Startup Legal Compliance Checklist for Year One
Starting a company is exciting. Keeping it compliant is essential. Indian startups face a wide range of regulatory obligations from the moment of incorporation, and missing any of them can lead to penalties, prosecution, or operational disruption. This comprehensive checklist covers every compliance requirement a startup needs to track, organized by category and timeline.
Immediate Post-Incorporation Compliance (Days 1 to 30)
| Task | Deadline | Form/Action | Penalty for Non-Compliance |
|---|---|---|---|
| Open bank account | Immediately | Current account with authorized bank | Cannot deposit subscription money |
| Deposit subscription money | Within 30 days | Transfer to company bank account | Required for INC-20A filing |
| Appoint statutory auditor | Within 30 days | Board resolution + ADT-1 | Rs. 300/month company + Rs. 100/month officers |
| First board meeting | Within 30 days | Hold and record minutes | Rs. 25,000 per meeting not held |
| Register for GST (if applicable) | Within 30 days of liability | GST REG-01 | Rs. 10,000 or 100% of tax due |
First 180 Days Compliance
- File INC-20A (Commencement of Business): Must be filed within 180 days of incorporation after depositing subscription money in the bank account
- Set up accounting system: Choose accounting software, set up chart of accounts, begin recording all transactions
- Register for Professional Tax: Required in states like Maharashtra, Karnataka, West Bengal, and others (varies by state)
- Shops and Establishments Act registration: Required within 30 days of starting operations (varies by state)
- MSME/Udyam registration: Apply if the startup qualifies as micro, small, or medium enterprise
- Startup India (DPIIT) registration: Apply if the startup meets DPIIT eligibility criteria for benefits
Ongoing Monthly Compliance
| Compliance | Deadline | Applicable To |
|---|---|---|
| TDS deposit | 7th of the following month | All companies making TDS-liable payments |
| GST return (GSTR-3B) | 20th of the following month | Monthly filers (turnover above Rs. 5 crores) |
| GST outward supply (GSTR-1) | 11th of the following month | Monthly filers |
| PF deposit | 15th of the following month | Companies with 20+ employees |
| ESI deposit | 15th of the following month | Companies with 10+ employees (some states) |
| Professional Tax deposit | Varies by state | Companies in applicable states |
Quarterly Compliance
- TDS returns (24Q, 26Q, 27Q): Due by 15th of the month following the quarter end (July 15, October 15, January 15, May 15)
- Advance tax installments: June 15 (15%), September 15 (45%), December 15 (75%), March 15 (100%)
- Board meetings: At least one board meeting per quarter with maximum 120-day gap
- GST returns (GSTR-1 quarterly): For businesses under the QRMP scheme (turnover below Rs. 5 crores)
- TDS certificates issuance: Form 16A to be issued within 15 days of TDS return filing
Many startups overlook board meeting requirements. You must hold a minimum of 4 board meetings per year, give 7 days advance notice to all directors, maintain a quorum (at least 2 directors or 1/3 of total directors), and record detailed minutes. A penalty of Rs. 25,000 applies for each meeting not held.
Annual Compliance Checklist
ROC Filings
- Statutory audit: Complete audit of financial statements by the appointed auditor
- AGM: Hold Annual General Meeting within 6 months of financial year end (September 30)
- AOC-4: File financial statements within 30 days of AGM
- MGT-7A: File annual return within 60 days of AGM
- DIR-3 KYC: All directors must file KYC by September 30
- ADT-1: File auditor appointment/reappointment within 15 days of AGM
- DPT-3: File return of deposits/loans by June 30 (if applicable)
Tax Filings
- Income tax return (ITR-6): File by October 31 (for audit-required companies)
- Tax audit report: Complete by September 30
- Form 16 issuance: Issue to all employees by June 15
- GST annual return (GSTR-9): File by December 31
- Transfer pricing report: If applicable (international or specified domestic transactions)
Event-Based Compliance
These filings are triggered by specific events in the company's lifecycle:
| Event | Form | Deadline |
|---|---|---|
| Share allotment | PAS-3 | Within 30 days of allotment |
| Director appointment/resignation | DIR-12 | Within 30 days of change |
| Change in registered office | INC-22 | Within 15 to 30 days of change |
| Increase in authorized capital | SH-7 | Within 30 days of resolution |
| Creation of charge (loan) | CHG-1 | Within 30 days of creation |
| Change in MOA/AOA | MGT-14 | Within 30 days of special resolution |
| Annual auditor appointment | ADT-1 | Within 15 days of AGM |
Compliance for Funded Startups
Startups that have raised funding face additional compliance obligations:
- FCGPR filing (if FDI received): File with RBI within 30 days of share allotment to foreign investors
- Investor reporting: Quarterly or monthly financial reports as specified in the shareholders' agreement
- Board observer rights: Provide board meeting notices and materials to investor nominees
- Reserved matters compliance: Obtain investor consent for matters listed in the SHA before taking action
- ESOP compliance: If ESOPs are granted, maintain ESOP register and file necessary forms
- Valuation reports: Required for each share issuance (from a registered valuer for CA certification)
Compliance Management Tips
- Hire professionals early: Engage a CA for accounting and tax, and a CS for ROC compliance from day one
- Automate accounting: Use software like Zoho Books, Tally, or QuickBooks to maintain real-time books
- Set up a compliance calendar: Use a shared calendar with reminders for every deadline
- Maintain a compliance folder: Keep digital copies of all filings, acknowledgments, and certificates organized by year
- Review quarterly: Conduct a quarterly compliance review to catch any missed or upcoming obligations
- Budget appropriately: Allocate Rs. 50,000 to Rs. 1,50,000/year for compliance depending on company size and complexity
Conclusion
Compliance is not a burden. It is the operational discipline that keeps your startup legally protected and investor-ready. Missing compliance can cost you far more than complying on time, both in direct penalties and in lost opportunities. Use this checklist as your ongoing reference guide, and update it as your startup grows and takes on new obligations.
IncorpX offers comprehensive compliance management packages for startups, covering all ROC filings, tax compliance, and regulatory requirements so founders can focus entirely on building their business.
Frequently Asked Questions
What compliance is needed immediately after incorporation?
Within the first 30 days of incorporation, you need to: open a bank account, deposit the subscription money, file INC-20A (commencement of business declaration), appoint an auditor (ADT-1 within 30 days of incorporation), and obtain GST registration if applicable. These are the most time-sensitive post-incorporation filings.
Is GST registration mandatory for all startups?
GST registration is mandatory if your annual turnover exceeds Rs. 20 lakhs (Rs. 10 lakhs for special category states). However, it is also mandatory regardless of turnover if you supply goods/services through e-commerce platforms, make inter-state supplies, or are required to deduct TDS under GST. Many startups register voluntarily for ITC benefits.
What is INC-20A and when should it be filed?
INC-20A is the Declaration for Commencement of Business. It must be filed within 180 days of incorporation, declaring that subscribers have paid the subscription amount. Failure to file INC-20A within 180 days can result in the ROC initiating proceedings to remove the company's name.
How many board meetings should a startup hold each year?
A Private Limited Company must hold a minimum of 4 board meetings per year, with not more than 120 days gap between two consecutive meetings. The first board meeting must be held within 30 days of incorporation. One Person Companies can hold 2 board meetings per year with a 90-day gap.
What labor law compliances apply to startups?
Startups with employees must comply with: PF (Provident Fund) if they have 20+ employees, ESI (Employee State Insurance) if employees earn below the threshold, Professional Tax (varies by state), Shops and Establishments Act registration, and the new labor codes covering wages, social security, and working conditions.
Do startups need to maintain statutory registers?
Yes, every company must maintain statutory registers including: Register of Members (MGT-1), Register of Directors (MBP-4), Register of Charges, Minutes Books for board and general meetings, Register of Loans and Investments, Register of Contracts with Related Parties, and Register of Share Transfers.
What is the penalty for not appointing an auditor?
If a company fails to appoint an auditor within 30 days of incorporation, the Board must appoint one within 90 days. Continued failure results in the members appointing at an EGM. Non-appointment penalty includes Rs. 300 per month for the company and Rs. 100 per month for every officer in default.
Is PF registration mandatory for all startups?
PF registration under the Employees' Provident Fund Act is mandatory when a startup has 20 or more employees. Some startups voluntarily register even with fewer employees. Both employer and employee contribute 12% of basic salary. Non-compliance attracts penalties including damages up to 100% of arrears.
When should a startup register for TDS?
A startup should register for TDS (obtain TAN) at the time of incorporation since TAN is now issued through the SPICe+ process. TDS must be deducted from the very first payment that crosses the applicable threshold: salary payments, rent above Rs. 2,40,000/year, professional fees above Rs. 30,000, and contractor payments above Rs. 30,000 per transaction.
What happens if my startup does not comply with labor laws?
Non-compliance with labor laws can result in: penalties and fines (varying by law), prosecution of directors and officers in default, employee claims and litigation, and negative impact during due diligence for funding rounds. Labor law compliance is increasingly scrutinized by investors during due diligence.
