It may not seem very far off, but in the year, the e-commerce sector contributed only 7.4% in global retail sales. By 2020, that number had grown to 18%. In 2024, projections point to around 22%. It is in the face of this growth rate that this business model is considered by many when starting their own business.
But there is also an area of e-commerce activity that requires professional knowledge: the area of accounting.
Hiring an accountant is vital to manage the company’s accounts, ensuring compliance with legal and tax regulations, and aiming for the growth of the business.
E-commerce: Individual entrepreneur or limited liability company?
Ease is one of the essential reasons that attract people to go for an e-commerce business. This is because you can start your business without putting extra money into it, i.e., all you need to do is to use what you already have. For example, any vacant room in your house can serve as an office or a warehouse.
Apart from this, you can choose Flipkart, Amazon, or any other online marketplace to be your storefront.
In that sense, operating as a sole proprietor is the best way ahead meaning that you are the company, any money earned is your income, and all risks are assumed by you.
However, a professional like an accountant may not agree with the fact that sole proprietorship is the best solution as despite having greater complexity and higher maintenance costs, a limited partnership also means paying less tax on the company’s income (and thus, on what you take home at the end of each month).
Corporate businesses also have limited liability, which means that they take the risk – so you don’t have to do it individually. For instance, if you decide to take a bank loan for a financing order, the loan will be taken by the company not you.
Limited partnerships are famous because of powerful reasons– and an accountant will be able to advise what could be best for you and how it might suit your business.
Help in filling out tax returns for the e-commerce business
When you start your business, you will have to register for tax purposes and get a GST registration number.
This means that you will have to submit GST returns periodically – monthly or quarterly – and, annually.
An advantage of submitting the Periodic Tax Returns promptly lies not only in meeting the legal deadlines without risk of fines and penalties but also in the opportunity to use the Input Tax Credit (ITC). Performing accounting tasks and filing tax returns is a complicated task, but it has to be done on time and with rigor.
It is also necessary to consider the other tax returns, which vary in the case of an individual or legal entity, and the payment requirements, if you have hired staff. In such a scenario, using the services of an accountant is simply a good idea.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.