Is this your year to start a business? Are you ready to add your own unique brand of fuel to the small business engine that powers the South African economy? Signs point to a global boom in entrepreneurship:
- Globally, it’s forecast that 870 million women will either gain employment or start a business by 2020.
- Members of Gen Y and Gen Z will take advantage of mobile platforms and emerging technologies to start their own companies.
- Baby boomers aged 55 to 65 are projected to start more small businesses than any other demographic.
South Africans of all ages dream of becoming their own bosses. Small businesses are truly the wave of the future; they are expected to keep growing and flourishing due to their nimble nature and consumer demand for their offerings.
This is exciting stuff, but starting a business requires more than a great idea. To do it right, entrepreneurs must prepare early for a handful of legal issues.
Registering your business
The first step to creating a formal business of your own is incorporating a company. A company separates your personal assets, responsibilities and liabilities from your business. You can register your company with the Companies and Intellectual Property Commission (CIPC).
You can register your company with or without a company name. Without a name, the registration number automatically becomes the company name. You can, however, add a company name later if you want to. To reserve a name costs R50; registering a private company costs R125.
Get your tax number
You’ll need a corporate income tax number from SARS and must register for VAT (if you expect your annual turnover to exceed R1-million or wish to claim VAT back on your expenses) and as an employer if necessary. If your payroll exceeds R500,000 a month, you must also register for the skills development levy (SDL). Talk to an accountant or tax consultant for expert advice.
Get to grips with labour law
Labour law is a minefield. This is especially true for the start-up owner or small business manager who doesn’t know the legal ins and outs of hiring, firing, rewarding and managing employees. If you will be employing people, you must learn what the Basic Conditions of Employment Act says about:
- working hours
- workplace conditions
- workplace discipline
You should also make sure you comply with the new National Minimum Wage.
It’s not a bad idea to spend some time with an HR consultant to draw up workplace policies, employment contracts and job specifications when you start hiring. It sounds bureaucratic, but it can help set appropriate expectations for employer and employees from the start.
Health and safety regulations
South Africa’s Occupational Health and Safety Act gives workers a range of rights in terms of health and safety in the workplace. Familiarise yourself with the guidelines around aspects of workplace safety. These include first aid, protective clothing, machinery, ladders, firefighting equipment, ventilation, lighting, temperature, noise and asbestos.
Understanding consumer protection laws
In the past decade, South Africa lawmakers have introduced laws such as the Consumer Protection Act (CPA) to strengthen consumer rights. The CPA aims to level the playing field between consumers and companies, with prescriptions around:
- ‘cooling-off’ periods after a consumer signs a contract with a supplier who approached them via direct marketing
- disclosure of information in plain, understandable language
- a consumer’s right to safe, quality products and services
- refunds, returns and repairs of products under warranty
As a small business owner, you must ensure that your customer contracts and policies are aligned with the demands of the CPA. Small businesses with a turnover below R2-million are classified as consumers under the Act. This is useful to know in the event of a dispute with a business partner or supplier.
Protection of Personal Information (PoPI)
If you are running any sort of business – especially an online business – you will probably be collecting personal information such as e-mail addresses, physical addresses, ID numbers and banking details from your customers and employees. In line with global best practice, the South African government has introduced privacy legislation such as the PoPI Act to protect people’s personal data. Every business is obligated to take reasonable steps to safeguard any personal data they have collected.
Get expert advice from the start
Questions or legal concerns about your start-up, especially in its early days, should not be put off to be addressed later. Lawyers and accountants are expensive, but not as expensive as an avoidable legal dispute with an employee or getting into trouble with SARS.
Meeting with a credible professional will allow you ask any questions you may have before getting started with your business. You’ll also be afforded the peace of mind in knowing that the business you started got off on the best possible foot from day one.
Editor’s note: Don’t forget another startup essential – your domain name. Now, check to see if the domain you want is available.
This article has been adapted from an original piece by Deborah Sweeney.