In this age of side hustle, you may be the only one among your friends who is doing business and have the legal backing of the law, however from time to time, your friends may have contracts to execute and may request to route the project through your company name due to your experiences on the job.
While i do not discourage you from helping your friends, it is important that you let them know that all taxes traceable through that particular transaction is 100% their burden to bear including bank charges.
And not for both of you to share.
Making this statement early in the the transaction will help you avoid paddling into senseless debt, therefore you must let them understand that the moment the payment hits your account, you will get your auditor to work out all the taxes involved including bank charges before you wire the money to their account, because if you fail to do this, you may be in indebted to government bearing avoidable risk and you may find it difficult to retrieve the money from your friend.
In Nigeria the basic taxes payable to the federal inland revenue includes company income tax at 30%, Value added tax at 5%, With holding tax at 5%, local content tax at 1%. Their are other taxes but these are the basic, exceptions does exist depending on the industry. The value added tax is paid by the client which you are required to collect from them and remit to the government, while the 30% are taxed on your profit.
Am bringing this to your notice to help young business owners guide against bad book keeping, a friend of mine has been doing business since 2016 using his friends company, as at date, their liability is running into millions and she does not even have the money to pay up because they have been enjoying the good times and not paying government.
Therefore, to avoid being a victim of circumstances from the very beginning make it clear that this deduction is something you must do and if they refuse, don’t let them use your company name, do not spoil your good record, you can offer to help them register their own business company name, its pretty easy with less than 100,000 naira for a 1,000,000 naira shares they can have their own business name within one week.
Also remember you can also charge them a little token, maybe certain percentage off the money they would be making in addition to taking the taxes, i know someone all he does is provide his company name for people to do business with and he charges 15% because his books are right.
Anyways this is all am going to say, remember tax burden for a business other than yours is not yours to bear, direct it to the right entity to avoid plunging into senseless debts.
Kindly comment your experience as regards to taxes and business with friends and family.
looking forward to reading your thoughts.
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