Give entrepreneurs A BREAK, closing a business is too costly

QUESTION: I’M in a serious spot because I need to close down my store but have too many roadblocks in the way. I rented a shop last year to expand my clothing business, which I used to do from my home using Instagram. Business started off slow, but it was starting to pick up after November and December.

BUT THEN, since March month end, things have shut down. Honestly, I haven’t even sold underwear, and I still have to be paying all this money out of my pocket. I have decided that it’s better to just close everything, but now, Companies Office is telling me that I need an audit report to close the business fully. When I was opening, I didn’t need an audit report, so why do I need this now? What must I do?

– Meisha

BUSINESSWISE: I’m sorry you are being forced to close down because of the crisis, and I know how painful it is to have to watch your hard-earned investment and sweat equity evaporate before your eyes.

Unfortunately, the other punishing lesson you and other entrepreneurs may learn in this crisis is how complicated and costly it is to close a business.

I always warn entrepreneurs that Jamaica is a world leader when it comes to opening a business but makes it neither cheap nor easy to close one down. In the 2020 World

Bank Ease of Doing Business Report, Jamaica ranked sixth out of 190 economies in the category ‘starting a business’. However, in other categories, we didn’t rank as well, such as ‘paying taxes’, 124, and ‘enforcing contracts’, 119.

The latter rankings have a direct bearing on the ease of closing a business as it is a costly and time-consuming to get clearance from the tax office to close your business, as well as putting to rest any contractual dispute with your landlord in the event you need to have the case addressed by litigation in court.

Also, whereas you don’t need to retain the services of an accountant or any other professional to open a business, you may need the services of several professionals to help you close, such as a lawyer and accountant in your case. Unfortunately, policymakers have not come to the realisation that when a business is forced to close, the entrepreneur is often out of money and resources and physically and emotionally drained. It is often the time when they are least equipped to afford the lengthy time, resources, and stress of a complicated and costly closure process.

On a hopeful note, I contacted the Companies Office of Jamaica, COJ, and was told that they are contemplating measures to help customers affected by COVID-19, though up to the time of writing this article, no decision or announcement had yet been made.

The challenge I know this will pose for you is that for every day you wait to close the business, your costs will keep escalating, as will your personal debt. Now, more than ever, you need certainty, urgency, and closure, and I simply don’t have any definitive answers for you on this.

Right now, to close your business, you must advise the COJ in writing and submit an auditor’s certificate verifying that there are no assets or liabilities, along with a fee of $4,500.

ANNUAL RETURNS

All annual returns must be filed up to the date of the request for removal before the company can be locked down. Checks with several registered accounting firms revealed that the cost of an auditor’s report ranges from $25,000 to $75,000 plus GCT, which includes their cost to investigate your current tax position, as well as whether the company has any outstanding loans with a financial institution.

If there are assets or liabilities, then the question of liquidation must be resolved, as detailed on the COJ’s website at www.orcjamaica.com/ compliance/.

A tax helpline representative – 1-888-TAX HELP – advised that a closure letter must be submitted to Tax Administration Jamaica, TAJ, along with your GCT certificate and certificate of closure from the COJ, if available.

Companies with employees must submit final IT02, ET03, and S02 forms with payments. A separate letter should be sent to the manager for customer service at TAJ requesting deactivation of the company’s TRN. Finally, closure notices must also be sent to the NIS and NHT.

On a very important note, to err on the side of caution, I have learnt from experience that even when you do hire a professional to close your business, you will need to personally walk through the process and maintain every record and receipt because it is not uncommon for steps to be missed or overlooked, which can result in the business not being struck from the roll of either the COJ or TAJ, and you will become personally liable for non-compliance-related interest and penalties that can accrue for many years after you have walked away from the business.

An improperly closed business can literally become a shackle impeding your ability to pick yourself up from these losses in the future.

One love!

■ Yaneek Page is the program lead for Market Entry USA, a certified trainer in entrepreneurship, and creator and executive producer of The Innovators and Let’s Make Peace TV series. yaneek.page@gmail.com.