping state.

Compliance with the law is significant for any organization; the first step to ensuring smooth business operations is the awareness and compliance with relevant laws. Recruiting a professional lawyer to advise, monitor, and maintain legal records is one of the best ways to ensure your company is safe and not exposed to legal complications and consequences.

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