Over 200 small business owners received free legal and tax compliance advice as part of the Flow Business webinar series.
Among topic discussed by legal expert, Debbie-Ann Gordon of DAG & Associates, were considerations in accounting for taxes and the tax write-off rules intended to relieve financially distressed businesses.
Gordon told the digital audience that it was imperative for business owners to take time out to explore the most suitable vehicle for their trade, whether sole proprietorship, partnership or company as the tax implications vary with each business type.
“It is important to be clear on your business form, as this has tax and legal implications. For example, sole proprietors should be aware that in a legal dispute they will be sued personally, while in the case of a limited liability company, the company will be sued and not the shareholders or directors. A limited liability company offers the greatest legal protection,” said Gordon.
“On the topic of extracting profits, the Sole Proprietor may withdraw cash from the business without any taxes beyond what is paid on the profits of the business. This is because the Sole Proprietor and the business are one for purposes of income tax. However, in the case of a company, the company is a separate person from its shareholders and directors and so amounts withdrawn from the company are taxed separately, whether as salary or dividend etc,” Gordon continued.
The provision of legal advice to small businesses is an untapped area says Sola Hines, Director, Legal Affairs for the Caribbean, Flow Jamaica Limited.
“Small business owners often wear many hats but understanding the legal landscape is not very easy. We wanted to fill this gap by providing general legal advice in all our Flow Business webinars. Debbie-Ann has done a stellar job of discussing taxes and its legal implications but there are several more topics to be covered in upcoming webinars,” Hines said.
One virtual attendee used the occasion to ask how to manage a business that was newly inherited.
Gordon in responding encouraged owners of newly inherited businesses to quickly seek clarity on the business form, that is whether it is a company, partnership or other and conduct a deep dive into its finances.
“Assuming the overarching business model is understood, special attention must also be paid to the income and expenditure of the business. This knowledge will inform whether you are able to offset, carry forward or deduct expenditures from your income so that the company operates as tax-efficiently as possible,” advised Gordon.
While acknowledging that most businesses in Jamaica are considered small or medium-sized, the tax attorney encouraged businesses experiencing financial hardship, to pursue the legal avenues for relief including write off of their debts and insolvency.
“In cases where a business is dormant or has ceased trading with no intention to revive the trade, you should remove the company or business from the register at the Companies Office of Jamaica. This will also prevent you from incurring future taxes,” said Gordon.
She, however, advised that if you intend to resume business, striking the business from the register may not be necessary or efficient, but in that case, you will need to continue filing your Income Tax and GCT Returns as well as your filings at the Companies Office.