Compliance is that angry mom who keeps everyone in check and makes sure that everyone is doing well and taken care of. Its not just all rules and regulations and filings. It is a way to ensure all parties’ interests are taken care of Compliance is adhering to the rules and regulations established by legal authorities on your business. And it can be challenging to follow each legislation and act consistently at times. But you fail to comply, and it will result in the loss of opportunities and incur fines.
As a company grows, this need for compliance grows. As a result, firms must adapt their compliance procedures to the changing external and internal contexts.
Legal requirements and company rules may differ from company to company. However, following and acting correctly in a legal and ethical context can add value to an organization, saving time and effort. In this article, we discuss the types of compliance filing for startups.
Why Is Compliance Important?
Organizations can benefit from timely compliance with all pertinent laws, regulations, and policies by keeping things operating smoothly, reducing fines and penalties, and retaining their place in the business; this is called compliance.
Here are some reasons why compliance is essential:
1. Employee retention
Employees tend to change jobs if they have any complaints or concerns at their current workplace. A favorable work environment is created with effective internal compliance, including safety, employee benefits, and compensations.
This favorable work environment motivates people to come to work and contribute to the company’s worth.
2. Competitive advantage
Businesses that follow all the laws and regulations and maintain solid internal procedures have a competitive advantage over those that do not meet the requirements on time.
3. Reduced legal charges
No company wants to face the consequences of breaking numerous rules and regulations. Compliance with these rules reduces the risk of fines, penalties, lawsuits, and even business closure.
4. Betters public relations
When a company is involved in legal proceedings or government involvement, the market or customers lose faith in it, negatively impacting it. Compliance will ensure that a company’s public relations and image remain positive.
Types of Compliance
These are primarily two principal types of compliances — internal and external. Here are what they mean and their subsets:
To avoid any negative influence on the organization’s goodwill, startups must obey the rules, laws, and standards established by governmental authorities.
These laws are designed to aid an organization’s public relations, trust, and transparency in its operations. In addition, conforming to regulations eliminates unnecessary duplication of resources’ efforts.
The following are some external compliance rules that companies operating in India must follow:
1. Company law
- The Companies Act, 2013 must be followed by any firm incorporated in India.
- The Companies Act of 2013 governs company directors’ appointment, qualification, compensation, and retirement.
- The Companies Act of 2013 covers aspects such as conducting board and Shareholder meetings.
2. Tax law
- Filing Income Tax Returns, Tax Audit Reports, TDS Returns, and determining tax liability under the Income Tax Act of 1961.
- Companies must register under GST and file monthly, quarterly, and yearly returns.
- Aside from regulatory compliance, new firms in India can take advantage of different tax breaks.
3. Labor law
India has mandated strong labor welfare and safety standards as a welfare state. The following are some of the most important laws to follow:
- The Employees’ State Insurance Act of 1948 makes it essential for some businesses to register with the State Insurance Corporation and contribute to the State Insurance Corporation Fund.
- The Employee Provident Fund Scheme of 1952 makes it essential for employers to contribute to their employees’ Provident Fund.
- The 1961 Maternity Benefit Act: An Act to control women’s employment in specific establishments for a specified period before and after childbirth and provide for maternity and other benefits.
Internal compliance refers to a collection of internal rules and regulations that owners, employees, traders, and consumers observe to maintain the quality of the organization’s services or products.
Only when an organization follows its internal rules and regulations will it be able to meet external requirements.
The following are some internal compliance rules that companies must follow:
1. Preventive policies
Designed to prevent errors or anomalies in the first place, these policies are incorporated into internal control systems and necessitate a significant amount of effort during the design and implementation phases.
2. Corrective procedures
Corrective action comprises assessing changes to a company’s operations to remove non-conformities and other undesirable outcomes.
It is usually a series of actions, laws, or regulations that an organization must follow in documentation, procedures, or systems to correct and remove recurring non-compliance.
3. Detective controls
Detective control is an internal control method for detecting problems in a company’s processes after they have occurred. Detective controls can achieve various objectives, including quality control, fraud prevention, and legal compliance.
Knowing and complying with applicable laws is the first step in ensuring smooth company operations for any corporation.
Compliance ensures that a startup faces no penalties at any stage of its development and avoids other potential risks and obstacles. Therefore, it is reasonable to conclude that the strength of its legal foundation determines a startup’s long-term viability.
How Can trica equity Make Compliance Filing Easier?
A startup entails a wide range of activities that are not standardized, requiring additional time and resources. These startups have a high opportunity cost since the time and resources spent on operations may be better spent on business development, thought leadership, and other ways to broaden the company’s vision.
Employee equity management is one area where founders and key employees in a firm might outsource. Employee stock options, also known as employee equity, are a robust tool to help your firm attract top talent, retain key employees, and grow.
Employee equity management includes making judgments about the company’s stock options policy. It takes a full-time job to issue stock options, manage operations, ensure compliance, provide timely reminders, and payments, and update their statuses.
Companies that manage their stock options without using a proper software solution may often fail to comply with the regulatory authority’s guidelines.
On the other hand, having employee equity management software in place will guarantee that policies are written with mandatory compliance in mind. Therefore, it is aligned with market best practices.
Take the first step in building an effective and easy ESOP management process for your startup with trica equity. Book a free demo today!