Operating a Private Limited Company opens up a myriad of possibilities, but it also comes with responsibilities. One of the most significant responsibilities you and your team will encounter is keeping track of unlimited compliance. Private limited company compliance is essential to keep your company operating legally. In fact, late filings, incomplete statutory records, and missed board meetings can subject the company to penalties, fines, or legal matters, slowing or even stopping the growth of your company.
However, fret not. The good news is that these matters are preventable. If you’re aware of the common mistakes that many businesses make, you can save your company from harm and protect all the time and effort you have already invested. More importantly, it allows you to concentrate on the things that matter- most importantly, your vision, your team, and your growth.
So let’s explore these compliance mistakes, rather than learning from your mistakes.
Common Compliance Mistakes of a Private Limited Company
Let’s discuss some frequent compliance mistakes that you may be making without realizing it, and how they can potentially hurt your business.
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Ignoring Annual Filing Obligations
It is indeed easy to say, “I will get to it later;” however, failing to file your ROC filings and annual returns, like MGT-7 or AOC-4, can get you in trouble. Even minor mistakes in your balance sheet, profit and loss accounts, or in your auditor’s report could incur penalties.
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Poor Board Meeting Habits
In general, skipping mandatory meetings of the board of directors or failing to have the minutes/write-up or resolutions around those meetings may seem benign. However, if these breaches are discovered during an audit, they can lead to adverse consequences. It is not an understatement to say that if you are not maintaining your statutory registers, you are simply exposing your business.
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Non-Compliance of Directors and Shareholders
When you change directors, shareholders, or your registered office, you must notify the ROC promptly. Simply delaying notification, or even worse, relying on outdated proofs of identity or address, can create unnecessary headaches. Your official records at the company registry should reflect the reality. This way, you are not caught off guard when something doesn’t check out.
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Overlooking Tax and GST Compliance
When a business files GST returns improperly or after the due date, sends invoices with mismatched values, or makes mistakes in TDS or income tax filings, it can lead to fines or problems. While most entrepreneurs can find tax compliance cumbersome, it is a shield against potential fines.
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Overlooking Statutory Registers/Records
Having incomplete or no register, like the Register of Members, Directors, Charges, Share Certificates, etc., can lead to headaches during an audit. Mishaps in accounting/bookkeeping do not just create discrepancies; they expose the company to additional scrutiny and fines.
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Failing to Comply with Compliance Specific to Your Industry
Some industries, like IT, finance, manufacturing, and healthcare, face additional burdens of compliance regulations. Not getting the appropriate licensing or permits may delay operations or, worse, stop projects altogether.
Tips to Avoid Compliance Pitfalls
Compliance doesn’t have to be overwhelming. Protecting your business so you can put your focus on what matters most is easy to do if you simply follow a few basic steps:
- Create a calendar to track deadlines. Track ROC filings, GST return filings, TDS returns and submissions, board meetings, etc.
- Maintain accurate and up-to-date records of minutes, resolutions, and statutory registers.
- Record changes in directors, shareholders, and registered office. Report changes to the ROC without delay.
- Consult professional services. Hire professionals like RegisterKaro to handle your financial filings and audits and avoid costly errors.
- Make use of technology. Set reminders, bookkeeping, recordkeeping, and other routine matters to digital.
- Stay on top of your industry compliance. Your specific sector will have specific compliance filing requirements. Keep yourselves informed of them so that you are not left blindsided.
Conclusion
While compliance may feel tedious sometimes, it can cost you time, money, and peace of mind if you do not stay on top of it. When you stay on top of filings, recordkeeping, and taxes, you are protecting the business and its growth. Undoubtedly, when you are proactive and structured about compliance, you run the operations more smoothly and keep the business on a solid path with less concern.
