Five out of seven business start-ups in South Africa fail in their first year according to Rob Davies, Minister of Trade and Industry. Globally, one out of two start-ups fails during its first year.
HomeTimes wants you to succeed as an entrepreneur and to live in the home of your dreams. To enable you to do this we have secured the rights to serialise the book, How to Survive and Thrive as an Entrepreneur, by author, business owner and serial entrepreneur, Neville Berkowitz (63), who shares the secrets he has learned over the course of his 40 years as an entrepreneur. Kele Scheepers co-authored the book.
Thanks to Berkowitz’s website, PersonalEmpowerment.co.
8 Getting legal
If you are starting a business that is not a legal entity, you can register as a sole proprietorship, whereby you will be taxed on profits in an individual capacity; or a partnership, whereby each partner is taxed on their share of taxable profits in an individual capacity.
Alternatively, you can register your business through CIPRO, in which case you can pay corporate tax in the form of a:
- Listed public company
- Unlisted public company
- Private company
- Close corporation
- Non-profit company
- State-owned company
- Collective investment scheme
If you are a close corporation, co-operative or a private company you could qualify for certain tax incentives and preferential rates in terms of the small business corporation incentive. If you meet specific requirements, you could qualify for the turnover tax system.
You can read the SARS tax guide for small businesses here. Make sure you maintain immaculate financial records because small mistakes can cause big problems in the long run.
You need to keep financial and tax records for at least five years, so develop an organised filing system.
You can also call the SARS contact centre on 0800 00 (SARS) 7277 for more information or assistance.
Business or trade requirements are governed by the National Business Act and are available throughout the country, whereas permits and certificates are usually issued according to local authority by-laws, which differ from municipality to municipality.
Certain businesses need a licence to operate. These include:
- Businesses where you will be selling or supplying meals, takeaways or perishable foodstuff.
- Businesses which involve health and entertainment facilities, such as Turkish baths, saunas, health baths, massages, infrared treatments, male and female escorts, three or more slot machines and electronic games, three or more snooker or billiard tables, nightclubs and discos, cinemas and theatres, and adult premises.
You will also need to have a licence if you are a hawker who sells food or meals.
A business licence permits you to carry out a particular activity in a certain area and ensures that your business and premises meet all of the building, public safety and health requirements. Depending on where your business is located, you will either be liaising with a metropolitan council, a local town municipality or an area district council. Either way, you will be dealing with the licencing office or licencing department in that municipality or council.
Call your local council to confirm whether or not you need a business or trade licence and where you can find the necessary information and application forms. Also find out if your business will need any additional permits or certificates.
A once-off fee is payable at the Business Licence Office when you are lodging your application. Ensure that the licencing department gives you proof of application and payment of fees.
After submitting your application, the licencing department will send a report to the other municipal departments that are involved in the process. Each of these departments has to complete a site inspection to make sure that your business complies with:
- Health and safety regulations
- Town planning schemes which relate to land use rights
- Building control in compliance with the National Building Regulations and Building
- Liquor regulations
- Laws related to noise and air pollution
- Public safety regulations
After all the departments have approved the application, you will be issued with a business or trade licence, which remains valid until ownership changes or until the activity specified on the licence changes. If reports from the departments indicate that other requirements need to be satisfied, then the Business Licence Office will send a notice to the applicant, who must comply with the requirements and then arrange a re-inspection with the relevant officer.
The licence is not transferable from one owner to another or from one property to another, and your premises may be inspected occasionally. A business licence can be withdrawn or suspended if there is a failure to comply with the endorsements.
Few things in life are riskier than launching and running your own business. As a small business owner, you need to deal with complex issues such as business plans, accounting systems, payroll processes, employee recruitment, cash flow concerns, marketing and risk management. You will also have to consider a plethora of insurance needs such as property, liability, vehicle, worker’s compensation, health or disability insurance.
There is a wide range of insurance products catering for small businesses. These include standard policies which cover theft, fire and vandalism, which can offset the potentially serious loss of buildings, equipment or inventory. It is likely that your bank or lending institution will insist that you have property insurance before approving your loan.
Property and liability insurance are essential coverage for a small business. Property insurance helps protect the property and physical assets of your business, and includes: buildings, furniture, equipment, supplies, leased equipment, inventory, money and securities, records of accounts receivable, machinery, data processing equipment and media, valuable papers, books, documents, mobile property (like cars, trucks and construction equipment), satellite dishes, signs and outdoor property not attached to your building. You can also include intangible property, such as trademarks and goodwill, in your property insurance.
Liability insurance covers four categories of events for which you could be held responsible: bodily injury, damage to others’ property, personal injury and false or misleading advertising.
The insurance coverage you choose will make the difference between security against unexpected losses and paying for such losses out of your own pocket. In most cases, a loss can hurt a business beyond the point of recovery and the premium cost is worth the peace of mind. Take stock of everything you want protected: stock, equipment, raw materials, builds, land, fixtures or vehicles registered in the business’s name. Then decide how much each of these is worth, and what you want your business to be protected from.
Choose an insurance broker who will help you find the best package to meet your needs. Remember to query exclusions and conditions to ensure that you find coverage that suits you and that you understand what is involved.
Specialised types of insurance are also available. For example, business liability insurance will help protect your business operations against legal action. Certain important assets of the business may be specifically insured against loss or damage. Business interruption insurance guarantees income during downtime. Plans which guarantee a level of personal income in the event of temporary or permanent disability are widely available. Life insurance for key individuals in the business could also minimise the impact on the business in the event of death.