CAN TWO FRIENDS BE BUSINESS PATTERNS?

You must consider these tips before starting a business with your alter-ego…     

One of the most discussed question asked in our Bollywood movies is ‘Can a boy or and a girl be just friends?’. But in real life scenario there is another question which prevails to more relevant than the one quoted above and that is ‘Can two friends be business patterns?’ . Well, we have seen a lot of examples where two friends have set up a successful business venture. However, there are also a few examples where difference of opinions in business has proved out be the reason for souring of the relationship between two friends. So, if you are planning to commence a business with your alter-ego it becomes really important for you to consider the following tips before starting the operations. 

BE CLEAR OF THE MONEY MATTERS

Money is one of the root causes of breaking off of relationship so never let this revered evil destroy your relationship. Be clear of all the monetary aspects of your business like their respective share in capital, profit sharing ratio, share in equity etc..  Once you have decided these points stick to them and avoid altering them without proper paper work. 

KNOW YOUR POSITION

You might be good at financial, marketing and operational matters but you can’t do that all by yourselves. So, it is of utmost importance for you to know your position and role in the company. Be clear of the responsibilities that you and your friend(s) is/are supposed to be endowed with. Once, you have decided the line of responsibilities give your friend(s) sufficient space, time and freedom to plan their course of action and execute them. This will evade any chances of conflicts and ego clashes that result in decline of business as well as the relationship.

BE PROFESSIONAL WHILE RESOLVING CONFLICTS

No matter how hard you try to evade the conflicts when you are working together, the situations of conflicts and disagreements are bound to arise and these situations would be the acid test of your relationship (both personal and professional). Try to handle these situations in the most professional way possible. Firstly, let the conflicts be confined to office and don’t take it to the personal level. Listen to the point of view of your friend cum business partner, have a discussion with all the stakeholders, support your claims with facts and past data and finally take the decision which is expected to benefit your business the most.

HAVE YOUR PRIORITIES STRAIGHT.

You must recognize the fact that business is business and friendship should be kept out of it. Forget about all your professional conflicts once you are out of the company premises and start enjoying the relationship you share with your friend. Draw a line between your personal and professional life and respect it. Never look at a professional criticism from personal point of view. Your friendship is worth more than your business aspirations. Remember that your friend and friendship was there with you even when this business didn’t exist.

BE INNOVATION FRIENDLY

You and your friend(s) might be prodigies in your respective areas of work but running a business includes a lot of diversified operations and there are a lot of chances of having a blind spot. So, make sure that you develop an environment which is innovation friendly and hire professionals who can give innovative ideas to your business.

Finally to answer the question ‘CAN TWO FRIENDS BE BUSINESS PATTERNS?’; ‘Yes’ two friends can certainly be business patterns. Given, they have a clear view of their responsibilities and priorities.

 

AFTEREFFECTS OF GST: HOW HAS GST AFFECTED THE MARKET AND THE CONSUMER

It’s been more than a week since the GST was rolled out. It has consistently been hailed as one of the biggest tax reforms since independence and has affected every part sector of the economy  in one way or the other.While some of the businesses are being benefitted on account of reduced tax expenses and easier transition of goods across state, the effect of GST has not been uniform in the economy. There are also some businesses which are incurring increased taxes even on the inventory purchased before the GST was implemented. Consequently, they are forced to sell the products at the same price, but are absorbing the higher tax costs.

Following are few sectors which have been affected post GST.

BENEFICIARIES 

One of the most benefitted business segments under the GST is the logistics. The removal of check posts has reduced the costs of transportation of the goods across the country. Moreover, the compliance cost is also expected to come down as the entire formal process will shift online. This will further smoothen the movement of goods from one state to another without incommodious paperwork.

Besides the logistics, entertainment avenues like cinema halls and theme parks are also among the other beneficiaries of the GST as the effective tax on them is now lower than the combined tax proportion they used to pay earlier. As a result of this the consumer’s bill has come down and at the same time it has also initiated the hope of increase in business opportunities in future.

Besides this, small businesses having turnover not more than Rs. 75 lakhs have been facilitated to register under the composition scheme under which they are required to file  the returns once in a quarter and would be liable to pay a rebated rate of interest. As a result compliance cost and working capital position of these businesses would definitely improve.

SUFFERERS

However, the GST is not a panacea for all and small businesses would have to bear the brunt of the new regime as under the current regime exemption limit has been reduced from Rs 1.5 crore per year to Rs 20 lakh per year. Similarly, textiles industry has also been suffering from the burden of high tax.

Besides this, the services placed under the highest tax slab of 28%, along with other charges, have also witnessed inflated bills. 

EFFECT ON CONSUMERS

Under the new regime, the tax burden of the consumers on certain necessary items of daily use would definitely come down. While some of the food items like unpackaged rice, wheat, Fresh milk and pasteurized milk etc have been placed in the 0% tax slab, other items like tea and coffee have been placed in 5% GST bracket. This would consequently reduce some burden of the households and, at the same time, would drop the family budget to some extent. According to dome experts post GST, a household kitchen would be able to save around Rs. 5000 per year. However, there are also some Goods and services like clothings, luxury cars and some other luxury services which are expected to cost more than the pre-GST regime and might cause a hole in the consumer’s pocket.

IMPACT OF GST ON FINANCE

Goods and services tax (GST), as quoted by some financial experts, is the biggest tax reform since independence. GST is going to affect every sector of the economy and hence it becomes really important for an individual to comprehend this profound regime. In our blog GST SIMPLIFIED: DECODING THE BIGGEST TAX REFORM we had tried to expound GST, in this blog we have come up with an in depth analysis of the effect of GST on various components Finance sector.

MUTUAL FUNDS

There are a number of expenses like management fee and application fee that are incurred by asset management companies (AMCs) which affect value of an investment. Generally, such services attract service tax. Now that the tax rate has increased from 15% to 18%, GST is going to have an adverse effect on the mutual funds market as this hike will consequently increase the Net Asset Value (NAV) and other related costs of the mutual funds. Hence it’s certain that GST is going to affect the Mutual funds and its respective distributers. However, the new system exempts the investors earning less than 20 lakhs a year.

Banking

 

Banking is one of the primary sectors of the Indian economy and the new tax regime, i.e. the GST is going to affect the banking sector as well. There are a number of services like ATM transactions (beyond the limit of free transactions), credit cards and loans which erstwhile were levied by a tax rate of around 15% but after the implementation of the GST, they would be taxed at 18%. Besides this, there are some other charges like non-maintenance of minimum monthly average balance and interest on the late payment of credit card dues that are going to be taxed at the rate of 18% instead of the prevailing rate of 15%. This margin of 3% is going to increase the cost of the banks. Besides this, various compliance norms associated with the GST are also going to increase the strenuousness of the banking sector.

Insurance

The taxes levied on the premiums depend upon the type of policies one has subscribed. While the full premium of pure life cover plan is entitled to be charged with the service tax, products like ULIP and endowment plans attract taxes only on the charges levied. Under the new tax regime, the tax levied on term plans has up from 15% to 18%. On ULIPS, a tax of 18% will be levied on the charges levied. For conventional savings and investment plans, the tax will go up from 3.75% to 4.5% of the premium in the first year and from 1.875% to 2.25% of the premium from second and subsequent years.  However, owing the overall of impact of the GST the premiums for the life and general insurance policies are going to increase as soon as the GST is implemented. 

Real Estate

The transactions of this sector is so pricey in nature that even a marginal change in tax rates would have a substantial affect the costs with this sector. However, there is still a lot of ambiguity regarding the effect of GST on the real estate but the experts firmly believe that the think tank behind the implication of GST would plan the tax rates in such a way that the overall impact of the GST on Real estate would be nullified. The reason behind their belief is that the under construction projects are going to attract 12%. The GST committee has also decided that the construction material would be carrying the input tax credit which would again reduce the tax burden of the home buyers. However, how the ready to move-in apartments would be treated under the new GST regime is still in smoke and it’s expected that such holdings would attract the stamp duty and other taxes as per the prevailing rates.

As the new provisions and other legal norms of the goods and Services tax would come in light, the picture would become more clear and we would be able to make our observations more firmly.