Question from Kona, H.I “How Can I Attract Investment at Start-Up?
Follow these SEVEN KEY disciplines.
- You MUST be extremely passionate about your idea and concept, “The Project”; you want to execute this plan;
- You MUST do research to convince yourself and others your Project will be a successful venture; the most noteworthy is proving demand for your product/service with existing SALES or bonafide orders;
- You MUST articulate your Project into a written Business Plan that makes sense; based on your researched and reasonable assumptions; no ‘Pie in the Sky’ delusions; having a sales track record backs you up;
- You MUST leverage all that you bring to the table; who you are & why you? Financial background, Managerial expertise – Start-Up Capital; cash & assets, your ‘Skin in the Game’;
- You MUST be able to explain your Project in sufficient detail to be understood;
- You MUST be knowledgeable about the industry and environment in which you will operate; competition, barriers to entry, regulatory controls, non-controllable factors; how will you battle the negatives?
- You MUST convey the REWARD; what will the return on investment be? Your forecasts based on early track record must prove profitability.
If someone else were asking you for money to fund this project would you buy-in? Know your audience; those who are invited to participate in The Project, friends, family investors and banks will be testing your ability to properly execute the plan. Can you deliver?
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Hello Roger,
I found information about your great website in Linkedin. I have a question:
How can income tax system effect you if you are self-emploed?
Thank you very much.
I wish you success.
Sincerely,
Olena
Thank you Olena for your inquiry. My answer is generic therefore it is suggested you also seek professional advice from a qualified Accountant after reviewing what follows.
Self-employment can be in the structural form of a sole proprietorship, a partnership or an incorporated company. In the first two structures the income you draw/earn is taxed personally at whatever tax bracket/rate you fall into. This depends on how much you earn and also where you are domiciled as tax law will vary within Countries, States and Provinces (jurisdictions).
With an incorporated company all earnings accrue within the company to be used to meet expenses and pay its owner(s). The company will pay income taxes on the residual profits after all expenses. The personal income can be in the form of taxable earnings and dividends. As a legal entity and with knowledge of your own tax bracket and personal circumstance your company can defer payment at its discretion to you the shareholder by splitting income between earned and dividend. Generally dividends will be taxed at a lower rate than earned income in many jurisdictions so discussion with your Accountant can help you plan an effective tax strategy.
Tax law may also apply to Sales/Revenues you earn. For instance in my country, Canada we have the harmonized General Sales Tax. Other jurisdictions may have a similar tax. Depending on the type of service you provide, your cumulative sales over a minimum limit may mean having to charge the tax to your customers. It is extremely important to know just what your liability is for collecting this tax in your distinct jurisdiction.
If you are required by law to collect sales taxes you are then liable for remitting these funds to your distinct tax authorities. Meticulous sales records must be maintained showing the amount of the sale separately from the tax collected. It is a good idea to have a separate bank account established so you do not confuse the amount of tax you now owe with the ownership of your sales revenues. For instance if you record total sales including the tax as revenue you may falsely believe all the money is yours thus skewing what you think you have made in profit.
Keeping a separate account for the taxes collected will help you from dipping into these funds inadvertently to pay normal operating expenses. Remember if tax collection is a requirement for you then the funds collected are held in trust by you for your government; failure to remit can result in serious consequences. Ignorance of the law is no excuse so the best advice is to prepare yourself before you start your business by talking with a professional CA or CPA and learn if these sales taxes apply to you.
Hello Roger,
Thanks a lot for your explanation and your time. It is very useful materials for me.
Sincerely,
Olena