Business in General

Points to Consider
Before plunging out on your own, make sure you cover these points:

  1. Are the prospects for that product or service reasonably profitable – considering the risk and capital outlay involved?

  2. Have you sufficient capital to “see you through” the initial stages when you are building up the business?

  3. How will it affect your family, friends and their lives?

  4. What happens if it fails?

  5. How much competition is around? If not very much, as yourself why? A profitable business always draws others unless it is something new.

  6. Be very careful of goodwill. This may be for a business name, contacts, client lists or a long term lease of premises. Often this item is well overpriced and should be allocated over assets depreciable to the new purchaser.

  7. Will you operate as a sole trader, partnership, trust or company, and does tax have any bearing on this decision?

  8. What’s the minimum you will need to make in order to provide for business costs and usual living expenses, and should you make drawings for yourself?

  9. Work out some sort of budget. A rough plan of what to expect is better than no plan at all.

  10. What do I need to keep in the way of books and records, and what about other items such as tax registrations, insurance, telephones, stationery etc?

  11. Have you discussed this with your tax adviser?

These questions should be settled after discussion with your adviser. Business today is a specialised field – it requires specialised advice.

A Simple System is Best
It is a requirement of tax law that all taxpayers in business must keep sufficient records in the English language in order for their income for any year to be readily arrived at. The records you are required to keep will depend on the type and size of business.

In general, most businesses need to adopt a system incorporating the following basic points:

  1. Open up a bank account with cheque facilities.
  2. All receipts or takings should be banked intact.
  3. All payments should be made by cheque as much as possible.
  4. Credit card payments can also be used.
  5. Cheque butts should be fully detailed.
  6. All deposits should be analysed and detailed.
  7. Small cash payments should be recorded in a cash disbursements or petty cash book.
  8. Keep all invoices, statements, receipts, legal papers, agreements, etc.
  9. Keep a record of all money owing to you and by you, and take stock at the end of each year.
  10. Keep all bank statements and reconcile them regularly.
  11. Let the IRD know that you are in business so they can provide you with the various forms you may require, especially if you are employing staff.

At the end of each financial year (31 March) your tax adviser will contact you and ask for all these things to be brought in. He/she will then proceed to complete your profit and loss accounts and balance sheets, so that taxation returns can be completed.