Statistically, a very small percentage of South African adults are involved in starting a business in their lifetime. An even smaller percentage runs an established business (being a business older than three years). This makes the entrepreneur part of a very small, but economically important minority. Undoubtedly, this situation can be ascribed to the fact that it is not easy to start up and run a successful business. That is why it is extremely important to be aware of all the legal considerations and tax implications that might arise when you go into business for yourself.

Let’s start at the beginning:


Entities:

Your business needs an entity from which to trade. You can trade as your own persona under a specific name (a sole proprietorship) or through a legal entity specifically designed for this purpose (a close corporation or a limited liability company). There are pros and cons to each of these options in respect of both legal and tax issues. Most importantly, these entities can serve to protect your assets from the liabilities of your business. Your legal and tax advisors would be able to give you comprehensive advice in this regard as no one solution fits every situation.

If you have a suspicion that you are currently trading from an unsuitable entity, don’t despair – there are procedures through which your business can be transferred from one entity to another with a minimal amount of risk. However, the procedures involved tend to be quite technical and consulting with a lawyer, despite the potential expense involved, could save you a lot of financial heartache in the long run.

Starting your business:

All new business owners need to be aware of certain basic requirements before they can open their doors and watch the cash roll in. Firstly, you need to make sure that the premises from which you intend to operate your business complies with the zoning requirements of your local municipality. This can be easily be established by contacting the municipality that has jurisdiction over the area in which the premises is situated.

In terms of the Businesses Act your business might also require a so-called business license from your municipality, especially if your business makes or sells perishable food or is involved in the health or entertainment industry (ie, saunas, massage or billiards parlours, night clubs, etc).

This license can be obtained from your local municipality and is a relatively quick and inexpensive procedure. The municipality will do certain investigations to make sure that your premises comply with national and municipal building, health, safety and fire regulations and after payment of the prescribed amount you will be issued with a certificate or license which remains valid for a specific period.

Before launch day

Make sure you have all your bases covered before opening your doors to the hordes of prospective clients or customers – you certainly don’t want to run around on your opening day looking for your VAT number.

This simple, though not exhaustive, checklist will ensure that you are competent and confident on race day:

  1. Make sure you have your certificate to commence (from CIPRO) business at hand
  2. Make sure that you deal appropriately with pre-incorporation contracts (your legal eagle should advise you in this regard)
  3. Register with SARS for income tax and VAT
  4. Register with SARS for the skills development levy
  5. Register with SARS for PAYE
  6. Register employees for UIF and Workmen’s Compensation
  7. Check the Occupational Health and Safety obligations relevant to your industry (eg. providing safety equipment to employees, putting up hazard signs etc.)
  8. Check your compliance with national and municipal health, building, safety and fire regulations (ie, disabled facilities, fire escapes, etc)
  9. Register with the bargaining council in your industry if applicable and understand all collective agreements which may affect your business
  10. Sign employment contracts with employees
  11. Register for services (electricity, telephone, water, rates, refuse removal, internet, security, public liability & general insurance, etc)
  12. Apply for your business license
  13. Display your certifications and licenses if necessary (halaal, liquor license)
  14. Comply with packaging standards and regulations (ie, sell-by dates, ingredients, etc)
  15. Open a bank account, get a cheque book and possibly a credit card machine
  16. Ensure your invoices reflect all the necessary legal information and each one is unique
  17. Ensure all your business documents and signage reflect all the necessary legal information (address, members/directors, registration numbers, vat no, etc)
  18. Ensure all your intellectual property is properly protected
  19. Display a copy of the Basic Conditions of Employment Act in your business
  20. Start a minutes of meetings book (for directors / members meetings)
  21. Ensure you have all the required company policies in place (ie, sexual harassment policy, IT policy, etc)
  22. Register with the SA Numbering Association to obtain unique barcodes for your products
  23. Ensure you comply with minimum wage legislation
  24. Ensure you have a liquor license if necessary
  25. Be aware of possible import/export licenses/taxes pertaining to your business
  26. Comply with local signage regulations
  27. As a landlord, make sure your lease is stamped within 30 days
  28. Make sure you have sufficient storage space to keep all your accounting records for the required 5 years
  29. Make sure your credit agreements comply with the National Credit Act
  30. Enlist the help of a tax practitioner to help you comply with your tax obligations

Many businesses fail within the first three years of opening up shop. Give your business a fighting chance by ensuring that you comply with the myriad of legal obligations imposed on your business – otherwise you might find that your business faces unexpected closures, obstacles and hindrances, worries you certainly don’t need during the first hectic month.

 

Floss twice a day and remember cash flow is everything!

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