How are companies classified according to legal form?

Organizations need to direct their actions towards the achievement of their objectives, for this reason, it is essential that they keep in mind what will be the way in which they are going to establish and carry out strategies to enhance their strengths, eliminate their weaknesses, take advantage of opportunities and face the threats.

The formulation and implementation of such strategies makes it necessary to take into account the organizational philosophy and policies, the physical and technological infrastructure resources, as well as the accounting and financial information.

In order that you can identify the different types of organizations existing in the environment, their definition and their characteristics, below, we explain the classification of companies in Colombia, so that you have a reference when choosing the class of company that adjusts to your needs and that you can guide your actions in an organized way.

 

We explain the reasons for bookkeeping your company

 

There are numerous different types of companies / legal entities in Colombia. This must be chosen depending on the needs of the business and its legal framework, it must be adapted to your business model.

Mainly it is important to understand that companies in Colombia are classified in four different ways, and this will depend on their:

  • Legal form
  • Capital ownership
  • Size
  • Economy

 

Regarding the types of companies according to their legal form, we have:

 

Sole proprietorship

In this type of company, the owner or, in other words, the person who has the legal capacity and obligations to answer for the company, must respond to the obligations and needs of the company with their assets.

 

Collective society

It refers to the type of business that is owned by more than one type of person. In the collective society all the partners must respond to the needs of the company with their assets, in return they will have a participation in the business management.

 

Cooperative

They refer to a non-profit company that has been created mainly to cover the social and economic needs of each of its owners, who in turn are workers or may even be clients or suppliers of the company.

 

Limited Partnership

It is a commercial company characterized by the existence of two types of partners: General partners and limited partners. The general partners are liable with all their assets for the results of the social operations (they have a statute similar to that of the collective partnership), and the limited partners are liable only up to the amount of their contribution to capital.

The advantages of this type of company are, in addition to the simplicity of the procedures and the administration, that the general partners can also attract the capital of others without them interfering in the management of the company. On the other hand, limited partners can be part of a simpler and less expensive partnership than the stock and limited liability companies.

 

Limited Companies

It is a company of a commercial nature, with a specific capital, made up of the shareholdings of the partners, with the great advantage that they will not personally respond to the corporate debts (the partner’s liability for the debts is limited to the contributions he has made), not even when the social patrimony is exhausted since they do not have subsidiary responsibility.

 

Stock Company

It is a commercial company of the capitalist type in which the capital stock is divided into shares (small parts of the capital) that can be freely transferred once the Company is registered in the Mercantile Registry.

The most obvious advantage is that shareholders are not liable for corporate debts with their personal assets (private assets), and on the other hand, there is the possibility of attracting outside capital through the issuance of bonds.

 

Criteria for choosing the legal form of your company

Since you already know the types of companies, depending on their legal form, you may wonder which one you should choose, following these criteria you can make a decision:

  • Type of activity: There are business sectors such as insurance or banks that force you to choose a specific legal form.
  • Number of shareholders: If a company has more than one partner, you must discard the sole proprietorship and opt for another option.
  • Starting economic investment: The incorporation of a company implies the contribution of an initial capital, while one in which the owner is autonomous does not imply any initial expense.
  • Bookkeeping: The bookkeeping obligations vary depending on the types of companies according to their legal form: The accounting of a self-employed person is (relatively) simpler than that of a company.

 

Don’t miss out on the benefits of business bookkeeping.

 

Setting up and registering companies in Colombia is a process that requires full attention and regulation, since this will define the approval of your economic activity before the different national entities, so it is important to leave the process in expert hands. Our experts at JLC ​​Auditors want to share with you the step by step you must follow so that your business or company complies with all the requirements established by law.

What types of legal vehicles exist?

Once you have a business idea and have developed a well-structured business project, it is important that you take into account the definition of a legal entity in order to establish your company.

In this article we will explain to you about the main legal provided in Colombian legislation for the exercise of any economic activity, as well as the most relevant characteristics of each one of them and the important elements in the creation of a company.

 

Learn about the types of companies in Colombia.

 

Differences between individuals and companies

 

Individuals:

According to Article 74 of the Civil Code, “all individuals of the human species are persons, regardless of their age, sex, race, or condition …”. With regard to the commercial registry, the natural person is that individual who, acting in his own name, professionally deals with some of the activities that the law considers commercial.

 

These are some of its main characteristics:

  • The individual is extinguished with real or presumed death.
  • His capacity is full once he reaches 18 years of age, as long as he has not been declared incapable by means of a sentence.
  • Once full legal capacity is acquired, it acts on its own.
  • It is identified with the Citizenship Card (CC).
  • There is no equity division, it is responsible for all activities and operations with its own equity.

 

Companies:

The legal entity is relevant since it was created with the aim of being able to articulate the right to association, through capitalist evolution, which makes it an indispensable figure in the development of stable societies.

 

These are some of its main characteristics:

  • Its existence begins at the moment of officializing the requirements demanded by law, such as the granting of the public deed and the registration in the respective chamber of commerce.
  • It is extinguished with the approval of the liquidation of the company.
  • Its capacity is total only in those matters related to the corporate purpose that has been established by the partners in the company’s bylaws.
  • Acts through its legal representatives, administrators, managers, directors, etc.
  • It is identified with the Tax Identification Number (NIT).
  • There is an equity division, the company has a different equity from that of the individuals that are part of it. The company is responsible for its own obligations, except in those companies in which the law expressly indicates that the partners are also responsible.

 

Types of legal entity

There are two types of legal persons, which are:

  • Companies of Public Rights: These are those alternatives that represent the entities that look after their interests and do not seek a profit of money. Its purpose is aimed at the common benefit, the moral or intellectual improvement of the associates, the defense of their rights, among others.
  • Mercantile companies: Those that represent private interests, regulated by specific commercial codes: Associations, companies, cooperatives, commercial civil societies, etc.

 

By its origin

According to their origin, legal entities can be:

  • National
  • Foreigners

 

Finally, it is important to note that a company must be legally represented by one or more individuals or companies and that there cannot be a company without legal representation.

 

These are the most common mistakes in bookkeeping for a business.

 

As we have seen, setting up and register companies in Colombia is a process that requires full attention and regulation, since this will define the approval of your activity. Our experts at JLC ​​Auditors want to share with you the step by step you must follow so that your business or company complies with all the requirements established by law economic before the different national entities, therefore it is important to leave the process in expert hands.

What to keep in mind to set up a company?

In Colombia, small and medium-sized companies represent 96% of the national business, contribute 40% to GDP, generate more than 17 million jobs and represent 9.8% of national exports. This shows its importance both for entrepreneurs and for the national economy.

So, if you are motivated and want to legally establish a company in Colombia, you must bear in mind that this process does not only represent the payment of taxes as many see it, but it is also an opportunity to obtain benefits that help improve financial aspects, tax and fiscal, market strategies, staff training, among others including their good image and market positioning.

However, although these benefits exist, there are certain incorrect thoughts on the businessman or entrepreneur minds at the time of setting up or formalizing their company and part of this is due to ignorance of the law and the non-application of the regulations that exist in their favor.

 

If you want to make your dream come true and set up your company in this article, we explain what is needed to set it up.

 

Learn how to obtain the tax ID of a company.

 

Business plan

When deciding to set up a company, it is necessary to take into account its global and long-term planning, definition of the activity to be carried out, risk assessment, financial capacity, business viability, market study, etc. All these aspects should be collected in what is called a Business Plan.

A Business Plan is a working document in which the idea of ​​the business to be started is developed. It is an open and dynamic work scheme that must be completed as the idea progresses. It must be synthetic and clear and, although it does not conform to any standard model, it must include the following aspects:

  • Description of the company
  • Product definition
  • Description or needs covered
  • Differences with competitive products
  • Market analysis
  • Marketing plan
  • Economic-financial study
  • Financial structure of the company
  • Profitability analysis

 

Classification by Economic Activity – CIIU Code

The CIIU Code is the International Standard Industrial Classification (revision 3.1 of the United Nations and adapted for Colombia by DANE). Its purpose is to group all similar economic activities by categories.

 

Classification by Economic Sector

Companies can be classified according to the economic sector in:

  • Industrial or Manufacturing: The primary activity of this type of company is the production of goods through the transformation and / or extraction of raw materials.
  • Commercial: They are intermediaries between producer and consumer, their main function is the sale of finished products and can be classified as wholesalers, retailers or retailers, and commission agents.
  • Service: As their name indicates, they are those that provide a service by transforming inputs (knowledge) into products with intangible characteristics, in exchange for a fee or based on a contract.

 

Size of the company

According to Law 905 of 2004, commonly called the Mipyme Law, the following parameters are followed to determine the size of a company. In the case of a combination of parameters, the determinant will be total assets:

  • Microenterprise: Personnel with no more than ten (10) workers, total assets excluding housing for a value of less than five hundred (500) current legal monthly minimum wages.
  • Small sized entity: Personnel between eleven (11) and fifty (50) workers, total assets worth between five hundred and one (501) and less than five thousand (5,000) current legal monthly minimum wages.
  • Medium sized entity: Personnel between fifty-one (51) and two hundred (200) workers, total assets worth between five thousand and one (5,001) to thirty thousand (30,000) current legal monthly minimum wages.

 

Steps to create a business

The Bogota Chamber of Commerce on its portal guides you in the process of setting up and consolidation of your company and allows you to do all the procedures to legally incorporate it.

 

Business definitions to consider

 RUT: The Tax Registration, RUT, constitutes the unique mechanism to identify, locate and classify people and entities that have the quality of taxpayers filing income tax and non-taxpayers declaring income and assets; those VAT and Non VAT responsible; withholding agents; importers, exporters and other customs users, and other subjects of obligations managed by the tax office – DIAN.

Mercantile Registry: The Mercantile Registry is the one in which the facts and acts related to individual entrepreneurs and mercantile companies are registered, in order to make them public so that they can be known by the people who contract with them.

Income tax: Income tax is levied on all income that a taxpayer obtains in the year.

 

These are the consequences of not bookkeeping.

 

If you are an entrepreneur and want to start your business set up process in Colombia, it is important that you take into account both the legal obligations to which you are subject, as well as the protocols to follow with the different public entities. Although the above sounds a bit complex, our experts at JLC ​​Auditors will want to share with you the step by step that you must follow so that your business or company complies with all the requirements established in the law.

How to get the tax registration for a company?

If you have decided to set up a company in Colombia or have seen an opportunity committed to a business idea that could work, the time has come to make dream come true. However, if you want to formalize your business and start operating as soon as possible, it is important to obtain the documentation required by law, such as the tax registration, since the way you set it may have implications for your taxes, legal processes and prosecutors. Therefore, in this article we will explain the entire process of how to do it.

 

Know the consequences of not bookkeeping.

 

What you should know about setting up a company

Incorporating a company in Colombia can mean a cumbersome process if you do not take into account various aspects and procedures that are strictly enforced. Therefore, it is recommended that you advise yourself well before starting your project.

 

These are the steps you must follow:

  • Step 1. Check if it is possible to register your company name, in other words, state that it is available. This will be one of the first steps you will take at the Chamber of Commerce when you move with all the documents to register your company.
  • Step 2. Write the bylaws of the company. In other words, the contract that will regulate the relationship between the partners.
  • Step 3. PRE-RUT. In the Chamber of Commerce you can process the PRE-RUT before proceeding to the registration. It is necessary that you present the bylaws, completed forms, the identity card of the legal representative and that of the alternate.
  • Step 4 – Registration. In the Chamber of Commerce they will carry out a study of legality of the bylaws. It is important that you bear in mind that it is necessary to pay the registration tax, which has a value of 0.7% of the amount of the capital.
  • Step 5. It is mandatory once the company has been registered along with the PRE-RUT, you proceed to open a bank account. Sometimes without the certification of the bank account, the tax office will not proceed to register the tax registration as final.

 

Regarding this point, we highlight the procedure for issuing the tax registration:

As detailed by the Chamber of Commerce, these are the requirements to request the NIT (tax identification number), which is an unique Colombian number assigned by the tax office DIAN (Direccion de Impuestos y Aduanas Nacionales) only once when the new entity is registered in the RUT (tax registration).

 

Requirements for individuals:

  • RUT printed, filled out through the portal of the tax office (DIAN) that contains the annotation “FOR PROCESSING IN CHAMBER”.
  • Present the original and a photocopy of the solicitor’s identity document. When the process is carried out through the proxy, original and photocopy of the proxy’s identity document and a photocopy of the identity document of the solicitor; original of the special power of attorney or simple copy of the general power of attorney, together with the certification of its validity issued by the notary, when the general power of attorney is valid for more than six (6) months.

 

Requirements for companies:

  • RUT printed, filled out through the DIAN portal that contains the annotation “FOR PROCESSING IN CHAMBER”.
  • Present the original and a photocopy of the identity document of the legal representative. When the process is carried out through the proxy, the original and a copy of the proxy’s identity document and a photocopy of the legal representative identity document; original of the special power of attorney or simple copy of the general power of attorney, together with the certification of its validity issued by the notary, when the general power of attorney is valid for more than six (6) months.

 

Keep in mind that for both cases it is necessary to verify:

  • The correct completion of the information registered in the form of the tax registration (RUT).
  • The photocopy of the identity document corresponds to the original and that it is displayed.
  • That the person requesting the procedure is the individual who is enrolling or the duly empowered attorney.
  • That the address provided in the RUT form matches the one filled out in the RUES form.

 

We explain the importance of accounting records in a company.

 

If you are an entrepreneur and want to set up a company in Colombia, it is important that you take into account both the legal obligations to which you are subject, and the protocols to follow with all the public entities. Although the above sounds a bit complex, our experts at JLC Auditors will be able to advise you on the process you must follow so that your business or company complies with all the requirements established by law.

Main types of companies in Colombia?

There are different types of legal entities and each one has distinctive features. If your goal is to make a profit, you need to form a business entity so that you can provide goods or services to customers in exchange for money. Likewise, business entities can be divided into various categories based on their size, legal structure, and other criteria.

In this order of ideas, if you want to incorporate a company in Colombia, we will tell you first that it is a process that requires full attention and regulation, since this will define the approval of your economic activity before the different national entities. Mainly in this article we will explain the types of companies that are the most used in the country.

 

We tell you what type of companies can be established in Colombia.

 

Types of companies in Colombia

The most common types of companies in Colombia are:

  • Simplified joint stock companies (SAS)
  • Limited liability companies (LTDA)
  • Corporations (SA)

The main steps to incorporate a company in Colombia include:

  • Formalization of the bylaws
  • Request for NIT (tax identification number of the company)
  • Opening a Colombian bank account

 

Simplified joint stock companies (SAS)

It should be noted that the Ministry of Commerce, Industry and Tourism has stated that Simplified Stock Companies (SAS) is the type of company most used in Colombia. As the newspapers reiterate, there is a significant increase of incorporations of this type of company, thanks to the fact that they allow the reduction of costs.

Other key characteristics that distinguish a SAS include:

  • Only (1) shareholder is required (either an individual or company), with no cap.
  • Limited liability equivalent to the amount of capital of the company.
  • The corporate purpose may remain undefined, allowing the company to engage in almost any business activity.
  • A board of directors is not required.

 

Limited liability companies (LTDA)

In regards to this type of partnership, it should be noted that the responsibility of the partners is limited to the amount of the capital contribution, in addition that the partners are not responsible for the payment of debts.

The characteristics are:

  • Minimum of 2 partners, no more than 25.
  • The partners’ contributions will be paid in full when the company is incorporated.
  • Generally, it must be incorporated by a public deed. However, the document can be kept private if:
    • The company has fewer than 10 employees.
    • The company has assets below 500 times the monthly minimum wage in Colombia.
  • The social purpose must be defined, limiting the commercial activities of the company.
  • A board of directors is not required.

 

Corporations (SA)

Important aspects of a corporation include:

  • Minimum of 5 shareholders, none of whom can have more than 95% of the outstanding capital stock.
  • Similar to LTDA, this company is generally incorporated through a public deed. However, the document can be kept private if:
    • The company has fewer than 10 employees.
    • The company has assets below 500 times the monthly minimum wage in Colombia.
  • The social purpose must be defined.
  • The corporation must have a board of directors.

 

Know the importance of accounting records in a company.

 

With the previous clarifications, you are ready to choose the type of company you want to set up under the current laws in force of the country. To clear up your doubts or start the process, remember that our experts at JLC ​​Auditors can advise you so that your company complies with all the requirements established by law.

What types of companies exist in Colombia?

An organization is a group of people who work together on a set of common goals. If the main objective of the organization is to make a profit from the sale of products and services, it is a commercial organization. This type of organization distributes any income that remains after paying all business expenses to employees and investors or reinvests it in the company.

For the purposes of tax collection, a business organization is an incorporated company. As such, each member of the organization benefits from limited liability protection. In addition, the organization maintains full control over the amount of its earnings that it will retain or distribute to the shareholders. For setting up a company or organization in Colombia, there are different types of commercial companies, in this article we explain more about it.

 

Know the consequences of not bookkeeping

 

What is a commercial company?

The commercial company is an alternative that allows various partners to group together and concur in order to carry out commercial activities, industrial production or the provision of services, where the profits or losses of the business undertaken are distributed depending on their participation in the business.

The commercial company is generally a legal entity that is born from a social contract signed by its members, who may be individuals or other commercial companies of different types.

  1. Collective Society

    The corporate name of Collective Society is made up of the full name or surname of one of the partners, or the names or surnames of all the partners followed by the expressions “& company”, “& brothers” , “And children” or other similar ones. The company must be made up of at least 2 partners who will have participation and vote to make administrative and managerial decisions. Unlike other companies, in collective companies, all partners have a deciding vote.

  2. Corporation (S.A.)

    It is the scheme most used by medium and large companies. It is incorporated by public deed between five or more shareholders, who are responsible only for their contributions. The capital will be represented in shares of equal value. At the time of incorporation, the authorized, subscribed capital (never less than 50% of the authorized capital) and paid (never less than 33% of the subscribed capital) must be indicated.

  3. Limited Liability Company (Ltda.)

    This type of company is set up in a public deed between, at least, two partners and, at most, 25, who respond according to their contributions. It should be noted that in this type of company, capital is divided into shares of equal value. Furthermore, the increase or decrease of the share capital requires statutory reform.

  4. Sociedad en Comandita Simple (S. en C.)

    The Simple Limited Partnership is a personalistic partnership, in which collective partners who contribute work coexist and, who may or may not contribute, capital and limited partners who only contribute capital, and which is dedicated to the exploitation of the corporate purpose in a collective name . While the general partners have unlimited liability, the limited partners have limited liability to their contribution.

  5. Sociedad en Comandita por Acciones (S.C.A.)

    It is incorporated by public deed between one or more managing partners and at least five limited partners or capitalists. It should be noted that there are two categories of partners: a) groups or managers: they administer the company b) limited partners: they do not intervene in its administration. In addition, the capital is integrated with the capital contributions of limited partners and groups and is divided into shares of equal value.

  6. SAS Companies

    98% of the companies created in Colombia operate under the SAS model (Simplified Stock Companies). The incorporation of SAS companies is done through a private document, which must be authenticated by those who participate in its subscription. and registered in the Mercantile Registry of the Chamber of Commerce.

 

These are some of the most notable benefits and features:

  • It can be set up with a single partner without specifying the corporate purpose, thus allowing the freedom to exercise functions and define itself in various areas.
  • The responsibility of each partner will depend on the contributions they make.
  • The company has no obligation to create a board of directors

 

How to set up a company?

For the incorporation and start-up of a company, be it a company, sole proprietorship or branch, the following steps must be followed: Decide whether to establish a company or a branch. If a company is to be established, it must:

  • Choose the corporate type.
  • Prepare the documents for the incorporation of the company.
  • Obtain the NIT of foreign shareholders through the completion of the Tax Registration (RUT) before the Tax Office – DIAN.
  • Raise and / or record in public deed the articles of incorporation of the company or incorporation of the branch.
  • Obtain letters of acceptance of company executives.
  • Carry out the commercial registry and obtain the Tax Registration of the company or branch through the completion of the RUT before the Tax Office – DIAN.
  • Register the company’s books at the Chamber of Commerce. Set up a bank account. Register the foreign investment in the Banco de la República.

In Colombia, as in different parts of the world, there are different types of societies or companies, which can be formed depending on the needs and requirements of their partners.

Normally when creating a company there is this question, what type of company is the most appropriate? Each society has its own characteristics that differentiate it from the others as we have seen. It is recommended that you choose the one that best suits your needs.

 

Learn about the benefits of accounting in companies.

 

If you are an entrepreneur and you want to start your business creation process in Colombia, it is important that you take into account both the legal obligations to which you are subject and the protocols to be followed with the different public entities. Although the above sounds a bit complex, our JLC Auditors experts want to share the step-by-step that you must follow so that your business or company meets all the requirements established by law.

What types of companies can be set up in Colombia?

The World Bank (Doing Business Report, 2011) lists Colombia as the fifth country in the world among 183 (and as the first in Latin America), with the aim of protecting investors.

The Colombian investment environment has been considered one of the most favorable for foreign investment. Colombia is one of the most open economies, in terms of percentage of foreign ownership, in Latin America.

Furthermore, it is important to highlight that Colombia has become one of the countries with the greatest economic stability in the region. Colombian GDP has grown 9.7% from 2010 to 2018 in real terms. Likewise, during the last decades, Colombia has been a reflection of political stability, firm respect for property and private initiative.

If you are looking for setting up a company in Colombia, it is important that you know the types of companies that you can incorporate. In this article we explain it to you.

 

Countless benefits for investors

Colombia was part of the second group of emerging economies that attracted worldwide attention: the CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa), according to the name given in 2010 by EIU (the Economist Intelligence Unit).

These issues are frequently overlooked, as well as the many benefits that this country brings to investors. Among which it can be highlighted that:

  • Colombia has the best infrastructure in the region. It has 8 high-current ports to the Pacific and the Atlantic that allow easy access to international markets.
  • The energy infrastructure in Colombia has been ranked as the best in the region, according to the IMD’s World Competitiveness Yearbook.
  • Colombia has nine ports, seven of them on the Caribbean coast. It also has 11 airports that allow easier access to international markets.

It is also important to emphasize that the New York Time has named Colombia as the second-best place to visit in 2018. Journalist Nicholas Gill details that: “After more than half a century of civil war coming to an end, Colombia is anxious for becoming the hot and adventurous and cosmopolitan hot spot it deserves to be.”

Types of companies that can be established in Colombia:

  • Simplified Stock Companies (SAS)
  • Limited Liability Companies (LTDA)
  • Corporations (SA)

 

Simplified Stock Companies (SAS)

The simplified stock company is regulated according to Law 1258 of 2008. Said company may be set up by one or more individuals or legal entities, who will only be liable up to the amount of their respective contributions. Except as provided in 42 of this law, the shareholder (s) will not be responsible for labor, tax or any other nature obligations in which the company occurs. Other features are:

  • Only one shareholder will be required, regardless of whether it is a legal entity or an individual.
  • The responsibility of each member will be limited to the amount of capital the company has.
  • It can be created for an indefinite purpose, thus allowing the organization to participate in any commercial activity.

 

Limited liability companies (LTDA)

The limited companies named in the Colombian Commercial Code as limited liability companies (LTDA), are a type of commercial union in which, as its name says, the liability of the partners is limited up to the amount of the capital that each contributed at the time of incorporating the company. This means that if in any eventual case the company cannot pay the debts acquired with its own means, the only assets of the partners that will be compromised will be that corresponding to their contributions, but at no time should they use their personal assets to cover the debts of the company. His considerations include:

  • Must have a minimum of 2 shareholders and a maximum of 25.
  • It must be incorporated through a public deed.
  • Before the company is incorporated, the corporate purpose must be detailed and it must be limited to its commercial activities.
  • The constitution of a board of directors is not necessary.

 

Corporations SA

A corporation is another option to consider, especially if it involves a larger number of shareholders. Under a corporation, the liability of the shareholders is limited only to the amount of the shareholders’ equity, except if fraud is committed.

Important aspects of a corporation include:

  • At least five shareholders, none of whom may have more than 95% of the outstanding capital stock.
  • This company must be incorporated through a public deed.
  • Must have a defined social purpose.
  • Must have a board of directors.

The creation and registration of companies in Colombia is a process that requires full attention and regulation, since this will define the approval of your economic activity before the different national entities, so it is important to leave the process in expert hands.

 

Learn about the benefits of online accounting.

 

If you are an entrepreneur and you want to start your business creation process in Colombia, it is important that you take into account both the legal obligations to which you are subject and the protocols to be followed with the different public entities. Although the above sounds a bit complex, our JLC Auditors experts want to share the step-by-step that you must follow so that your business or company meets all the requirements established by law.

The most common bookkeeping mistakes in a company

When many entrepreneurs start their business idea, they themselves try to take care of all occupations to save money, for example, they try to keep their own bookkeeping. However, the task of tracking every penny of supplier income, taxes, expenses, and payments is really complicated and requires a great deal of time to complete. It is important to mention that when carrying out the bookkeeping of a company it is easy for a large number of errors to occur that unfortunately could cost a large amount of money to your business, although they can be avoided with the help of bookkeeping service. Therefore, in this article we will explain what are the most common errors that can occur, do not miss it.

 

Learn about the benefits of bookkeeping in companies.

 

1. Assume that earnings always mean cash flow

To explain this situation a little more, it is important to give an example. Let’s suppose that you have just closed an agreement for COP$10,000,000 in a project that your company will take 2 months to complete and that costs you about COP$4,000,000,000 to execute; In that case, a profit of $6,000,000 would be reserved. This situation would be a great mistake since it is not aware whether situations that could lead to the delay of the project could occur or not, thus increasing its cost.

It is tempting to write down each agreement as income when it happens; after all, it is a new income for your business. But this situation will make your company appear healthier than it really is, providing a distorted image of the actual condition. Therefore, bookkeeping service in Bogotá will allow you to allocate the profits in the proper way.

 

2. Not taking bookkeeping seriously enough

It is important to emphasize that the key to effective bookkeeping is to record everything from the smallest transaction to the payment of large customers and suppliers. You must make sure that everything is registered and categorized in your accounts.

No matter what the size of your company is, if you take bookkeeping seriously you will provide an accurate and reliable picture of the financial health of your company, allowing you to determine exactly how well or poorly it has performed in a given period. In this regard, it is advisable to hire a Colombian bookkeeping service and leave your company’s bookkeeping in the hands of experts.

 

3. Separate personal and business accounts

Although maintaining two bank accounts instead of one may seem like a burden, the reality is that it is not. It makes your accounts much easier to manage. Although it may seem obvious to some, others have yet to consider it.

When all of your business finances are taken care of from one account, it makes taxes much easier and simpler.

It should be noted that the business bank account must be used strictly for business purposes. The credit card should not be used in emergencies for any personal use as it will be reflected as a sign of misuse. It is also a good practice to present all the invoices, commercial and personal separately and to contract a bookkeeping service that allows you to better manage your accounts.

 

 

4. Forgetting to record small transactions

For someone who is not an expert, it is quite easy to think that petty cash transactions are not important, but it is essential that your company keep a record of all your expenses, no matter how insignificant.

This is especially important in retail environments, where many transactions are based on cash.

Stay on top of small transactions and it will become much easier to manage larger ones. Bogotá bookkeeping services help you keep track of small transactions so you can easily manage your books as your business grows and number of transactions increases.

 

5. Not assigning clear budgets to each project

Entering a project without having any idea how much it could cost your company is an easy way to end up spending much more than you intended.

Not budgeting effectively also makes it difficult for you to control a project that has clearly cost your business more than it should. This can cause your company to spend its limited funds on projects that will not yield a return on investment. A Colombian bookkeeping service allows you to know the appropriate budgets for each project.

 

6. Not being willing to delegate

Small business owners are often unwilling to delegate bookkeeping to experienced accounting professionals, but business growth depends on the critical ability to allow other professionals to handle anything outside of your core business competencies.

 

We explain what accounting records are.

 

Simply, you must be willing to let other people do their work while you do yours. Few business owners are qualified in bookkeeping, tax strategies, business asset management, and business entity creation to capitalize on the advantages of certain business structures. A bookkeeping service will help you maximize income and minimize taxes.

Consequences of bad bookkeeping

As an entrepreneur it is essential to know that wrong bookkeeping can cause you a serious financial loss, which can put your financial security at risk. If you really do not know what the consequences are of bad bookkeeping at your company, do not worry, in this article we will explain them to you.

 

We explain the importance of the accounting records of a company.

 

What will happen if you have bad bookkeeping practices?

To start with, if you don’t know much about bookkeeping, you probably don’t understand the serious implications of its bad practice. Here we will tell you some consequences that you could face if you do not have a bookkeeping service in Colombia:

 

  • Miss tax benefits:

A company that does not have bookkeeping service and does not keep its income and expenses up to date, most likely when filing the Income Statement to the tax office (DIAN), ignores declaring information that could involve savings, deductions and tax breaks. Also, failing to keep an accurate record significantly increases the chances of erroneous or inaccurate statements being made, exposing you to penalties.

 

  • You will be more exposed to fines and penalties:

Likewise, if you do not have bookkeeping service in Bogotá, you will surely be fined at some point by the tax authorities, and once this situation occurs, your company will be more exposed to continuous and random reviews. It should be noted that the amount of these fines is not economic and not only will they affect your bank accounts, but you could be punished with closing orders or cessation of activities, putting your company and economy at stake.

 

  • Cash flow problems:

This is a scenario that could happen to anyone who does not have bookkeeping service in Colombia: Not being aware of a cash flow imbalance. This could lead to serious problems such as reaching the end of the month without enough money in the bank to pay employees or cover office supplies, pay bills, among other things. These problems can be avoided by hiring a good accountant who will keep track of the records and help you avoid future problems.

 

Consequences of bad bookkeeping

 

  • Poor business decisions:

Given this, a great question to ask is: How can you make precise decisions for your company if you do not understand the current financial health of it? When you have to face decisions about hiring new employees, business development, or marketing costs, you need an accurate picture of your company’s financial health. This information is essential so you can run financial reports and then make decisions based on the current financial trends you are experiencing. Bookkeeping services enable you to make smart decisions.

 

  • You will waste time and money correcting errors:

You can expose yourself to numerous situations that could take away your time and money if you do not have bookkeeping service to keep your accounting records. Remember, not only you expose yourself to a sanction, you could also limit the entrance of credits to fulfill your objectives within the company, among other things.

 

Why do you need an accounting professional?

In case you have been careless with your company’s bookkeeping, the recommendation is to find a professional to help you. If you do it yourself, it will probably take you weeks to find the mistakes you may have and fix them. You should review every detail, ask for copies of invoices, annoy customers and suppliers, and give up free time or productive hours to dedicate them to bookkeeping that you should have already done.

 

Learn how to start an accounting process in companies.

 

A bookkeeping service in Colombia can cause a domino effect that improves many aspects of your business. Although a missed transaction or math error may seem minor, it can certainly play an important role in the accuracy of your reports in the future. When it comes to finances, it is essential that you have an expert team that oversees every detail. Therefore, hiring a professional accounting and bookkeeping service not only guarantees the accuracy of your reports, but also helps with the long-term success of your company.

Importance of accounting records in a company

For most small and large companies in the country, the management of accounting records in Colombia has become an integral part of their business activities since these documents are the basic backbone of any organization.

Therefore, it is absolutely necessary that you store, preserve and manage these records so that later they can be unified and thus boost the future growth of your business. Whatever the category, the intelligent maintenance of accounting records in Bogota is extremely essential to maintain the regular flow of your operating activities. If you want to know more, in this article we will explain the reason for its relevance.

 

We explain the benefits of accounting in companies.

 

Before starting, it is important to mention the main benefits that can keep your company from keeping accounting records up-to-date and in perfect control:

  • Regularly monitor the overall growth of your business
  • Help you develop market-oriented trade policy strategies.
  • Identify sources of income and track deductible expenses.
  • Make decisions faster and more efficiently at work.
  • Achieve full regulatory compliance.

 

Why is financial document management necessary?

Now, let’s review the relevance of accounting records within your company or business and their incidence:

 

  1. It allows you to be a guardian of your organizational activities

Colombian accounting records, financial statements, audit books, and sales and purchase reports can show if your business is growing at a positive rate. This provides an authentic verification window that allows gaps to be identified and market-oriented trade policies to be formulated. In short, it increases the probability of business success.

 

  1. Optimize the preparation of authentic financial statements:

A robust accounting record system ensures the complete availability of various business documents, such as profit and loss statements, balance sheets, and other types of information. These records are useful for preparing accurate financial statements.

For example:

  • Accounting records such as: income and expense statements show your organization’s benefits and overhead for the given time period.
  • On the other hand, complex accounting documentation, such as balance sheets, is the most authentic proof of your existing legal assets, liabilities and actions, in a given period of time.

 

 

  1. It helps to properly identify your sources of income

All types of commercial and non-commercial organizations extract monetary and property benefits from various sources of income. Information related to these sources is required to separate business from non-business income and tax from non-taxable income. Advanced document filing systems can help you identify and verify these sources of income with the highest degree of authenticity and precision.

 

  1. You can track your deductible expenses

Accounting records can help you track each and every expense you have invested in your business. Because, if you don’t record your expenses properly, you can lose or misplace them. This would create more problems when completing annual tax returns.

 

  1. Properly optimize your tax returns

Similarly, the accounting records services in Bogotá will allow you to accommodate the data related to income, expenses and credit reports. Remember that this information is a mandatory requirement to prepare and file solid and adequate tax returns.

 

Know what accounting records are.

 

As we have seen, keeping accounting records in Colombia is one of the most important and key processes within the Administration department. And it is that the bookkeeping is the registry of all the economic operations that the company has carried out in a period in question, which undoubtedly makes it a fundamental pillar in the administration of a company.

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