One of the most common reasons why businesses are failing is that corporations either neglect enforcement or neglect law enforcement that are nothing but regulatory compliance. It involves businesses to take certain actions to satisfy a certain request or order. The act of obeying a certain command, law, or requirement is known as compliance. Such compliances are the backbone for any businesses since most of the business activities depends on it. Also, following the compliance measures reflects a good startup hygiene and therefore, can win investors’ trust in future.
Here are few of the crucial reasons why compliance acts as a backbone for your startup.
Getting the Right Start
You may have an awesome idea and the right funds to get your project up and running. However, even before calculating profit and loss statements or recruiting a team of professional people to work for you, the first thing you need to do is register your business. You can register a private company or an LLP but most of the startups in India benefits when they register private limited company online. Without such registrations, the company won’t last at all. In fact, it never ‘exist’ in the first place. There are so many startups and existing businesses that later fall into deep waters due to not being licensed.
Maintaining Books of Accounts
Account books are corporate transaction documents or financial information. This is managed by business organization under accounting rules that includes Paper Ledger, Bookkeeping, Defaulter List, Profit and Loss Report & Balance Sheet. According to corporate law, account books must be held for 8 years.
Filing Necessary Returns
Filing income tax return is more important at a time when the governing bodies are tracking all those who have lost out or have cheated by not paying up. A return is a document containing income information that a taxpayer will file with the tax authorities. A licensed dealer files GST returns monthly and quarterly. Just another word of caution is that failure to file income tax returns and GST returns returns is a big non-compliance problem, which can shut down your startup. A return is a form(s) filed with a taxing authority documenting revenue, expenditures, and other tax details. Until assessing an organization’s tax, reports, accounts, regulatory records, documentation and vouchers, it is important to examine how much financial statements and non-financial disclosures that provides an accurate and fair view of the company’s business.
Ensuring Employee Retentionv
One of the main assets during a startup’s initial phase is recruiting and retaining employees. Possibly you are building an A team for your company and you will have to comply with their contracts, payment systems, recruiting methods, etc. Focus should be on providing a secure, competent and open atmosphere for employees to ensure better retention. Prioritizing compliance would make them feel better not to be penalized for non-compliance. It also keeps workers motivated because they feel suitably paid for the amount of work they do. The better, the harder they work.
Facilitate Brand Protection
Many compliance comes into play when startups shape up to become brands. Intellectual properties are synonymous with branding features that act as an advantage when the product marches on the market. The most valuable of all assets a company can have is intellectual property, and ensuring security of intellectual property rights in India is extremely important. Taking advantage of IPR by creating a distinct corporate identity independent from rivals. As a business you can also offer other your IP to other businesses or license it, such that it adds to the revenue stream. Alternatively, it also help you avail protection loans for IPR that covers the company’s follow-up name and brand specific designs to avoid infringement cases.
Getting the Right Permissions
Each startup must take the required approvals by applying for the required permits and licenses. The first license you need is the business license that allows you to do your business. For instance, you would require FSSAI for starting a food business and the same goes for other businesses depending on its nature. And there are many other certificates you need, such as fire department permits, state licenses, and some even from the health departments.
Expanding your company to the global community would later require a highly strict company and not doing so could mean facing fines from several regulatory bodies. Startups should then look at compliance as an expenditure made to preserve business for the future.
If so much has been put in, why gamble it all by not following the fundamentals easily followed and adhered to? There are occasions when non-compliance won’t affect your company immediately, but you’ll be found sooner or later. Today, being safe is better than later being sorry.