Business compliance and the entrepreneur
If you are an entrepreneur and the title made you raise your eyebrows…good. You are probably thinking “Compliance? With what? I’m just a small business!” Or the classic “This is just a side hustle”. The truth is all business are impacted by compliance on some level, some more than others.
So how do you know what to comply with? This article will introduce you to some basic tenets of compliance for different business structures within Trinidad & Tobago.
In Trinidad & Tobago, there are 3 main types of business registration.
Sole Trader
Partnership
Limited Liability Company
It is important to understand each registration type as each type has different implications regarding how you interact with and comply with our regulatory bodies.
But before we understand “how” let’s understand “what”.
What is a sole trader
The name itself gives a very big hint to what this is. A “sole” person carrying on a “trade”. This is a singular person conducting a business for themselves.
Key characteristics
The business belongs to the owner ONLY
The owner bears ALL risks and rewards
While the business might have a name, the person and the business are legally the same body
What is a partnership?
A partnership is a business with 2 or more owners. A simple partnership can be 2 or more sole traders coming to work together because of common interests or synergies within their businesses. A more complex model can be a law or accounting firm that is in an incorporated partnership with a legal status similar to that of a limited liability company.
Key characteristics
The persons coming together must have common business interests
Profits and losses shared among the partners according to a partnership agreement
What is a Limited Liability Company (LLC)
A business that is incorporated under the Companies Act. The business identifies itself with “LTD” at the end of its name. It is on the other end of the registration spectrum when compared to sole trader in that it is a separate legal entity from the person/s who own it. This causes the business structure to have much more compliance needs and is more regulated than the sole traders.
Key characteristics
Separate legal entity which allows owners to enjoy a limited liability
The company can enter into agreements on its own like the purchase of property etc
Heavy compliance via several pieces of legislation
How to comply?
The level of compliance needed by a business depends on the structure chosen with the LLC having the most requirements.
At a basic level, all the structures are subject to tax returns with the BIR (Board of Inland Revenue). However, the returns for each are different with different allowances and deductions. ALL businesses must file a tax return.
For the Registrar General, at a minimum, all business names must be registered. For a sole trader and unincorporated partnership, there is usually no other requirement after that. However, for incorporated partnerships and companies, there are additional documents for initial registration and every year after that of the business. That’s right…EVERY YEAR. So the right business structure must be chosen from the start so that entrepreneurs are fully aware of what they are getting into and the resources it would take to stay compliant.
This table summarises some of the basic documents that are required by the business structures.
Compliance is not just for the "big" companies, it applies to businesses at all levels and can lead to higher costs if not managed properly. Failure to comply with the requirements results in penalties and interest in addition to the taxes and fees that were legitimately due. That's a double hit!
To avoid any issues, this is definitely an area you should consult with a professional. As you can see from the table, there are many moving parts and different requirements at different times of the year. Having a resource dedicated to this area can reduce the likelihood of non-compliance.
Entrepreneurs, are you compliant?
Andrea Ragoo is a professional accountant in Trinidad & Tobago. Follow on LinkedIn