Human Resources

12
Apr

Growing Your Business Through Trust

The aim of an employer is to promote his business such that it outlives him. In order to accomplish this, a solid foundation of trust that the employees can drive business growth without undue interference from the employer must be established. Often times, most business owners who do not trust their employees enough to relinquish their hold on them end up with a stagnated business. A lot of employers put themselves under so much pressure trying to micro-manage their employees. While this might seem their way of ensuring employees do what they are supposed to do, these employers might be doing their business a great dis-service if they do not allow some level of freedom and trust. If you are reading this article, you might have to say goodbye to your inner ‘Chief Information Officer’ to save yourself the trouble of constant exhaustion. Here are some reasons why you need to let go.

Grow your Business with Trust

Grow your Business with Trust


1. Trusted employees are more responsible and conscious of company goals

When you are always on people’s neck, it reduces their chances of growth. However, when they are left alone to deliver, they feel more responsible for their actions and the actions of others that might affect their timelines and deliverables. Unconsciously, they take on leadership roles and begin to keep tabs on each other (teamwork), thereby, taking the stress completely off you.

2. Employee’s autonomy is important for creativity
Do you share instructions or just your goals and objectives? Chances are that when you share instructions, you limit the paths to achieving a goal. You also limit flexibility. While you have some rules to guide them, it is always better when the process is not as you want it. Employees often come with fresh ideas that can be tapped in a friendly and open work environment. When you do not allow them to breathe, you lose out on their chances of sharing such ideas.

3. Trusted employees stick around
People leave their jobs more often because of their bosses, than they do because of their job descriptions or other factors. Trusted employees easily becomes sentimentally attached to a company because they feel appreciated and responsible. Even when the wage is not good, they think about the satisfaction they get. This reduces turnover and improves productivity.

4. Scrutiny kills confidence
Nobody wants to be under serious scrutiny even as an employee. It erodes confidence and kills creativity. The success of most companies these days is tied to the fact that they value employees’ ingenuity. When you boss people around, watch them all the time and critique their actions, it builds a form of resentment in them. They start to realise that they cannot please you and it gets to a point where they don’t even bother to add extra effort anymore, they will wait for it to pass through you.

5. Lack of trust puts a lot of pressure on the leader
When you are always scared that people will let you down, they will let you down. Employees are not the only ones who get frustrated when you don’t trust them, you also get frustrated. There are ways you can step back and delegate without relinquishing your oversight. If you do not find it easy to do this, then you need to think about what you might have done wrong instead. Did you hire the right hands? Do you train people? Do you always impose your own style? Do you give them good briefs? And most importantly, do you have something more valuable to do?

In conclusion, People thrive on trust and when ‘trust’ resonates in your workplace, even your customers feel safer. Sometimes, all you have to do is make resources available, you cannot keep doing all the work.

30
Dec

Tax Obligations of Sole Proprietorships, Partnerships and Incorporated Companies

It is no longer news that the Nigerian government has become increasingly keen on enforcing compliance with tax laws. Therefore, it is important for business owners to have basic knowledge of Nigerian tax system. To start with, different levels of government make laws and regulations related to taxation of businesses and individuals, respectively. Hence,  a first step will be to understand the various taxes and levies  administered by Federal, State and Local Governments in Nigeria.

A reference point would be the Taxes and Levies (Approved List for Collection) Act CAP T2 LFN 2004. Some interesting highlights include making it unlawful for Tax Collectors to mount roadblocks for the purpose of collecting taxes. In addition, there are limits to the use of Police to enforce tax collection.

For business owners seeking to know their tax obligations under the law, provided below is a succinct guide:

  1. Sole Proprietorships and Partnerships

Taxation of  sole proprietorships and partnerships are somewhat similar as both are subject to the Personal Income Tax Act (PITA), which makes provision for the direct assessment of the tax liabilities of the business on the sole proprietor or partners.
“Partnership” and “Sole Proprietorship” as business entities do not pay income tax. Rather, the tax (that is, the Personal Income Tax) is levied on the owner’s  share of profit after the distribution of the profit or loss made by the business.

For a full understanding of your tax  obligations, you can consult the Personal Income Tax Act.

In summary:

  • Your partnership or sole proprietorship is not ‘itself’ chargeable to tax
  • What is chargeable to tax is the share of profit from the partnership or sole proprietorship.

 

  1. Incorporated Companies

An incorporated  company, for tax purposes, is treated as a separate legal entity from the owners and therefore pays taxes accordingly. Based on the Companies Income Tax Act, the income of a company on which tax is payable are  the profits of a company from whatever source and irrespective of whether such profits are distributed as dividends or not.

Hence, your company should do the following as far as the tax law is concerned:

  • Find out if the income accruing to your company and its line of business is chargeable under the Companies Income Tax Act. You can share your line of business with me so as to enable me give a proper advice in this regard.
  • Pay 2% of your assessable profit as annual Tertiary Education Tax. This tax represents your company’s social responsibility to the Nigerian education sector.
  • If your company does any of the lines of business stated below, and have an annual turnover of NGN100M (one hundred million naira) and above, your company will be mandated by law to pay 1% of its profit before tax or the net profit figure as disclosed in your company’s account as the National Information Technology Development (NITD) Levy. The businesses affected are:
        1. Banking and Non-Bank Financial Institutions (NBFIs) such as capital market operators, mortgage institutions and microfinance banks
        2. Insurance Services and Brokerage
        3. Cyber and Internet Services
        4. Pension Fund Administration, Pension Management and allied activities, and
        5. GSM Services and Telecommunication.

 

  1. General Tax Duties Affecting Sole Proprietorships, Partnerships and Incorporated Companies

  • Value Added Tax (VAT):

VAT is an indirect tax imposed on the supply of services and goods in Nigeria, except for items that are exempted by the VAT Act (please consult the Value Added Tax Act for more information). VAT is calculated at 5% flat rate.

Every business owner in Nigeria (whether an incorporated company, sole proprietorship or partnership) is required to be an agent of the Federal Government to collect and remit VAT (Value Added Tax). Your duty is to include 5% of the total goods and services supplied as VAT on your invoice when sending to your clients/customers. When you receive payment, the VAT should be remitted to the Federal Inland Revenue Service (FIRS) on or before the 21st day  of the month following the month the goods or services were sold. For example, VAT collected in January should be remitted on or before 21st February.

  • Capital Gains Tax:

When your company (whether incorporated company, sole proprietorship or partnership) sells an asset, it must pay 10% of the chargeable gains accruing from the sales. For purposes of computation, you must be guided by the provisions of the Capital Gains Tax Act.

  • Withholding Tax (WHT):

WHT is an advance payment of tax and is deducted at source. By implication, your company (whether an incorporated company, sole proprietorship or partnership) merely acts as collection agent for onward transmission to the appropriate tax authority. Your company should deduct at source the WHT from gross payments made to individuals, partnership, community trustees, executors, family and body of individuals in respect of the following income sources:

    • All aspects of building, construction, civil work and related activities;
    • All types of contract activities or agency arrangements other than outright sales and purchase of goods and property in the ordinary course of business;
    • Professional services;
    • Technical services; and
    • Commissions

The current rates for withholding tax are as follows:

S/N

Types of Payments

Rates

(Companies)

Rates

(Individuals/ Partnerships)

1.

Interest, Rents & Dividend

10

10

2.

Royalties

10

5

3.

Building and Construction

5

5

4.

All types of contracts and agency arrangement, other than sales in the ordinary course of business.

5

5

5.

Consultancy and Professional Services

10

5

6.

Management Services

10

5

7.

Technical Services

10

5

8.

Commission

10

5

9.

Directors Fees

10

10

 

Conclusion

A good understanding of how tax system operates in Nigeria is necessary to the long term success of your business. It is therefore imperative that you embrace the knowledge shared in this article and use it to structure your business for purposes of effective compliance with government tax regulations.

 

Please note that the thoughts expressed in this article are the author’s opinion. This should not be used in making business or investment decisions and is not intended to serve as a tax advise.