Understand the importance of an entity health check in Bolivia to secure your business and manage risk. Bolivia is an attractive country for executives looking to expand. However, local and strict regulations may add a layer of complexity. As such, it is essential to understand the business conditions and corporate compliance requirements before company formation in Bolivia. This includes conducting an entity health check in Bolivia.
Key Takeaways
| Types of entity health check in Bolivia | There are two main types of entity health checks. They typically focus on either the fiscal or legal condition of the company. |
| Reasons for an entity health check in Bolivia | To enable executives to know how the business is being managed To reduce risks of penalties and negative reputation To reduce transaction risks |
| Necessity of entity health checks in Bolivia | It is not a legal necessity in of itself, but it will help you make sure you are staying compliant. |
| Who conducts an entity health check in Bolivia | It should be done by a fully independent auditor to ensure total neutrality. The auditor should also be well aware of Bolivian company law. |
How does an entity health check work?
An entity health check is an audit carried out by a third-party to verify its local corporate compliance. An entity health check in Bolivia involves the verification that company administrators and employees are fulfilling legal and fiscal obligations.
What kind of audits are involved in an entity health check in Bolivia?
Legal and fiscal obligations are the most important aspects to check in a company established in Bolivia. These provide essential information about a company’s status. Likewise, the audit will conclude if the business obligations are according to local laws. There are multiple kinds of audits involved in an entity health check in Bolivia, these include:
Legal auditing
The moment a company is constituted in Bolivia, it must fully comply with all legal obligations. Some of these obligations are:
- Registry of Commerce: Companies must have a trade registry number to operate with legal domicile in Bolivia.
- Company books: Once a company is constituted, company books must register all the important resolutions of shareholder meetings or Board of Directors meetings.
- License to operate: The municipality will grant the company a license according to the business activity registered at the Registry of Commerce. To maintain the license validity, the company must pay an annual payment.
- Bank accounts: The bank account registers the company’s money movements as proof of good administration. Bank accounts are vital in case of a tax audit.
- Trade registration update: Companies must update their trade registration with documentation that proves their existence and compliance with local corporate obligations. This documentation must be submitted every year.
- Labour obligations: If a company has employees, the entity health check in Bolivia verifies the company’s legal compliance with the Ministry of Labor, Health Insurance Office and Pension Fund Office.
Fiscal auditing
Once obtaining a trade registry number, the next step is to get a tax ID. The most important fiscal activities audited by an entity health check in Bolivia are:
- Tax ID: This document needs to register the main activities of the company. The date of registration will determine the company’s tax obligations.
- Monthly Tax returns: Tax returns are declared according to the tax calendar established by the tax office each year. The last digit of the tax ID is used to verify if tax returns are declared properly and before the due date.
- Financial statements and annual balance: Each year, the tax office establishes the deadline to file the financial statements and annual balances. These documents determine if a company needs to pay the Corporate Profit Tax. Paying taxes on time is crucial to avoid unnecessary expensive fines.
Companies can choose to conduct both kinds of audits (legal and fiscal) or to hire a third-party to determine if obligations in a specific field are fulfilled correctly.
Some benefits to hiring a third-party for an entity health check in Bolivia
In Bolivia, the legal report will inform if a company’s obligations have not been reached. If this is the case, companies can immediately comply with pending obligations to reduce or avoid penalties from local authorities. In the worst cases, corporate non-compliance can produce criminal responsibility for legal representatives, administrators or shareholders.
Given all of the above, it is strongly recommended to hire a third party to conduct an entity health check in Bolivia at least once a year. This is the best way to know the company’s status and act as quickly as possible if administration modifications are needed to avoid financial and reputational risk. Hiring a third-party allows a company to better prepare for unwanted contingencies.
FAQs on an entity health check in Bolivia
1. Why should you get an entity health check?
The main advantages of conducting an entity health check include:
To enable executives to know how the business is being managed
To reduce risks of penalties and negative reputation
To reduce transaction risks
2. What steps are there to an entity health check?
Carrying out a successful entity health check involves the following 3 key steps:
1. Information collection
When carrying out an entity health check, a large amount of information will have to be gathered. This will include collecting data from your company’s operations, legal, accounting, and administrative departments.
Note that a best practice many companies are adopting is the creation of a compliance or audit department, in charge of centralizing important company information, which eases this first step.
2. Information validation
Once gathered, the information goes through a validation process. In this step, an entity health check agent will review all the data and documents obtained, cross-reference it against primary sources where necessary, and otherwise seek to prove the veracity of all records being audited.
3. Record Keeping
Records of all the documents and evaluations made during your entity health check will not only be valuable for presenting to tax authorities in case of an inspection, but also during future entity health checks. In some cases, keeping such records is a legal obligation, due to laws desiged to prevent money laundering.
3. What happens in an entity health check?
Generally, an entity health check includes:
Evaluation of finances, social security payments, and other fiscal obligations
Examination and review of contracts signed with third parties
Review of corporate and accounting books
Review of monthly tax returns and tax statements
Review of upcoming renewals of certificates and policies
Preparation of financial statements
Review of balance sheets submitted at the closure of the fiscal period
4. Who can perform an entity health check in Bolivia?
It should be done by a fully independent auditor to ensure total neutrality and make sure everything is in accordance with the authorities.
Conduct a local entity health check in Bolivia with the support of Biz Latin Hub
With offices all over Latin America, Biz Latin Hub has the expertise to offer due diligence services for investors and companies of all sizes. The legal and accounting team in Bolivia can serve your company at any time of the year to ensure your company is ahead of compliance deadlines. Get in touch now with our Bolivian team for further information about how an entity health check in Bolivia is conducted.
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