For startups, compliance obligations are an absolute must-have, and we delved right into it in the first of our compliance series. But here’s the thing — there are various startup regulatory compliance requirements to satisfy. Therefore, it is important to know the types of regulatory compliance for startups that need to be satisfied.
Types of regulatory compliance for Startups
Indeed, it bears repeating that startups that fail to comply with regulations face legal risks and penalties, which can be detrimental to their operations and their existence even. Compliance, therefore, is essential to ensure that startups operate legally, ethically, and sustainably. Before you read on, click here to see the easiest way to ensure you stay compliant from anywhere.
There are several types of compliance that startups are required to satisfy. These can all be grouped into two general categories: Internal and External Compliance.
Internal compliance, otherwise referred to as corporate compliance, refers to the adherence to internally designed codes, policies, and rules intended to regulate the business’s internal operations. This ensures that the business is run in such a manner that it meets the desired level of operational quality and productivity. It may also be aimed at putting internal processes in place to guarantee adherence to external compliance requirements. These rules may cover delegation of financial and administrative responsibilities, meeting rules, conflict of interest situations, employee relations, etc.
External compliance for startups, on the other hand, often involves adherence to the government’s rules and regulations introduced to regulate the operations of businesses within its jurisdiction. These rules often cover various issues, and failure to comply may result in significant consequences ranging from the imposition of penalties to the complete shutdown of the business. There are different ways to classify the components of external compliance; however, we shall consider the types of external compliance across these four headings: legal compliance, financial compliance, data privacy compliance, and industry-specific compliance. These are examined below:
- Legal compliance: This refers to adhering to laws and regulations set by the government. These laws vary depending on the country and industry in which the startup operates. Legal compliance includes business registration, taxation, labour laws, intellectual property laws, and environmental regulations. Startups must comply with these laws to avoid legal penalties and ensure that they operate within the legal framework.
- Financial compliance: entails adhering to financial regulations, accounting standards, and taxation laws. Startups must keep accurate and up-to-date financial records to comply with financial regulations. This includes maintaining financial statements, income statements, balance sheets, and cash flow statements.
- Data privacy compliance: involves adherence to data protection laws and regulations. Startups that collect, store, or process personal data must comply with data protection laws to ensure that they protect the privacy of their customers. Some of these laws include, where applicable, the Data Protection Act in the United Kingdom, the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) in the United States. Startups must ensure that they have the necessary technical and organizational measures in place to protect personal data and comply with data protection laws.
- Industry-specific compliance: refers to adhering to regulations and standards specific to the industry in which the startup operates. This includes compliance with the prevalent financial regulatory framework for fintech startups, compliance with health and safety regulations for healthcare startups, compliance with food safety regulations for food startups, and compliance with aviation regulations for drone startups. Industry-specific compliance ensures that startups operate within the legal framework set by regulatory bodies and governments.
In conclusion, compliance for startups is critical to operating legally, ethically, and sustainably. Startups must always endeavour to comply with internal and external compliance obligations. If you need the easiest way to ensure compliance, click here to get started.