Compliance Requirements for Different Business Structures
Compliance is a vital aspect of business operations in India, ensuring that companies adhere to legal regulations. Different business structures have varying compliance obligations that need to be fulfilled to maintain legal standing and smooth operations.
Proprietorship:
– Annual Filings: Although proprietorships aren’t required to file annual returns, maintaining financial records is crucial for tax purposes.
Partnership:
– Partnership Deed: Draft a partnership deed outlining terms, responsibilities, and profit-sharing among partners.
– Annual Filing: File Income Tax Return and Partnership Firm Return annually.
– Maintain Records: Maintain books of accounts, audit records (if applicable), and other financial documents.
Company:
– Company Incorporation: Register your company under the Companies Act, 2013, and obtain a Certificate of Incorporation.
– Annual Filings: File Annual Return (Form MGT-7) and Financial Statements (Form AOC-4) with the Registrar of Companies (RoC).
– Board Meetings: Hold regular board meetings and maintain minutes of the meetings.
– Audits: Conduct regular audits and file audited financial statements with RoC.
– Statutory Compliance: Comply with provisions of the Companies Act, 2013, such as appointing auditors, directors’ disclosures, etc.
LLP Compliance:
– LLP Agreement: Draft an LLP agreement outlining partner responsibilities, profit-sharing, and more.
– Annual Filing: File Annual Return (Form 11) and Statement of Accounts & Solvency (Form 8).
– Partners’ Meetings: Conduct partner meetings and maintain minutes.
– Statutory Compliance: Adhere to LLP Act, 2008, including maintaining accounts and compliance documents.
Payroll: Ensuring Employee Compensation Compliance
Proper payroll compliance is essential to uphold employee rights and meet legal requirements in India.
Key Payroll Compliance Steps:
– Salary Structure: Design a transparent salary structure in line with legal norms.
– TDS Deductions: Deduct TDS from employees’ salaries as per their tax slabs.
– Provident Fund (PF): Deduct and contribute PF on eligible employees’ salaries.
– Employee State Insurance (ESI): Deduct and contribute ESI for eligible employees.
– Professional Tax: Deduct and remit professional tax to the state government.
– Income Tax Declarations: Collect annual income tax declarations from employees.
PF Registration and PF Return Filing: Streamlining Provident Fund Compliance
Provident Fund (PF) compliance is crucial for safeguarding employee retirement savings. It involves PF registration and regular return filing.
Steps for PF Compliance:
– PF Registration: Register your company under the Employees’ Provident Fund Organization (EPFO).
– Employee Contribution: Deduct PF contributions from employees’ salaries and contribute an equal amount.
– Employer Contribution: Contribute the employer’s share to the EPFO.
– PF Return Filing: File monthly PF returns through the Unified Portal.
ESI Registration: Ensuring Employee Health and Insurance Coverage
Employee State Insurance (ESI) provides medical and insurance benefits to eligible employees. ESI registration is a vital compliance requirement.
ESI Compliance Steps:
– ESI Registration: Register your company under the Employees’ State Insurance Corporation.
– Employee Contribution: Deduct ESI contributions from employees’ salaries.
– Employer Contribution: Contribute the employer’s share to the ESI Corporation.
– Return Filing: File ESI returns detailing the contributions made.
Managing Directors and Directors in Companies: Additions and Removals
Managing directors and directors play key roles in a company’s governance. Adding or removing directors involves specific compliance procedures.
Adding Directors:
– Director Identification Number (DIN): Obtain DIN for new directors by filing Form DIR-3.
– Board Approval: Pass a resolution for appointing new directors in a board meeting.
– Form DIR-12: File Form DIR-12 with the RoC within 30 days of appointment.
Removing Directors:
– Resignation Letter: A director must submit a resignation letter to the board.
– Board Meeting: Conduct a board meeting to accept the resignation and record it in the minutes.
– Form DIR-12: File Form DIR-12 within 30 days of resignation.
Share Transfer in Companies: Ensuring Smooth Ownership Changes
Share transfer allows the ownership of a company to change hands. Compliance ensures transparency in this process.
Steps for Share Transfer:
– Share Transfer Deed: Execute a share transfer deed in the prescribed format.
– Board Approval: Obtain board approval for the transfer.
– Stamp Duty: Pay stamp duty on the share transfer deed.
– Form SH-4: File Form SH-4 with the RoC within 60 days of transfer.
DIR-3 KYC: Director’s Know Your Customer Compliance
DIR-3 KYC is a mandatory compliance for all directors to ensure transparency and prevent misuse of director identification numbers.
Steps for DIR-3 KYC Compliance:
– Form DIR-3 KYC: File Form DIR-3 KYC with the RoC annually.
– DIN Verification: Verify the DIN through OTP and update personal details.
Registered Office Change: Updating Company’s Registered Address
Changing the registered office address requires compliance with legal procedures to ensure transparency.
Steps for Registered Office Change:
– Board Approval: Pass a board resolution approving the change of address.
– Form INC-22: File Form INC-22 with the RoC within 15 days of change.
Increasing Authorized Capital: Facilitating Business Expansion
Increasing the authorized capital allows a company to raise additional funds. Compliance is necessary for transparent operations.
Steps for Increasing Authorized Capital:
– Board Approval: Pass a board resolution to increase the authorized capital.
– Shareholder Approval: Obtain shareholder approval through an Extraordinary General Meeting (EGM).
– Form SH-7: File Form SH-7 with the RoC within 30 days of passing the resolution.
Winding Up of Company: Ensuring Legal Closure
Winding up a company involves proper compliance to legally dissolve the entity and settle obligations.
Winding Up Steps:
– Board Resolution: Pass a board resolution for winding up and appointing a liquidator.
– Creditor Meeting: Convene a meeting with creditors to discuss the winding-up process.
– Resolution: Obtain shareholder approval for winding up in an EGM.
– Liquidator Appointment: File Form INC-28 to appoint a liquidator.
– Settlement: Settle company’s obligations, distribute assets, and file Form ITR-6 for final return.
Winding Up of LLP: Closure with Compliance
Winding up an LLP requires adherence to legal procedures to ensure a proper and transparent closure process.
LLP Winding Up Steps:
– Partners’ Resolution: Pass a resolution for winding up and appointing a liquidator.
– Creditors’ Meeting: Convene a meeting with creditors to discuss winding-up proceedings.
– Filing with RoC: File Form 24 for winding up, along with necessary documents.
– Liquidator Appointment: Appoint a liquidator and inform the Registrar.
– Settlement: Settle liabilities, distribute assets, and file the LLP’s final return.