There are several ways you can use to fix this problem and the most common ways are:

a) Declare a shareholder salary

b) Repay the loan form the company

c)Declare a dividend

The current rate as at 17/02/2020 prescribed by IRD is 5.26%

It is basically a loan from a shareholder. When a company is registered the shareholder will generally pay a share capital of $100 which is recorded under the Equity on the balance sheet of the entity.

Is the fund that a shareholder withdraws if they are not paying themselves wages.

This is also known as fund introduced into the company. Since the company is a separate entity thus the shareholder will have introduced fund if they don’t have sufficient fund in the company account to pay the debts of the company.

The straight answer is NO. You won’t see drawings in The Profit & Loss Account of the company. This is generally recorded on the Shareholder Current Account.

YES.

Contact us to discuss about your obligation

Yes

Yes

Standard method is the best as it is simpler and can be prepared at a lowest cost.

YES, records need to be kept for 7 years.

– Better control of your business

-Increase you chance of getting finance or funding

-Saves time and money

-Audit will take less time

– Cashbooks, journals & ledgers

-Bank statements and deposit slips

-Receipts and invoices issued

-Wage books

-Paper-based method

-The computer method

-The Computer method

-Sole Trader

-Partnership

-Limited Liability Company

-Look through Company

a) Sole Trader

*They will have to manage their own business and are responsible for all the business’s income and debts.

*Sole traders don’t pay themselves wages instead take out drawings when they need money for personal use.

*Drawings done by a sole trader is not tax deductible

b) Partnerships

*Partnership itself doesn’t pay tax on its income or profit, nor do the partners pay tax on any regular drawings that they do form the business. Instead, at the end of the year if the business makes any profit, then the profit is allocated to the partners as per the agreement among the partners.

We can’t reallocate partner’s share of income or losses if there’s a bona fide contract.

Generally, the partner who works for the partnership can be paid salary with PAYE deducted if there’s a contract of service.

c)Limited Liability Company

Any profits made belong to the company.

The company can distribute money in 3 ways.

• The shareholders can periodically withdraw money from the company. At the end of the year the company calculates a salary amount on which the shareholder will have to pay income tax on.
• The shareholder can be paid wages/salaries with PAYE deducted. These are treated as the deductible business expense for the company.
• The company can also pay dividends to the shareholder out of the profits that remain after tax.

d)Non-Profit Organisations

Unless your organisation has been approved by Inland Revenue as being fully exempt from income tax, the organisation must file an income tax return each year. There are several income tax exemption entitlements available as long as none of the income or funds are distributed to the members.

The organisation main aim must be to meet the requirements of the particular exemption. You must apply for income tax exemption as it is not automatic.

You must include the following while applying.

• Copy of organisation’s written rules or constitution
• Copy of certificate of incorporation, if organisation is incorporated
• Details of how the organisation will operate

e) Charities register

You will need to register your charity with Charities Services. There are 2 main conditions that need to be fulfilled.

• The charity’s purpose and activities must be exclusively charitable
• None of the charity’s income or fund may be used to benefit its members, trustees or associates.

If your charity is fully exempt form income tax, you will not need to file an income tax return unless Inland Revenue department will ask you to. A registered charity is also exempt from having RWT deducted from its interest and dividend income. HI sis known as having RWT exempt status.

It is a separate tax but a way to paying your income tax as you receive income through the year. If you residual income tax is more than $2,500, you’ll have to pay provisional tax for the following year.

There are 3 options that you can choose from-standard, estimation and ration.

Due dates for provisional tax

Capital Expenses – are usually one-off payments to buy assets that will be used to run the business

Revenue Expenses-are the operating expenses that are recorded on the income statement. These are fully deductible.

• Council Rates
• Insurance
• Power
• Telephone & Internet
• Interest on Mortgage/Rent Paid
• Repair & Maintenance