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The latest changes to the corporate legistration allow small business owners to keep operating costs low. Does that means that you should do away with auditing, secretarial and other professional services right away? Before you rush to so, first evaluate your own situation.
There are 3 key factors to consider, viz., (1) nature, scale and profitability of operations, (2) internal resources.
(1) Nature, scale and profitability of operations
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If your company comprises a single shareholder or a husband and wife team, you would want to minimise professional cost. If it involves other partners, you would prefer the corporate structure and systems to be professionally structured and managed.
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If your operation is a smallish one, say turnover is less than $100,000 per annum, you would want to minimise professional cost. If you envisage high turnover, you could then afford to engage expert services.
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If your operating margin is very thin, you would want to minimise professional cost.
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Consider the cost of the service provided by external parties. Some are more expensive than others.
(2) Internal resources
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if internally, you are shorthanded, or none of your team member are familiar with or knowledgeable about with financial and corporate matters, it would be more cost effective to outsource secretarial, bookkeeping or other corporate management functions to specialists.
Cost benefits considerations
There's no one-shoe-fit-all advice. But broadly speaking, the majority of small businesses could do away with expensive audit, secretarial and other corporate maintenance costs until they grow to be and of a certain scale. Meanwhile, it is important to first know your own needs, seek unbias service providers and adopt a balance approach should there exist a cost-benefit conflict. Whilst the present environment permit considerable savings - all necessary corporate work still need to be performed and managed. It makes sense to outsource - albeit economically.
Company secretarialship, auditing and bookkeeping are the 3 important areas in corporate management:
What to consider in corporate secretarial matters?
Indeed, today's legistration allow you to self incorporate and appoint anyone including yourself to be the secretary.
Firstly, incorporation is a one off affair and unless you have incorporated many companies are are familiar with every aspects of self-incorporation, such activities should be outsourced to specialist.
this is especially so if yours is not a single shareholder or a husband-and-wife shareholding.
Post incorporation. You will need to establish and maintain all relevant registers, including shareholdings, directors, charges etc. You will also need to prepare relevant directors' resolutions and shareholder meeting to approve certain corporate transactions.
You will need to monitor all statutory filings deadlines.
Missing too many filings deadlines or wrongful conduct in statutory filings would invariably result in being singled out by the relevant authority to appoint a qualified person to act as secretary. Being ordered to do so, would not only incur higher cost but would somewhat blemish your company's standing in terms of corporate management
When to consider auditing services?
Auditing is the assurance given by approved company auditors that the financial statements of a company are stated in a true and fair manner.
By virtue of its size, large companies will benefit from the discipline of auditing and the assurance given to shareholders that the accounts are prepared in a proper manner.
On the other hand, owners of small companies are likely to be actively managing their operations and the cost of auditing would only be justifiable if external parties such as financiers and bankers require it.
Audited financial statements offer additional assurances when new investors acquire shares or purchase the business of a company. In the event that such needs arise, it is always possible to arrange for an audit stretching as many years as desired. As such, there is no need for small businesses to have auditing performed year after year in anticipation of such needs. Furthermore, such needs can also be satisfied by due diligence audits- which is even more appropriate for such purposes.
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