Statutory Compliance for Startups
Table of Contents
Statutory Compliance for Startups
Companies Act, Limited Liability Partnership Act, Insolvency and Bankruptcy Code, competition act and partnership act manage and regulate compliance mechanisms for forming and continuing a business entity. The Ministry of Corporate Affairs (M.C.A.) is in charge of these mechanisms. Tax regulation and compliance for the Direct and Indirect Tax Regime under Central Laws such as the Income Tax Act, the Central Sales Tax Act, and Customs duties are governed by the Ministry of Finance. State Laws such as property tax, professional tax, stamp duty, and registration fees are governed by State Laws such as the Property Tax Act. statutory compliance for startups, startups diverse business models, Complying with Labour Laws for Startups, Important statutory law compliances for startups..
India’s diverse business models
Solitary-Ownership Business
This is a thing that isn’t subject to a separate body of legislation. In this business model, all decisions are made by a single person who also bears the risk of both profits and losses.
Basic prerequisites for a Sole Proprietorship include a business name and location, along with a bank account in the business’s name, as well as a current checking account.
H.U.F. Venture
In the business world, this is known as the ‘H.U.F. business model,’ which refers to a company owned solely by members of a Hindu family. The rules that apply to this design are derived from Hindu law.
Hindu families should be the basis of this business model, as should groups of people such as the family head (Karta), the wife, sons, and daughters. The term Hindus covers Sikhs, Jains, Buddhists, but does not include Christians and Muslims. Similarly to what was said earlier, food and estate should be shared equally among the Hindu family members. There will be a Capital Asset and a Corpus Fund. Declaratory stamp paper deed announcing H.U.F.’s establishment, with information on Karta and Coparceners, as well as a bank account in the name of the H.U.F. and Karta’s photo and the Permanent Account Number (P.A.N.), as well as an I.D. with evidence of address and a bank account. statutory compliance for startups, startups diverse business models, Complying with Labour Laws for Startups, Important statutory law compliances for startups..
Partnership
In this case, the Indian Partnership Act of 1932 governs the operation of the business. The formation of a joint venture Two or more persons can form a company and divide the earnings and losses from that Firm in an agreed-upon ratio when they agree to join forces to start a business. The maximum number of partners in a banking firm is ten; the maximum number of partners in any other type of corporation is twenty.
To begin a Partnership Firm, you will need a Designated Name for the Partnership Firm, a bank account, and a Partnership Deed, among other things.
Though not required, registering the Firm is recommended to safeguard partners’ rights in a disagreement. If a firm is not registered, the partners and Firm lose their ability to litigate over issues resulting from contracts.
Partnership with Limited Liability (L.L.P.)
The Limited Liability Partnership Act of 2008 governs this. Minimum two partners are required to begin this model, with one partner being Indian. There is no upper restriction on the number of partners prescribed by the Act. There is no minimum capital requirement to form an L.L.P. because it is a body corporate with a separate legal entity, similar to that of a company. Each partner’s liability is equal to the agreed-upon contribution.
Limited Liability Corporation
The Companies Act governs this business format, which is the most popular. A private limited company is a legal entity with its own P.A.N., licences, and bank accounts, and the owner’s responsibility is restricted to the business’s shareholdings. It has a perpetual existence. A minimum of two members and a maximum of 200 members are needed to form a private limited company, with a minimum of two directors and two shareholders, although only one person is needed to form a One Person Company (O.P.C.). This concept has the potential to raise money from a wide range of sources, including venture capitalists and other grantmakers.
Limited Liability Company
The Companies Act governs this business structure. There is no upper limit to the number of people who can form this business entity; nevertheless, at least one of them must be a resident director (Indian).
Among the documents needed to register a public limited company are: a company name that has been accepted for use by the government, a Memorandum of Association, Articles of Association, and a board resolution authorizing the appointment of a director, as well as photographs and proofs of the registered office of the company. After reviewing the submitted paperwork, the Registrar of Companies (R.O.C.) issues the Certificate of Incorporation and Registration Certification of Public Limited Company.
M.S.M.E. (Small and Medium-Sized Enterprises)
Any business that qualifies as a Micro, Small, or Medium Enterprise (M.S.M.E.s) under the Micro, Small, or Medium Enterprise Development Act, 2006 (M.S.M.E.D.), can apply for ‘Udyog Aadhaar,’ a unique identification number provided by the government, in order to take advantage of various government programmes and subsidies. To learn more about M.S.M.E. Registration, including how to register, renew, and take advantage of its many benefits, go to this page. statutory compliance for startups, startups diverse business models, Complying with Labour Laws for Startups, Important statutory law compliances for startups..
Complying with Labour Laws
In order to take advantage of certain benefits and to comply with certain regulatory restrictions mandated under such laws, a business entity must register the entity under one of the following models by filing remittances, reports, keeping registers and records etc.
The Establishment and Shops Act
This is a piece of state legislation whose goal is to regulate the working conditions of employees in businesses, such as the number of hours worked, rest periods, overtime pay, holidays, and grounds for terminating employment.
After the shop or commercial facility opens for business, the owner must register the business within 30 days after opening.
The business or establishment will be registered and a registration certificate will be issued, which must be displayed clearly in the establishment if the regional Inspector is satisfied. It is necessary to renew the registration certificate 90 days before its expiration date by paying the stipulated cost. The registration certificate is valid for five years. The regional inspector must be notified in a defined way of any changes to the information given by the business, including the closure of the business.
Workers’ Compensation and Other Provisions Act of 1952 (P.F. Act)
This is a piece of federal legislation aimed at improving the well-being of employees. If a factory or business employs 20 or more people, they must register under this Act, and the maximum monthly wage covered by this Act is Rs 15,000/-. To calculate the P.F. contribution, you must subtract the dearness allowance from your base salary, which does not include things like a food allowance or a dwelling rent allowance.
ESI Act of 1948 on Employees’ State Insurance
All Indian states save Nagaland, Manipur, Sikkim, Arunachal Pradesh, and Mizoram are covered by this Central legislation that aims to provide social security for employees. For non-seasonal factories employing ten or more people, this legislation applies. It is also extended to shops and businesses and private medical and educational institutions, which employ 20 or more individuals. The Act has a monthly wage cap of Rs. 21,000/-.
The Worker’s Compensation Act of 1923 (W.C.A.):
This is just another piece of Central government law aimed at providing workers’ compensation for injuries caused by workplace accidents. Schedule II of the Act specifies which employees are covered by the Act. statutory compliance for startups, startups diverse business models, Complying with Labour Laws for Startups, Important statutory law compliances for startups..
The 1972 Gratuity Payment Act (P.G.A.)
This Central Act will set up a system for paying employees who work in places like factories, mines, oil fields, ports, plantations, railroads, and retail outlets that employ at least ten people.
Rule 3 of the Payment of Gratuity Rules, 1972 states that the employer must give the regulating authority of the area a notice in Form ‘A’ within 30 days of the rule becoming relevant to the establishment.
Maternity Benefit Act (M.B.A.)
This is a piece of law designed specifically for women who work in specific settings and want to offer them with pre- and post-natal benefits. As long as 10 or more people are employed or were employed in the preceding 12 months in any shop or establishment in a state in which the Act applies, the Act applies to all establishments owned by the government.
Factories Act of 1948
This is a piece of social legislation created to ensure the health, safety, and well-being of employees in the workplace.
It is required by the Model Factories Rules, 1948, that the owner of every factory submit Form ‘6’ for registration and licencing to the chief Inspector within 30 days of its application date.
1961’s Apprentices Act
This Act regulates and controls Apprentice training, as well as topics related thereto. Certain requirements set by the Act must be followed by the employer
There is a law that regulates employment and working conditions for construction and building workers (B.O.C.W.)
An Act to govern construction employees’ employment and working circumstances, as well as their safety, health, and welfare, as well as other matters relating to or incidental to construction. The law applies to any business that employs or has employed 10 or more construction employees in the past 12 months on any given day.
Within 60 days of this Act coming into effect, every business is required by B.O.C.W. rules to submit an application to the registering officer for registration.
Regulation and Abolition of Contract Labor Act, 1970 (C.L.A.)
As a result of this Act, employers of contract workers are required to follow specific regulations. It also provides for the eradication of contract labour under certain conditions and addresses other issues.
Every business must register within the timeframe specified in the state rules, or the registration will be denied by the certifying authorities unless it can demonstrate good cause for the delay.
Labor Laws (Exemption from Furnishing Returns and Maintaining Register by Certain Establishments) Act 1988
S.H.W.A.R.E. Act, 2013 (POSH)
POSH was passed to protect women in the workplace from sexual harassment, as well as to prevent and address complaints and other issues that may arise in the course of doing so. To guarantee that women are safe from sexual harassment in the workplace, the law requires employers to take certain precautions to protect them from it in both public and private settings.
Labor Welfare Fund (L.W.A.)
Working conditions, social security, and raising one’s standard of living are all included in what is known as labour welfare. The Labour Welfare Fund Act was passed by several state legislatures and is dedicated solely to the well-being of workers.
Employers, employees, and in some states, the government all contribute to the Labour Welfare Fund. State-specific Labor Welfare Fund Acts and Rules are drafted for various states and union territories. statutory compliance for startups, startups diverse business models, Complying with Labour Laws for Startups, Important statutory law compliances for startups..
