Incorporation & Post-Incorporation Compliance

Certificate of Incorporation & PAN/TAN

Once a company is incorporated through the MCA’s SPICe+ system, the startup legally comes into existence and receives its Certificate of Incorporation (COI), which acts like the company’s “birth certificate.” Along with COI, the system automatically generates PAN and TAN through an integrated process with the Income Tax Department. These documents are essential for opening a bank account, conducting financial transactions, deducting TDS, and filing tax returns. Founders must securely store all digitally issued certificates because these documents will be verified during due diligence, GST registration, and investor onboarding.

Opening Company Bank Account

Every startup must open a dedicated current account in the company’s name within 30 days of incorporation to comply with Section 12 of the Companies Act. All revenue, expenses, investments, and statutory payments must flow through this account to maintain financial transparency. Using a personal bank account can trigger compliance issues, tax notices, and problems during audits. Maintaining clear segregation of personal and business funds is a cornerstone of corporate governance.

First Board Meeting Compliance

Under Section 173, a company must hold its first board meeting within 30 days of incorporation. During this meeting, directors pass key resolutions for opening a bank account, appointment of an auditor (if needed), adoption of MOA/AOA, issuance of share certificates, and approval of the registered office. Proper minutes of the meeting should be maintained as per Secretarial Standards (SS-1). Failure to hold board meetings attracts penalties under Section 450.

Registered Office Verification – INC-22 Filing

If the registered office address was not finalized during incorporation, the company must file Form INC-22 within 30 days to verify the address. Valid proof such as a rent agreement, NOC from owner, utility bill, or property tax receipt must be attached. Having a verified registered office is mandatory for receiving official government communications and notices from MCA, Income Tax, and GST departments.

Mandatory Annual Compliance Under Companies Act

Appointment of Auditor – ADT-1

Auditors are the backbone of a company’s financial governance. Under Section 139, companies must appoint a statutory auditor within 30 days of incorporation and file ADT-1 with MCA. The auditor is responsible for verifying financial statements and ensuring compliance with accounting standards. Failure to appoint an auditor prevents filing AOC-4 and may attract penal action under Section 147, including heavy fines.

Annual Return – MGT-7/MGT-7A

Under Section 92, startups must file an Annual Return containing details about directors, shareholding patterns, promoters, loans, meetings, penalties, and overall governance. This filing ensures transparency and prevents fraudulent changes in ownership. For small companies and OPCs, the simplified MGT-7A form applies. Late filing results in hefty penalties under Section 403.

Filing Financial Statements – AOC-4

Under Section 137, every company must file its audited financial statements, board report, CSR report (if applicable), and auditor’s report using AOC-4. These filings disclose the company’s financial health to regulators and investors. Non-filing not only results in penalties but may attract director disqualification under Section 164(2).

DIN KYC – DIR-3 KYC

Every director must update their KYC annually through DIR-3 KYC or DIR-3 KYC web. If not filed, the DIN becomes inactive and cannot be used for signing any MCA forms. Reactivation requires a penalty of ₹5,000. This ensures MCA has updated director identity records.

MSME Form-1

If a startup delays payment to an MSME supplier beyond 45 days, it must file MSME-1 twice annually. This is mandated by the MSME Act and monitored by MCA to protect small vendors. Non-filing increases legal vulnerability for the startup.

Event-Based Compliance

PAS-3 for Share Allotment

Whenever a startup issues shares whether for investors, ESOPs, or founders PAS-3 must be filed within 15 days of allotment. This is compulsory under Sections 39 and 42. Non-filing creates irregularities in cap table, complicates due diligence, and may invalidate fundraising rounds.

Share Transfers & Stamping

Under Section 88, startups must maintain an updated Register of Members. Every share transfer must follow proper documentation, stamping, valuation (if required), and board approval. Non-compliance exposes the company to shareholder disputes and MCA scrutiny.

Change in Director – DIR-12

Any appointment, resignation, or change in designation must be filed via DIR-12. This ensures MCA’s database reflects actual leadership. Not updating director details can cause complications in filings, notices, and audits.

Change in Registered Office

Depending on whether the change is within the same city, ROC, or state, startups must file INC-22, MGT-14, INC-23, or INC-28. This ensures proper jurisdiction for legal communication.

ESOP Compliance

Issuing ESOPs requires compliance with Section 62, Rule 12, shareholder resolutions, valuation reports, and filing PAS-3. ESOPs without compliance become legally invalid during due diligence or acquisition.

LLP Compliance

Form 11 – Annual Return

Form 11 is the Annual Return filed by every LLP on or before 30 May each financial year. It contains key information such as details of designated partners, changes in management, contributions received, and a summary of all compliance activities undertaken during the year. Even if the LLP has not carried out any business or has zero turnover, filing Form 11 is mandatory. Non-filing attracts a stringent penalty of ₹100 per day, with no upper limit, which can quickly accumulate into a heavy financial burden. Persistent default may also lead to notices from the Registrar and potential prosecution under the LLP Act, 2008.

Form 8 – Statement of Accounts & Solvency

Form 8 must be filed annually by 30 October and includes two major components: (a) a Statement of Accounts showing the LLP’s financial position, and (b) a Solvency Declaration signed by the partners, affirming that the LLP can meet its liabilities. This filing is critical because it highlights the LLP’s financial health and operational integrity. Non-filing leads to daily penalties of ₹100 per day, may trigger MCA scrutiny, and can create legal complications during audits, funding, or due diligence. Form 8 is legally significant because partners are personally liable for the accuracy of solvency declarations.

GST Compliance Roadmap

GSTR-1 & GSTR-3B

Every startup registered under GST must file two core monthly or quarterly returns: GSTR-1, which reports outward supplies, and GSTR-3B, which summarizes tax liability, ITC claims, and payments. The filing frequency depends on turnover and QRMP eligibility. Delayed filings lead to late fees, 18% interest on tax, and automatic blocking of ITC. Continuous default may also result in e-way bill blocking under Rule 138E, affecting business operations. Filing these returns on time is essential to maintain compliance and avoid cash-flow disruptions.

E-Invoicing Compliance

Startups whose turnover exceeds the government-notified threshold (currently ₹5 crore in many cases, subject to updates) must generate e-invoices for B2B transactions. These invoices are authenticated through the Invoice Registration Portal (IRP). E-invoicing ensures real-time reporting, prevents tax fraud, and enables automatic population of sales data in GSTR-1. Non-compliance results in invoices being treated as invalid, attracting penalties under Section 122 of the CGST Act.

ITC Reconciliation – Rule 36(4)

Under Rule 36(4) of the CGST Rules, startups must reconcile their Input Tax Credit (ITC) with the details uploaded by vendors in GSTR-2B. Only eligible ITC reflected in GSTR-2B can be claimed. Incorrect claims lead to ITC reversal, penalties, and interest at 18%. Regular reconciliation helps detect vendor non-compliance, prevents financial losses, and ensures smooth GST audits.

Annual Return – GSTR-9 / 9C

Businesses crossing the prescribed turnover limit must mandatorily file GSTR-9, the annual GST return summarizing all transactions for the year. Those above a higher limit must also file GSTR-9C, a reconciliation statement certified by a CA/CMA. These filings ensure complete year-end reconciliation of outward supplies, inward supplies, ITC, taxes paid, and adjustments. Non-filing may attract penalties under Section 125, increased scrutiny, and potential GST audit triggers.

Income Tax Compliance

TDS Deduction & Quarterly Returns

Under the Income-tax Act, every startup is legally required to deduct TDS (Tax Deducted at Source) on various payments such as salaries (Section 192), contractor payments (Section 194C), rent (Section 194I), professional fees (Section 194J), interest (Section 194A), and commissions (Section 194H). After deducting TDS, the amount must be deposited with the government within the stipulated timelines and reported through quarterly TDS returns Form 24Q (salary) and Form 26Q (non-salary). Failure to deduct or deposit TDS attracts interest under Section 201(1A), penalties under Section 271C, late filing fees under Section 234E, and in extreme cases, prosecution under Section 276B. Proper TDS compliance is essential for avoiding tax scrutiny, preserving cash flow, and maintaining financial credibility for investors and lenders.

Advance Tax

Startups that have a tax liability exceeding ₹10,000 in a financial year must pay advance tax in four instalments June, September, December, and March as mandated under Sections 208 and 211. Advance tax ensures that companies pay taxes consistently throughout the year rather than in a lump sum at year-end. Failure to pay or underpayment results in interest under Sections 234B and 234C, which can significantly increase total tax liability. Proper advance tax planning helps startups manage cash flow more efficiently, avoid last-minute tax burdens, and remain compliant with Income-tax regulations. For businesses with fluctuating income, quarterly projections and budget tracking become essential to avoid penalties and maintain financial discipline.

Labour Law & HR Compliance

EPF Registration & Monthly Returns

Under the Employees’ Provident Funds and Miscellaneous Provisions Act, EPF registration becomes mandatory once a startup employs 20 or more employees. Both employer and employee must contribute 12% of basic wages to the Provident Fund. Startups must file monthly ECR (Electronic Challan-cum-Returns) and deposit contributions within the due date. Delays result in penalties, damages under Section 14B, and interest under Section 7Q, and intentional defaults may lead to imprisonment for responsible officials. EPF compliance also enhances employee trust and supports long-term HR stability.

ESIC Compliance

The Employees’ State Insurance Act mandates ESIC registration for startups employing 10 or more employees (in some states 20), where employees earn below the prescribed wage threshold. ESIC provides comprehensive healthcare, disability, maternity, and social-security benefits. Employers must file monthly returns and deposit contributions. Non-compliance can lead to penalties, interest, and prosecution under Sections 84 and 85 of the Act. ESIC compliance is crucial for employee welfare and legal protection.

Shops & Establishment License

Every startup operating an office, branch, warehouse, or co-working facility must obtain a Shops & Establishment License from the respective State Labour Department. The license governs working hours, overtime rules, leave policies, holiday entitlements, child labour prohibition, and workplace safety norms. Some states require annual renewal, while others have one-time registration. Failure to obtain or renew the license can attract fines and labour inspections, affecting day-to-day business operations.

Professional Tax

Professional Tax is a state-level tax applicable in Maharashtra, Karnataka, Gujarat, West Bengal, Telangana, and several others. Startups must register under Professional Tax and deduct PT from employee salaries, depositing it to the state authority either monthly or annually depending on rules. Non-payment results in interest, late fees, and penalties. For founders, proper Professional Tax compliance ensures smooth payroll processing, avoids labour department notices, and strengthens HR governance.

FEMA Compliance

FC-GPR Filing

Under the Foreign Exchange Management Act (FEMA), any time a startup issues shares or convertible securities to a foreign investor whether through private placement, rights issue, or ESOP exercise it must file Form FC-GPR on the RBI’s FIRMS portal within 30 days of share allotment. This filing requires a valuation certificate from a Chartered Accountant, Merchant Banker, or Registered Valuer, ensuring that the shares are issued at or above Fair Market Value, as mandated under FEMA pricing guidelines. Non-compliance with FC-GPR timelines can lead to compounding proceedings and heavy penalties under Sections 13 and 15 of FEMA, including monetary fines up to three times the amount involved. Proper FC-GPR filing is essential to maintain regulatory transparency, avoid foreign exchange violations, and ensure a smooth fundraising experience with global investors.

FLA Return

The Foreign Liabilities and Assets (FLA) Return is an annual filing required under FEMA for all Indian companies and LLPs that have received foreign investment or made overseas investments during the financial year. Filed by 15 July each year, the FLA return reports the organisation’s foreign shareholding, external commercial borrowings, overseas assets, and liabilities. The filing ensures that RBI maintains accurate records of India’s foreign investment inflows and outflows. Non-filing or incorrect filing can attract FEMA violations, scrutiny, and compliance notices. Filing the FLA return on time helps startups maintain clean foreign investment records, reduces regulatory risk, and strengthens credibility during due diligence or future FDI rounds.

DPIIT & IP Compliance

Startup Recognition

DPIIT (Department for Promotion of Industry and Internal Trade) recognition is one of the most powerful compliance benefits available to Indian startups. Once a startup is recognised under the Startup India scheme, it becomes eligible for several regulatory relaxations, tax incentives, and procedural ease. The biggest advantage is the tax exemption under Section 80-IAC, which allows eligible startups to claim a 100% income-tax holiday for three consecutive years within the first ten years of incorporation, provided they meet the turnover and innovation criteria. DPIIT recognition also allows startups to self-certify compliance under key labour and environmental laws, reducing the risk of inspections and penalties in the initial stages. Additionally, recognised startups receive faster processing of patent applications, discounted IP filing fees, and eligibility for government-hosted seed funds, grants, and incubator programs. Overall, DPIIT recognition improves legal clarity, reduces compliance burden, and enhances investor trust during early-stage fundraising.

Trademark/Patent Registration

Intellectual Property (IP) compliance is a critical part of a startup’s legal strategy. Trademark registration protects the startup’s brand name, logo, and identity, preventing competitors from copying or misusing it. A registered trademark also provides a statutory right under the Trade Marks Act, 1999, enabling the founder to enforce brand protection through legal action in the event of infringement. Similarly, patent registration under the Patents Act, 1970 safeguards product innovations, technical processes, and unique solutions. DPIIT-recognized startups enjoy up to 80% rebate on patent filing and fast-track examination, which significantly reduces cost and time. Strong IP protection boosts investor confidence because it creates defensible business value, helps justify valuations, prevents legal disputes, and ensures long-term ownership of innovation. For startups in tech, D2C, SaaS, healthcare, manufacturing, and R&D-heavy sectors, IP compliance is essential to maintaining a sustainable competitive edge.

Conclusion

Building a successful startup in India requires more than innovation and funding — it demands disciplined, transparent, and continuous compliance. From incorporation to annual filings, event-based reporting, tax obligations, labour regulations, GST filings, and FEMA requirements, every compliance step directly affects a startup’s credibility, legal standing, and operational stability. Startups that ignore these responsibilities often face penalties, investor distrust, cash-flow disruptions, and even the risk of strike-off under the Companies Act. A structured compliance roadmap ensures that the business remains legally protected, financially sound, and prepared for audits or due diligence at any time.

For founders, compliance should be treated as a strategic investment rather than a regulatory burden. Staying updated with MCA, GST, Income Tax, and FEMA requirements helps avoid legal complications and builds trust with customers, partners, and investors. By adopting systems, maintaining proper books, engaging professionals, and following a compliance calendar, startups can prevent costly mistakes and focus on sustainable growth. A compliant startup is not just safer it is stronger, scalable, and far more attractive to investors.

Frequently Asked Questions (FAQs)

Q1. What is a startup compliance roadmap?

Ans. A startup compliance roadmap is a structured plan outlining all legal, regulatory, tax, accounting, and corporate governance requirements a new business must meet. It covers registrations, statutory filings, licences, financial reporting, labour law obligations, and ongoing compliance responsibilities. The roadmap ensures the startup operates legally, avoids penalties, and remains investor-ready.

Q2. Why is compliance important for early-stage startups?

Ans. Compliance protects startups from legal penalties, ensures business continuity, builds investor trust, and establishes credibility in the market. Early-stage startups that ignore compliance face issues such as GST cancellation, DIN disqualification, tax notices, and rejection during due diligence. Strong compliance practices create a stable foundation for growth.

Q3. What are the mandatory registrations required after incorporation?

Ans. After incorporation, startups must obtain a PAN, TAN, bank account, GST registration (if applicable), Professional Tax registration (state-wise), Shops & Establishments licence, and Udyam registration for MSME benefits. These registrations ensure the business can legally operate, hire employees, and comply with tax and labour laws.

Q4. What ROC compliances must startups file annually?

Ans. Startups registered as Private Limited Companies must file annual returns, financial statements, hold board meetings, and maintain statutory registers under the Companies Act, 2013. Key filings include Form AOC-4, Form MGT-7, DIR-3 KYC, share allotment forms, and event-based filings like changes in directors or capital structure.

Q5. What tax compliances do startups need to follow?

Ans. Startups must comply with GST filings (GSTR-1, GSTR-3B, GST annual return), TDS payments and returns, advance tax, and income tax filings. Non-compliance results in interest, late fees, penalties, or prosecution. Startups must also generate e-invoices if they cross turnover thresholds prescribed under GST law.

Q6. Do startups need to follow labour law compliance?

Ans. Yes. Startups with employees must comply with PF, ESIC, Bonus Act, Gratuity Act, Maternity Benefit Act, and the Shops & Establishments Act. Payroll, employment contracts, wage records, attendance, and statutory contributions must be accurately maintained to avoid labour disputes and legal penalties.

Q7. What contracts and internal documents must startups maintain?

Ans. Startups should maintain founders’ agreements, employment contracts, vendor agreements, client agreements, NDAs, privacy policies, and IP assignment documents. Proper documentation prevents disputes, protects intellectual property, and ensures legal clarity in business operations and relationships.

Q8. Why is bookkeeping and financial compliance essential for startups?

Ans. Accurate bookkeeping ensures clean financial statements, helps file taxes correctly, and prepares the business for fundraising. Investors carefully examine financial records during due diligence. Maintaining proper accounts, reconciliations, invoices, and audit trails is essential for compliance and financial discipline.

Q9. How does non-compliance affect startup funding?

Ans. Non-compliance significantly delays or blocks funding because investors require clean legal, tax, and regulatory records. Missing filings, unpaid taxes, unregistered IP, disputed ownership, or poor documentation raise red flags. A compliant startup appears trustworthy, scalable, and low-risk to investors.

Q10. How often should startups review their compliance status?

Ans. Startups should review compliance monthly for tax filings, quarterly for financial and accounting checks, and annually for ROC filings and statutory audits. Regular compliance tracking prevents last-minute issues, reduces legal exposure, and ensures the company remains ready for investment or expansion.