#BounceExclusive: 5 Things A Small Business Owner Must Know About Tax (1)
Mr. Ibekwe (not real name) is a food dealer at Oyingbo market in Lagos.
His rice supplies come from Kebbi state and Abakaliki besides the imported ones he gets from major distributors. His beans supplies come from Sokoto and Kano. His garri comes from Edo state and yam comes from Benue. His wheat supplies come from Zamfara and Jigawa states.
Having established a formidable reputation with his suppliers, all he does each time he needs his suppliers is to send a quote to them and they waybill the products to his warehouse at Iddo in Lagos.
Mr. Ibekwe has also established a strong distribution network.
More than 40% of the food retailers and restaurants in Lagos Island and part of the mainland patronize him. Business was growing.
But one day, his long-time friend who worked with the ministry of education told him of government’s plan to supply food to schools.
With the help of that his friend, he could be sure to secure the contract. The contract extends several months and the contract sum runs into several hundreds of millions.
Mr. Ibekwe had been making so much money but not in hundreds of millions. It was a lifetime opportunity, one he needed to grasp with both hands.
But there was a catch, all business owners vying for the contract must show evidence of tax payment for the past three years.
But my dear Ibekwe does not even have a registered company let alone evidence of tax payment.
So, to cut the long story short, he lost the contract, as he was disqualified in round one.
There are many "Ibekwes" in Nigeria, who own thriving businesses but are not registered let alone paying tax to government.
If you belong in Ibekwe’s clan, here are 7 things you need to know about tax:
1: Tax Is Evidence Of Business Legitimacy: Governments do not tax unregistered businesses. So, your registration means that your business is legal and officially approved by state authorities.
So, first you must apply and register your business with the corporate affairs commission. If you have no idea how to go about it, you need to seek help from a lawyer who will charge you a small fee and complete the registration. Make sure the lawyer is not a phony.
As a small business, you may do only what is called business name registration without incorporation. Even with this status, you shall be issued a CAC business name registration certificate which qualifies you for a tax identification number with which you can start paying tax.
2: Your Business Cannot Have A Bank Account Without Tax Registration: As a small business owner, a bank account registered in your business’ name makes you more reliable and convinces more people to do business with you.
However, you cannot open a bank account in Nigeria today in your business’ name without registering for Value Added Tax at least.
For you to open the bank account, you must provide a tax identification number of your business.
And you see, not many of your clients would be willing to pay money into your personal account while dealing with them as a company.
To be continued...