Compliances

Important Compliance for Running Business in India

Important Compliance

Do you have a business or looking to start any kind of business in India? Do you know how to start your own company? Are you facing a dilemma of whether to start a proprietorship, partnership firm or company? In this article, we will discuss Important Compliance for Running Business in India.

Even if you have selected the business entity, you want to start your business with; are you aware of the process of setting up the business, Important compliance need to be followed?

For starting any business in India, there are five types of entities you can opt from. The list of business entities includes proprietorship, partnership firm, company registration, limited liability partnership etc.

list of business entities

Further, in this article, we will discuss every type of business entity one by one in detail.

Define Sole Proprietorship.

Sole proprietorship is a type of unregistered business, which is controlled and managed by person. Sole proprietorship is one of the most common forms of business entities in India. It is usually set up for micro and small businesses in the unorganized sectors. These types of business entities have least compliances for their functioning.

Compliances to adhere in Sole Proprietorship

Sole proprietorships have minimum compliances in comparison to other forms of business entities in India. However, they cannot avail the benefits of limited liability. The annual profits made by the proprietor are equal to the annual income of the proprietorship firm.

Compliances to adhere in Sole Proprietorship

In case of FSSAI License

Supply chain compliance- Whenever your product or service is provided through a chain of suppliers, then you must keep in mind to maintain the quality of product till it reaches the customers.

Advertising Compliance- You need to take care of the advertising aspects of the food license. It must not defame the product of competitors, luring the customers by false hopes etc

License and other regulatory compliance- Once you get the FSSAI license, it is mandatory to get it updated. The set up of food business must be in accordance with the latest rules and regulations released by the FSSAI.

New Product development assessment- If you are planning to launch a new product in the market, then you have to keep the authenticity of the product in mind and make sure to launch it as per the FSSAI guidelines[1].

Products and operational compliance, comprehensive FSMS and schedule 4 audits- You need to keep a check on the manufacturing practices involved and material used in it. You need to have the Food Safety Management System (FSMS), schedule 4 audits for the inspection of manufacturing units, there has to be no adulteration in the products you offer, and cannot use any hazardous equipment that may cause harm to employees.

Vendor license and raw materials standard- You have keep the track of raw materials used in the products and must obtain the vendors’ license if applicable.

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FSSAI Compliance

GST Registration compliances

Once you get the certificate of GST registration, you are required to file the GST returns on time as per the requirement.

Income tax returns

In case of a sole proprietorship, you need to file the returns as an Individual.

Let’s move on to the partnership firm, in this we will take a look at their compliances.

Compliances in case of Partnership firm

Partnership firm is basically an agreement signed between two or more individuals, who agree to share the profits of a business earned by the partnership.

These partnership firms are regulated under the Partnership Act, 1932.

Compliances in case of Partnership firm

Event Based Compliance

  • Partnership Firm registration in Form I within a time limit of one year.
  • Change in name of Partnership Firm or change in the principal place of firm or change in the nature of business in Form II within a time limit of 90 days.
  • Closing and Opening of Branches in Form III within a time limit of 90 days.
  • Change in details of Partner in Form IV within a time limit of 90 days.
  • Change in Constitution or Dissolution in Form V within a time limit of 90 days.
  • In case minor becomes major and elects to become or not to become a partner in Form VI within a time limit of 90 days.

Annual Compliance

In case of partnership firms, you need to file the annual Income tax returns with the income tax department in the prescribed form.

Compliances in case of Private Limited Company

Private limited companies are set up for a dynamic range of businesses. The liabilities under these business entities are limited to the shareholdings held by the shareholders of the company. The maximum number of shareholders in a private limited company is 200. And it doesn’t allow the shareholders to share trades publicly.

Once you have started a private limited company, there are certain compliances that need to be followed. Below is the list of compliances that need to adhere in the private limited company-

Compliances in case of Private Limited Company

S. No. Particular of Compliances Forms Section
1. Board Meetings

It is required for a company to hold minimum two meetings of its Board of Directors every year in such manner as prescribed that the minimum gap between both the meetings, should not be less than 90 days.

173 & SS-1
2. Appointment of Auditor

The auditor shall be appointed for the period of 5 years and for this purpose form ADT-1 is required to be filed within 15 days of appointment.

139 ADT-1
3. Appointment of Company Secretary

It is required for every private company whose paid up share capital is rupees Rs.5 Crore or more to appoint whole time company secretary.

203
4. Account Maintenance

The company is required to maintain its accounts.

128(1)
5. Finalization of Financial Statements

The company is required to finalize its financial statements (Balance Sheet & P/L Account) on the basis of its accounts for the previous year.

Schedule III
6. Income Tax Return Filing

The company needs to file its income tax return with the income tax authority before the due date.

7. Directors’ Report

It is a report produced by the board of directors in the AGM which describes the affairs of the company.

134
8. Notice of AGM

Notice of AGM shall be given to all the shareholders of the company before 21 days.

101 &

SS-II

9. Circulation of Financial Statements

It is required for a company to send approved Financial Statement, Directors’ Report and Auditors’ Report to members at least 21 clear days before the date of AGM except in the case when AGM is called on shorter notice.

136
10. Annual Filing of Financial Statements

It is required for a company to file its financial statements within the period of 30 days of Annual General Meeting with the following attachments:

• Balance Sheet

• Statement of Profit& Loss Account and cash flow statement

• Directors’ Report

• MGT-9 (Extracts of Annual Return)

• Auditors’ Report and

• Notice of AGM.

Note* Cash flow statement in case of other than small companies.

AOC-4 137
11. Annual Return

It is required from Company to file its Annual Return within 60 days of Annual General Meeting. Annual Return will be filed for the period 1st April to 31st March.

MGT-7 92
12. Annual Return Signing

Under this, the annual return should be signed by Practicing Company Secretary, in case there is no whole time company secretary. In case of other than small company.

13. It is required for every Company having paid up share capital of 10 crore rupees or more or having turnover of 50 crore rupees or more shall be certified by practicing company secretary. MGT-8 92
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Compliances in case of a public limited company

Public limited companies are regulated under The Companies Act, 2013 and they can be incorporated in the form of listed public company or unlisted public company. Stocks of listed companies can be purchased by anyone, either by privately through an initial public offering or through trades on the stock market.

These public limited companies have to follow certain compliances. Let’s take a look at the list of compliances that need to be followed-

Compliances for Public Limited companies

S. No. Particular of Compliances Forms Section
1. Board Meetings

It is required for a company to hold minimum four meetings of its Board of Directors every year in such manner as prescribed that the minimum gap between both the meetings, should not be more than 120 days. It is required for companies to hold at least one board meeting in each quarter of the year.

173 & SS-1
2. Appointment of Auditor

The auditor shall be appointed for the period of 5 years and for this purpose form ADT-1 is required to be filed within 15 days of appointment.

The shareholder will ratify Auditor every year in AGM but there is no need to file ADT-1.

139 ADT-1
3. Appointment of Company Secretary

It is required for every public company whose paid up share capital is rupees Rs.10 Crore or more to appoint whole time company secretary.

203
4. Account Maintenance

The company is required to maintain its accounts.

128(1)
5. Maintenance of Registrars

• Register of Directors & their shareholding;

• Register of Members.

6. Finalization of Financial Statements

The company is required to finalize its financial statements (Balance Sheet & P/L Account) on the basis of its accounts for the previous year.

Schedule III
7. Income Tax Return Filing

The company needs to file its income tax return with the income tax authority before the due date.

8. Directors’ Report

It is a report produced by the board of directors in the AGM which describes the affairs of the company.

134
9. Circulation of Financial Statements

It is required for a company to send approved Financial Statement, Directors’ Report and Auditors’ Report to members at least 21 clear days before the date of AGM except in the case when AGM is called on shorter notice.

136
10. Notice of AGM

Notice of Annual General Meeting is required to be prepared according to Section 101 of Companies Act 2013 and Secretarial Standard II. It is required to be sent to all the directors, members and statutory auditor and Debenture Trustee (if any).

101 &

SS-II

11. Adoption of Financials and Director Report:

It is required for Company to file MGT-14 along with a copy of Resolution within 30 days of General Meeting.

MGT-14 179(3)
12. Financial Statement

It is required for a company to file its financial statements with the following attachments within 30 days of AGM:

• Balance Sheet

• Statement of Profit& Loss Account (Including Consolidated Financial Statement)

• Directors’ Report

• MGT-9 (Extracts of Annual Return)

• Auditors’ Report and Cash Flow Statement

• Notice of AGM.

AOC-4 137
13. Annual Return

It is required for Company to file its Annual Return within 60 days of Annual General Meeting. Annual Return will be filed for the period 1st April to 31st March.

MGT-7 92
14 Annual Return Signing

Under this, the annual return should be signed by a Practicing Company Secretary, in case there is no whole time company secretary.

15. It is required for every Company having paid up share capital of 10 crore rupees or more or having a turnover of 50 crore rupees or more shall be certified by practicing company secretary. MGT-8 92
16. It is required for Companies to get Secretarial Audit of the Company from the Practicing Company Secretary and their report will be in Directors’ Report (MR-3).

a) All Listed Companies

b) Every Public Company having;

• Paid-Up Share Capital of Rs. 50 Crore (fifty crore rupees) or more; or

• Every Public Company having a Turnover of Rs. 250 Crore (two hundred fifty crore rupees) or more

MR-3 205
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Compliances in case of Limited Liability Partnership

Limited liability partnerships are preferred as they offer the benefits of both partnership firms and companies. It is considered as a separate legal entity and there is no requirement of minimum capital contribution.

However, there are certain compliances that need to be followed. So let’s take a look at the list of compliances-

Compliances for Limited Liability Partnership

Forms Due Dates
Annual Return in Form 11 30th May 2018
Statement of Solvency in Form 8 30th October 2018
Income Tax Return
When the audit is not required 31st July 2018
When the audit is required 30th September 2018

Hope you have better knowledge of Important Compliance by now. For any information contact Enterslice. We have a team of professionals. They have helped a number of clients in starting their own business and helped them at every step.

All the best for your future venture.

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