Category Archives: Business Success

A Taxing Time for the Self-Employed

Over the last two weeks, we have been focusing on the steps that newly self-employed persons should take to start out on the right footing in business. It is definitely a challenge to figure out which taxes are applicable and when they are due to be paid. Let’s take a look at the charges that sole proprietors are required to pay:

Income Tax

Income tax should be calculated on all sources of earnings including business profit, rent, and subcontracts. This tax is charged on the net profit after allowable deductions such as salaries, business rent, bank loan interest, transportation and all other expenses incurred in the production of the business income. The tax rate is 25 per cent of income, but persons are currently allowed to keep J$196,872 of their earnings tax-free.

Even though you are newly self-employed, you are still required to file an estimated income tax return. This outlines how much tax you’ll be liable to pay for the year, based on your expected taxable earnings. It’s best to be conservative when stating how much income you think you will earn when you’re just starting out.

Estimated income tax payments must be paid quarterly on the 15th of March, June, September and December each year, regardless of when you actually started operating. So if you commenced business in August, you will still need to pay up the quarterly amounts for March and June when you are filing for the September quarter.

An annual return outlining your actual income and tax liability is due by March 15th each year. If you earned less than J$1m in gross income you can just fill out an accompanying schedule that outlines your income and expenses. If your income is above this amount, you will need to submit more detailed documents like a profit and loss statement.

Note that losses from a business can be set off against all other income earned in that year. If a loss cannot be fully offset, the balance may be carried forward to the following year’s returns. If your tax liability is nil, it means that your estimated quarterly payments for the next year will also be nil, as they are calculated on the taxable income of the previous year.

Want to learn how to be successful in business? CLICK HERE!

The annual return form can be a little challenging for the average person, so it is advisable to get an accountant to calculate your final statement. Ensure that you keep proper records of all your expenses, as these can help to give you tax savings. You also need to keep your records for at least six years, as the tax department can request an audit on your books.

National Insurance Scheme (NIS)

All employed persons are obligated to make payments to the NIS, which was designed to provide retirement and other welfare benefits for its contributors. The law says that persons should contribute five percent of their gross income to the NIS, up to an earnings ceiling of J$500,000 per year. So the maximum that anyone would pay for NIS is J$25,000 per year.

To start the payment process, visit the nearest NIS office with your NIS card and you’ll be given a blue stamp book to record your weekly contributions. You have to buy J$20 stamps from the post office, which are to be affixed to each of the 53 spots on the blue book. Save time by buying all the stamps at once (J$1,060 for the year). If you’re newly self-employed, the NIS agent will tell you when your weekly obligations should start.

To complete the NIS payments for the year, take a copy of your annual income tax returns to the NIS to calculate the balance owed, if any. The NIS office will issue a demand notice which must be paid at the Inland Revenue Office. Then, take that receipt to the NIS office where they will record your payment and issue a new blue card for the current year.

National Housing Trust (NHT)

The law states that all persons between the ages of 18 and 65 years must contribute to the NHT once they are working and earning at least the minimum wage. The NHT classifies self-employed as persons who are working for themselves or earning an additional income to their regular pay cheque, contract workers and company directors, all of whom should pay three per cent of their income; while domestic workers, and Jamaican citizens working in embassies and consulates in Jamaica or overseas pay two per cent.

To register as a self employed contributor, you need to complete a declaration of income form which should be signed and stamped by a Justice of the Peace. This document outlines what you estimate you will earn for the year. Then, call the NHT office for an appointment with a compliance officer to determine your contribution amount. You will need your NIS card, TRN, valid identification, one passport sized picture, and some form of evidence of your estimated income.

NHT payments for the previous month’s contributions are due by the 14th of the current month. You can pay cash at any commercial bank and by debit or credit card at NHT offices island-wide. Note that late payments attract a 20 per cent interest penalty. Currently the NHT has an amnesty for outstanding contributions, so take advantage of this if you need to.

Next week we’ll conclude our series on self-employed start-up steps by looking at some other tax requirements.

DON’T MISS MY NEXT ARTICLE! CLICK BELOW TO RECEIVE IT IN YOUR EMAIL:

Subscribe to Financially S.M.A.R.T. by Email

Copyright © 2008 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, September 4, 2008

Cherryl is a financial columnist, consultant and coach. See more of her work at www.financiallyfreenetwork.com and www.financiallysmartonline.com. Contact Cherryl

Lessons for the Self-Employed

“I read your article last week outlining all the institutions that self-employed persons need to visit when starting out. I’m trying to decide if I should leave my job and start my own business with an idea that I’m convinced will work. What advice can you give someone who is thinking about becoming self-employed?”

The decision to become your own boss is not always an easy one. If you’re thinking of leaving your regular nine-to-five job to strike out on your own, you’ll be faced with feelings of uncertainty about your plan of action, and fear about an unknown financial future.

After changing my job situation from employee to ‘self-generated-income earner’ last year, I have learnt many lessons about becoming an entrepreneur. Some have come the hard way by learning from my mistakes, but valuable knowledge has also been gained by observing and mirroring the practices of profitable business owners.

Here are some of priceless tips I’ve learned about successful self-employment: Continue reading Lessons for the Self-Employed

Self-Employed Start-Up Steps

Every year, more and more people join the ranks of the self-employed in Jamaica. Some seek this route in desperation as they can’t find a regular job, while for others it’s the fulfillment of a long-held dream. Whatever the reason that motivates you to become your own boss, it’s important to start out the right way.

There are some initial requirements that must be carried out to ensure that you’re operating in accordance with Jamaican laws. Let’s take a look at some of the legal steps involved in becoming self-employed:

1.   Register at the Companies Office of Jamaica

It’s actually illegal to operate a business without first registering the name with the Companies Office of Jamaica (COJ). Any individual or firm with an established business place involved in the trading of goods has to be registered, and if you’re providing a service using a name other than your given name, you must register that name.

Sole proprietors apply with a BN1 form, while two or more operators fill out a BN2 partnership form. To complete your application, you will need to bring your Tax Registration Number (TRN), a valid photo identification card, and proof of address such as a utility bill with your name and location. Continue reading Self-Employed Start-Up Steps

Getting out of business debt

“I’m desperately seeking a way to turn around my business. I’ve run up a lot of debt in trying to promote a new product, but sales are not coming in fast enough to cover my repayments.

“I am confident that I’m about to make a breakthrough as more customers are accepting my product, but I don’t know how I’m going to survive until that happens. I can’t give up now, as generating income from the business is the only way I can hope to get out of my debt. What can I do?”

The above quote tells the real-life scenario of a determined entrepreneur, who despite all her financial challenges continues to follow her business dream. She has a vision to revolutionize her industry with new technology, but like many young business owners, has underestimated what it would take to succeed.

Faced with escalating debt, she is anxious about her future and desperate to find solutions. Continue reading Getting out of business debt

New Options for Small Business Financing

“I need to get a loan to expand my small restaurant. However, many of the micro financing options charge interest rates that would kill my business. Regular banks ask for collateral that I don’t have. No one wants to sign as a guarantor for my loan. I’m getting very frustrated, because I know that if I got financing, my business would really take off. What can I do?”

The universal answer facing small business owners in search of financing is “No Collateral, No Deal.” If you’re an entrepreneur with a viable business idea or an expansion plan, at some point you’ve probably faced the challenges of raising capital without collateral.

There is an increased business-friendly focus in most of the commercial banks. With more people going the route of self-employment, it makes sense for financial institutions to pay closer attention to the development of the Micro, Small and Medium Enterprise (MSME) sector.

Small business can eventually bring big business in the long run.

Continue reading New Options for Small Business Financing

Revenues from Referrals

Recently we looked at one of the secrets of making money – applying the law of attraction to manifest wealth. The law of attraction states that whatever you think about and focus on will determine your results.

So if you concentrate on earning money instead of worrying about your bills and debts, then you will be more likely to succeed in achieving the money you desire.

I decided to take my own advice by carrying out all the recommended steps to create abundance. One ‘pretend-I-have-money’ technique I used is visualizing cheques coming to me in the mail. In less than a week, I received a completely unexpected cheque rewarding me for a business referral I had made over a year and a half ago.

Yes, I know I probably would have received this money even if I hadn’t visualized it, but it was definitely a sign that the law of attraction was in effect!

After getting this sizeable referral payment, I was re-energized to seek other customers for this overseas-based training company. If I could earn all that money for simply enlightening my associates about the benefits of their business, then I would be happy to be a walking advertisement for them.

This experience was a perfect example of the power of referral marketing for increasing business revenues. A satisfied customer, armed with a strong motivation to tell others about your business, is a marketing medium that will keep providing customers long after the print ad has faded and the radio commercial is forgotten.

Word-of-mouth marketing can be especially beneficial to start-up operations that might not have the funds to spend on traditional forms of advertising.

Marketing coach, John Jantsch writes about ‘Referral Madness’ in the June 2008 issue of Entrepreneur magazine, “Referrals are probably the ultimate measure of success for your marketing efforts.” Jantsch explains that people refer for logical reasons because they know that your company offers good products and deals, and also for emotional reasons because they like doing business with you.

Unfortunately, too many entrepreneurs fail to take advantage of the potential profit that enthusiastic customers can bring.

How can you kick-start this referral process to enhance your business revenues?

Jantsch reveals that it’s important to develop your customers’ trust in your company and your products, by ensuring that you deliver what you promise all the time. “You must intentionally build processes that allow you to deliver such a wonderful experience that your customers have little choice but to rave about your company and its services.”

Let’s look at some steps recommended by Jantsch to convert prospects into customers who can become referral agents for your business:

1. Know: People need to get familiar with your operation. Identify your ideal target market and use direct advertising, networking opportunities, newspaper articles, and PR events to get their attention. If they don’t know that you exist, they can’t recommend you!

2. Like: Ensure that you create a great first impression. ‘Fake it until you make it’ so that your prospective customers see an image of where you want your company to be, not where you are today. Spend a little extra to make your marketing materials and office area really stand out.

3. Try: Encourage new customers to experience your service. You may have to offer free products or services, use supermarket sampling opportunities, or provide some kind of worthwhile reward to entice them to give you a try.

4. Buy: Make it simple and effortless for your customers to buy from you. Offer payment options, delivery services, fast turn-around time, and superior after-sales service to remove any hesitations they may have in purchasing from you.

5. Repeat: Keep them coming to you over and over again. Use customer appreciation events, frequent buyer rewards, complimentary product lines and cross-selling offers to ensure that they buy repeatedly. Remember, consistent clients make great referrals.

Once you have hooked your customers to your products and services, many of them will naturally tell their friends and family about you. However, to maximize your referral business, it’s best to establish a formal programme that will provide customers with tangible rewards.

Customers will be more motivated to spread the word if they will receive a direct benefit.

Here are a few ideas that you can utilize in your referral programme:
– Give free or discounted services for a specific number of new customers brought in;
– Provide monetary commissions based on new sales brought in;
– Offer free gifts from a joint venture partner which may also want to advertise its services (e.g. travel destinations, book vouchers);
– Create a free information guide to be given out in exchange for new leads such as email addresses;
– Ask your customers how they would like to be rewarded if they help to increase your business.

Remember, your own customers can potentially be your most productive marketing and sales team. Encourage referrals and watch your business revenue grow!

Take Advantage of the Tax Amnesty

If you are enjoying Jamaica’s benefits, you must pay your taxes,” – Don Wehby, minister without portfolio in the Ministry of Finance

This impassioned declaration came from Minister Wehby as he spoke recently at a First Global Bank corporate breakfast, where he shared highlights of the 2008/09 Budget Debate.

His comments came against the background that some 40 per cent of Jamaica’s productive activity was taking place in the grey or underground economy. The income of these persons is not reported, so although they are benefiting from the amenities of the country, they contribute little or nothing to the tax coffer.

Wehby’s message was clear: the time had come for Jamaicans to change their attitudes about paying taxes, and the government was prepared to use both persuasive and punitive methods to ensure that delinquent taxpayers toe the line. Continue reading Take Advantage of the Tax Amnesty

Four things that can destroy your business dream

“I’m struggling to find the right business venture that can guarantee me success. I tried running my own operation in two different industries, but I had to close down the businesses both times because they weren’t viable and I was losing money. I know it’s possible to make money in business, so what am I doing wrong?”

Many businesses suffer from varied problems that can undermine their viability. Lack of enough low-cost working capital, high production costs, competitive pressures, – the list goes on. When you think of all the challenges, it’s a miracle that so many people desire to be their own bosses!

Sometimes the underlying cause of issues that business owners face has less to do with a difficult economic environment, and more to do with the entrepreneurs’ own attitudes and practices. It’s easy to recognize the external issues contributing to business failure, but it’s harder to identify the negative habits that can destroy a business dream. Continue reading Four things that can destroy your business dream

It’s Tax Time!

“Time is running out: file outstanding income tax returns by March 15. We would rather see you sooner… than later.” The Tax Administration department has been conducting a very visible media campaign to remind people that it’s time to pay income tax. We can’t say we haven’t been warned!

Who exactly is being targeted in this tax compliance drive? According to the Tax Administration’s website, www.jamaicatax.gov.jm, income tax is to be paid by all individuals and companies, at the specified rates, on all income or profits earned or received. Some persons, such as pensioners, non-residents and the disabled are entitled to specific tax exemptions. Continue reading It’s Tax Time!

What Do Bankers Want?

One of the major complaints that I receive from small business clients is that banks are too rigid in their demands whenever they are seeking financing. A common cry is that many financial institutions are happy to collect their money, but never show the same appreciation when a loan request is made.

Anyone who has made pitch for financial assistance and left the bank rejected and dejected has probably wondered, “What exactly does this bank want from me anyway?”

Recently the Small Business Development Agency in association with Scotia Small Business held a workshop on strategic business planning to assist small organizations to grow their operations.

Peter Mohan, manager of Scotiabank Morant Bay, gave an insightful presentation which revealed some key issues that bankers focus on when considering whether your loan application would be successful or not. Continue reading What Do Bankers Want?