Private Limited Company is the most sought after organisation structure by the majority of startups. But little do they that there are many compliances which are to be required to be taken care of, once the company is incorporated and some of these compliances do have a due date. It is often seen that founders do ignore this aspect and end up paying penalties.
Some of the mandatory compliance are:
Conducting Board Meetings
Every company is required to hold a board meeting where the directors of the company meet and take decisions on important aspects of the business. The first board meeting must be held within 30 days of incorporation and a minimum of 4 board meetings must be held in a financial year. In the case of a small company, minimum 2 board meetings must be conducted. Most of the startups fall under the category of Small Company.
Conducting Annual General Meeting (AGM)
Annual General Meeting is a meeting where all the shareholders and directors of the company meet together. The first AGM of the company must be conducted within 9 months from the end of financial year and subsequent AGMs are to be conducted within 6 months from the end of financial years. Decisions like the appointment of the auditor, approval of financials by shareholders are taken there.
Related Article: How To Choose Best Business Structure For Your Company
Appointing Statutory Auditor For The Company
Each year the financials i.e. the Balance Sheet and Profit and Loss Account of a company are to be verified and certified by a statutory auditor who shall be a Chartered Accountant in Practice. The first statutory auditor shall be appointed at the first board meeting held within 30 days of incorporation while subsequent appointment shall be made in Annual General Meetings.
Deducting Tax At Source (TDS)
Every company must deduct a specified percentage of tax from the payments made for transactions specified by Income Tax Act and deposit the same with the Income Tax Department. Noncompliance of the same would lead to payment of the penalty.
Payment Of Income Tax
Income tax is a term everyone is familiar with. Every year the company is required to pay Income Tax and file Income Tax return. As most of the startups incur losses in their initial years, they must file Income Tax return showing the loss incurred so that, the loss of current year can be set off with future year’s income.
Filing Annual Returns And Financial Statements
After the AGM, companies are required to file their Financial Statements & Annual return in which details like the shareholding pattern, director’s details etc. are to be given.
This is not the end as there are many other compliances which are to be taken care of. It is always recommended to either in-house experts or outsource to take care of the compliances so that the founders can put their best efforts in the core business activities.
[The author of this post is Nitin Khurana, Manager Audit and Assurance, Manohar Chowdhry & Associates firm based in Gurugram.]