Starting A New Business? Get To Know Of Necessary Compliances For The Business
Are you an aspiring entrepreneur all set to take the leap and start your own business? Starting a new business can be an exciting as well as a daunting step. There is the excitement of putting into action one’s ideas and seeing the business of your dreams taking shape in reality. At the same time, there are a number of tasks that need to be attended to and a lot of paperwork to complete. Also, there are legal and essential compliances to heed which you might not be aware of but which are mandatory for the business.
With deAsra’s aim to support and guide entrepreneurs at every step in their entrepreneurial journey, a list of compliances that are necessary to have and some that are good to have even if not mandatory are listed here to ease the startup journey for every entrepreneur.
Must-Have Compliances To Start A New Business
There is some compliance for business that is absolutely essential for the business even though entrepreneurs might not be aware of them. These compliances are mandatory as well as beneficial for the business and include –
Compliance For Business
Selecting an appropriate business entity for the new business registration is one of the first and mandatory compliance for a business. A business entity implies the type or structure of a business, irrespective of what it does. The type of business entity defines how taxes are paid and the corresponding liabilities are determined. The first step for any business is to understand the workings and process of the business. For eg: if you are starting a masala business you need to understand which specific food business-related compliances would you need.
The different types of business entities include-
- Sole Proprietorship- the Proprietorship does not require any mandatory documentation for registering itself
- One Person Company or OPC – this is a company that has only one person as its member and requires the business to be registered as a company
- Partnership Deed- a partnership deed is drawn to incorporate a partnership between 2 or more members
- Limited Liability Partnership – this type of business entity has the benefits of a private company and a partnership firm
- Company Formation – this is an independent legal entity. The shareholders of the company bring in the capital whereas the management and operations are looked after by the Board of Directors. There are two broad types of companies: a Private Company and a Public Company.
Choosing the appropriate business entity to register the business is a necessary compliance for business and must be selected considering the features of each of the various entities as deemed suitable for the business. Since business registration is one of the vital legal compliances to consider while starting a new business, entrepreneurs can always opt for business registration services for their respective business entity such as those offered by deAsra.
- Business PAN Card
A Permanent Account Number or PAN card is a ten-digit alphanumeric number laminated card that is issued by the Income Tax Department that is mandatory for individuals or businesses that apply for it. The PAN needs to compulsorily be in the name of the business other than for a sole proprietorship where the PAN of the individual who owns the business works as the PAN for his business. The chief objective of the PAN card is to use it as a universal identification key or identity card to track all financial transactions that might have a taxable component and can be used to identify incidences of evasion of tax. The PAN number remains the same irrespective of the change of address of the business within India.
- Business Premise Documentation
Another compliance for business that is a must is the documentation pertaining to the business premise. If the business premise is owned by the business owner then an ownership deed and document is a must. If the business premise is rented or leased then the owner must ensure that rent and the lease agreement is drawn. Also, business owners are advised to check with the landlord of the premise or with the manager/person-in-charge of the society or property where the business is located who can update the business owner whether a NOC is needed or not for running their business from those premises.
- Bank Account In Business’s Name
A bank account in the name of the business (or in the name of the owner in case of a proprietorship) is must-have compliance for business. The current bank account is an essential requirement if the business applies for a business loan or for funding to start and run the business and also to avail any subsidies that the business might be entitled to. Therefore a bank account in the business name is must-have compliance for a business.
- Registrations Based On Nature Of Business
Another must-have compliance for a new business is to obtain necessary mandatory registrations depending on the nature of the business. For instance, if the business is a food enterprise dealing in the production, retailing, processing, or handling of food then the business requires an FSSAI registration/license. Similarly, most businesses require to get a Shop Act for their business. The process of applying for the Shop Act, and its applicability might differ from State to State within the country but it remains necessary compliance for business. In certain states and places, Shop Act is referred to as Ghumasta or Trade License or by some differing nomenclature but its characteristics remain the same.
A transport business such as a rental cab service or goods delivery business requires a Motor Vehicle Registration and similarly, a business dealing with the export of goods requires an import-export license. These are examples of just some of the licenses and registrations that are a must for businesses depending on the type of the business.
Good To Have Compliances For A New Business
There are some compliance for business that are not mandatory for starting a new business but are recommended to have as they make certain business processes and operations easier if the business is registering under them. These include
- GST Registration
From the time of its introduction, the Goods and Service Tax or GST has been a revolutionary reform that aims to provide a uniform and streamlined taxation structure and process across the country, thereby creating transparency and making the process easier for individuals and businesses alike. A GST registration is recommended as the businesses registered under it can avail of the Composition Scheme under which small taxpayers can rid themselves of the process of fulfilling GST formalities by paying GST at a fixed rate of turnover which is beneficial for the business too. Additionally, if the business deals with other business that is GST compliant, the new enterprise can benefit from the input tax if it also registers under GST. The eligibility criteria for GST for businesses is if a business, irrespective of its type, size or business model, has an annual turnover above the threshold limit of Rs 40 lakhs then it requires GST registration and the threshold limit for the North-Eastern States, Jammu and Kashmir, Uttarakhand and Himachal Pradesh is Rs 20 lakhs. Thus, even if a new start-up does not qualify for GST under the criteria it is good to have GST compliance for business owing to its benefits discussed above.
Also, GST registration is mandatory for an entrepreneur who supplies via an e-commerce aggregator as well as for every e-commerce aggregator.
- Udyam Registration
Udyam Registration helps provide MSME recognition to a business and the eligibility criteria for businesses to apply for Udyam Registration is that it must be an existing business that is in the manufacturing or services sector.
A business is classified as Micro if it has an investment of less than Rs 1 crore and a turnover of less than Rs 5 crore, a small enterprise if it has an investment of less than Rs 10 crore and an annual turnover of up to Rs 50 crore and as a Medium enterprise if it has an investment of less than Rs 50 crore and a turnover of up to Rs 250 crore. An Udyam Registration is beneficial for MSMEs, providing the business with several advantages and is useful compliance for business that entrepreneurs must consider. Entrepreneurs and business owners can avail Udyam Registration service to register their business and can know about Udyam and its various benefits in-depth here.
- Income Tax Returns
ITR or Income Tax Returns is a mandatory return and should be filed by all businesses before the due date. Technically speaking ITR is a form in which the taxpayers file information about their income earned and the corresponding tac applicable to the Income Tax Department. The GST details submitted by a business are correlated to the ITR because a business or a person whose income as per the ITR is differing sharply from what is declared in the GST would come under the radar of the officials. Therefore, GST and ITR help establish transparency and ease the taxation process.
Insurance is defined as a legal agreement between 2 parties, which are the insurer (insurance company) and the insured (individual or business) such that the insurer promises to make good the losses incurred by the insured in the event of an insured contingency or event. When a new business is set up the entrepreneur might invest in new, high-value machinery and equipment for the business as well as purchase vehicles for the business. These high-value objects and vehicles require insurance to safeguard them and the business in case of a mishap or unforeseen event. Also, when vendors give out high-value equipment and machinery as well as goods to the business owner they insist on insurance for the same to safeguard the equipment or the goods.
In the case of some businesses where the employees or members of the business are the high-value possession of the business, the owners can opt for key-person insurance to compensate for the financial loss to the business that would arise from the death or extended incapacity of the important ‘key’ member of the business.
- Patents And Trademarks
Some businesses might deal with innovative products and inventions. Getting a patent for a new process implies that the business is bestowed with certain legal rights which will prevent its rival businesses and competitors from using or copying its products or inventions and patent protection is an integral part of new business registration in today’s times.
The same applies to trademarks which are obtained to easily recognize and identify a symbol, phrase, word, or even name that denotes a specific product. The trademark legally differentiates the product or service from all other similar products and services and acts as a means to recognize the source.
Patents and trademarks can thereby essential compliance for business that are good to have and which will help protect the business and its products or services and create a brand value for the same.
These are some of the must-have and good to have compliance for business which were discussed to help ease the journey for entrepreneurs taking their first step to realizing their dreams. For further assistance and information on any of these compliances, entrepreneurs can always approach deAsra for guidance and support.