8 things you must be aware of if you are a startup

As entrepreneurs, we want to innovate, experiment and do every thing possible in a different way. In this fast-pacing world, survival is the most important element for any new business that is being set up or is already there in the market. But, when it comes to legal structure, I'm sure nobody wants to run their brains and would keep it as simple as possible. 

Therefore, to help with those legal compliances, here is a list of few compliaces under various acts that must be complied with: 

TDS, Form 20A, GST Registration, DIPP, Trademark, MSME, Cash Transaction, Legal Documentation

Form 20A

Form 20A which is also known as INC 20A is a mandatory form that is required to be filed by a company (incorporated after 2^nd Nov. 2018 with Ministry of Corporate Affairs). The directors of that company are required to file this declaration form within 180 days from the date of incorporation of company. A Company must file this declaration to the earnest as non-filing of this form may lead to a huge penalty or removal of name of the company. This form should be verified by a Chartered Accountant (CA) or Company Secretary (CS) or Cost Accountant in practice.

Attachments-

1. Subscribers proof of payment for value of shares.
2. Registration Certificate

Penalty-

1. The Company is liable to pay Rs. 50,000/-.
2. Every defaulting officer is  liable to pay Rs. 1,000/- per dayas penalty up to a maximum of Rs. 1,00,000/-.

Consequences-

1. ROC may initiate action for the removal of name of the company.
2. Company cannot borrow money.
3. Company cannot start business.

Legal Documentation

Getting all documents ready before starting a business is a great thing but not many people are aware about the documentations that needs to be filed before incorporating a business.

1. Employment Agreement
2. Founders agreement
3. Non-disclosure Agreement
4. Terms of use

GST Registration

GST (Goods & Service Tax) was introduced on July 2017 with an aim to remove cascading effect on taxes i.e., double taxation.

If you run a business/start-up and you are an exclusive dealer of goods, you must register as soon as your Turnover exceeds Rs. 40 lakhs in any previous year. But if you are an exclusive dealer of services, you are reguired to register for GST as soon as your turnover exceeds Rs. 20 lakhs. The limit of turnover reduces as one moves from goods to services.

GST Resgistration should be done right from the scratch of your business. Since the cost is also minimal, one should reap proper benefits from the commencement of their business. 

TDS (Tax Deducted at Source)

By the name only, it clarifies its meaning i.e., tax is deducted whenever payment is made. TDS stands for Tax deducted at source. Government has made it mandatory for all companies including startups to deduct TDS whenever they pay any salary to their employees or payment is made to contactors, or whenever any rent is paid .

It is your duty to submit the tax amount of your employees otherwise get ready to hurt your profits. Further, you are required to submit a statement which shall contain details regarding tax deducted and deposited to government. The TDS return is required to be filed every quarter in the form of TDS statement however the payment of TDS shall be deposited in every month. Non deduction of tax shall lead to disallowance of your expenses.

Start-ups are required to submit quarterly TDS return before these dates:

DIPP- Department of Industrial policy and promotion

The government of India has come up with different schemes to promote start-ups. Their vision is to change the nation from job seekers to job creators. To fulfil this vision, Government of India has launched this scheme known as Startup India Registration which will not only help startups financially but also non-financially.

If you are a private limited company or LLP or a partnership firm and your business activity focuses towards innovation or improvement, then congratulations!! you are eligible for the registration.

Benefits of Getting Startup recognized by DIPP

1. Exemption from Income Tax
2. Exemption from Angel Tax
3. Self-certification under various labour and environmental laws.
4. Easy winding up of company.
5. SIDBI Fund of Funds (Government Establishment) will help the start-ups.
6. Interconnection and sharing of ideas with other start-ups.
7. Get specified Government Tenders.
8. Helped by Business Incubators.

Trademark

A new car, a new building or even a new business is incomplete without a “NAZAR BATTU” that is a Nimbu-Mirchi garland. Basically, it is made of seven chilli and one lemon tied together and hung on walls. But,“can these garlands protect your business from getting copied”? A big “NO” would be the answer.

Ever hear these tag lines:

1. I’m loving it- ‘Mc Donalds’
2. Just do it- ‘Nike’
3. Impossible is nothing- ‘Adidas’

Why can’t their competitors use these taglines in their products?

Why can’t Burger king use “MC” before their burger names?

Imagine, spending lacs and crores of your money on building your reputation and watching someone else reap the fruits!! What can you do now? How will you protect your business?

The answer to this would be “Trademark”. Yes, you read it right. Every successful business gets their Trademark registered. Trademark is a mark or symbol which can be graphically represented and has the ability of differentiating the goods, products or services of entity from others. The name, logo, designs, tagline or product is a crux to any business and thus forms part of the Trademark. Further, whenever you think of expanding your business, it will be the cherry on top as people would be aware of your brand.

Getting a Trademark Registration has huge benefits, some of which are listed below:

1. It helps your consumers know you and your innovative products or services.
2. It enhances your competitive advantage over rivalry firms.
3. It builds Trust and Goodwill among the customers in the market.
4. It Differentiates your product.
5. Global Trademark Registration.
6. Use of ® Symbol
7. Protection for 10 years at low cost.
8. Creation of Intangible Asset.

Cash Transaction

• Pay Cash in Temples, but not in Business!
• Be a cashless millionaire.
• Saving Money in cash is not a wise decision.

We all have heard these sorts of quotes and phrases. But ever wondered, why are these said? Let me tell you the answer of this. We often give and accept cash in order to complete monetary transactions everyday without giving it more thought.

Cash has become a devil in the eyes of Government, if used beyond the limits! There is a limit for spending cash in business which you should surely watch out to stay away from troubles.

Here is a list of 4 limits in your daily transaction:

Acceptable Limit: Accepting cash worth Rs. 2 lakhs or more in a single day or from one or more transaction relating to one or more event will lead to cash transaction violation.

Donation Limit: Donating more than Rs. 2,000 in cash to a registered trust or a political party is also a violation of cash laws.

Business Payments: If you pay more than Rs. 10,000 in cash for an expense related to your business or profession, your expenses will not be allowed under Income Tax Act & you may have to pay a penalty.

Receive or Repay: Receiving or repaying Rs.20,000 or more in cash for transfer of immovable property can invite tax trouble in near future. And you will be surprised to know that the receiver is liable to be penalised and not the payer.

MSME: Micro, Small & Medium-sized Enterprises

As Aadhar provides an identity to the Individuals, likewise Udyog Aadhar also serves an identification to your business. To get this unique number you need to get yourself registered as MSME. MSME stands for Micro, Small & Medium-sized Enterprises. In recent times, to promote small businesses, Government of India has taken this initiative which has given a greater boost to the Entrepreneurial Sector.

Although getting registered as MSME is not mandatory but it will be beneficial to get your business registered here because it provides a lot of benefits in taxation, statutory and financial matters. No matter what business you are in, you can get your business registered here and claim such benefits & that too from the Government of India itself. In a developing country like India, MSME industries are the backbone to the economy.

Who can register here?

Following persons can get their registration done here, subject to Limit on their Turnover:

1. Proprietorship Firms.
2. Partnership Firms.
3. LLP’s (Limited liability Partnership).
4. Private Limited Company.
5. Public Limited Company.

Classification of MSME based on their Turnover

Benefits of Getting registered in MSME’s:

1. Easy sanction of Bank Loans.
2. Lower Rate of Interest.
3. 50% subsidy on expenditure for Patent & Trademark registration.
4. Up to 75% subsidy on actual expenditures towards product licensing.
5. Exemption in Excise Duty (duty on Manufacturing).
6. Exemption under Direct Tax Laws.
7. MSME registration helps in getting Govt. Tender.
8. Compensation of ISO certificate expenditure.
9. Collateral Free Loans i.e., no need to pay securities to get loans.
10. MSME’s get concession in their Electricity bills.
11. Govt. provides certain projects exclusively held by MSME.

Don’t worry if this is too much for you to handle, Finology Legal is here to help you!
For any legal services visit Finology Legal or write to us on legal@finology.in , or call at +91-9893249950