A lot of entrepreneurs and small business owners take a “we’ll deal with it when it happens” approach to solving legal and compliance challenges. If you are one of these reactive, seat-of-the-pants-type businessmen, be aware that you leave yourself vulnerable to liability and compliance risks. You may even miss growth opportunities and get huge tax shocks when you least expect them. All of this can be downright dangerous for your business’s lifetime and for your peace of mind.
We are now at the half-way point in the financial year. This is a great time to do a mid-year legal check up of your business and ask yourself some tough questions. The answers you glean will give you the insights you need to figure out where you are at present and if you’re on the right path for the future.
Here is our 5-point mid-year checklist!
#1: Should you expand to another state?
Maybe you’re doing really well in your home state and are thinking of expanding to other states. But before you jump in, get more information!
Is there a demand for your products or services in your target states?
What is the tax structure in that state and is it financially feasible for your company?
Are government policies in your favour? For example, can you set up base in an SEZ (in that state) and take advantage of tax breaks?
Will you find labour with the requisite skills, training and abilities?
#2: Should you expand your product/service portfolio?
Many small firms expand into new product lines without knowing themselves and their own capabilities better. Don’t make this mistake!
Reassess your current situation. Do you have the capability and resources to add more products to your portfolio? If you need to hire more human resources or invest in more assets, do you have the financial wherewithal to do so?
Also, find out if there are barriers to entry in your proposed product line. If there are more opportunities than barriers, now may be a good time to pursue your vision of expansion!
#3: Should you change your company’s legal structure?
Perhaps your company started life as single person concern or a partnership firm. But as it has grown and become more complex, you might have realised that a different structure may better suit your needs. You might get more funding opportunities and tax flexibility if you form an LLP or private limited company.
Research what’s out there and what might work best for you in future.
#4: Do need more people on-board?
No company can survive without its people.
And it definitely needs people to grow: people with the right attitude, skills and competencies who can convert management’s vision into reality with their hands-on-deck approach.
Assess your staffing situation. If you are growing your product line (see #2 above) or expanding into another state (see #1 above), you will need the support of your staff. Are your people already overworked and/or overwhelmed? Then you should consider increasing your team with more employees, vendors, freelancers, etc, especially if you plan to expand. Also, evaluate your current team and identify if professional learning/development is required to prepare them for your future plans.
#5: Are you meeting your compliance requirements?
When you run a business, you agree to meet certain ongoing legal obligations. These may vary according to your location, industry type or business structure. It is your responsibility to keep yourself updated on these requirements and make sure you stay on top of them.
What are your state’s reporting requirements?
Do you need to hold annual meetings for stockholders?
When should you file your company’s returns?
Which laws are applicable to your business and are you abiding by them?
Are you meeting your tax obligations?
Do you need to renew any certifications, licenses or permits? By when? What are the fees?
Final thoughts…
Mid-year is an ideal time to catch up on everything that was due in the first half of the year and also to prepare for actions you must take in the second half to meet your legal obligations as a going concern.
Consider talking to a legal or financial expert (corporate lawyer, company secretary, chartered accountant, etc) for guidance. They can help you verify that you’re doing what you must to keep your company legally intact and compliant.
At MyTaxGuru, we help business owners in India successfully navigate the complex legal and regulatory landscape. We can help you with business registrations, trademarks, tenders and all ROC-related activities. For more information about our services, contact us:
Phone: 022-2308-0666, +91 9224618250
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