Monday 15th of July 2019
Entrepreneurship is the dream of most driven and passionate professionals. It gives them the oppo
...rtunity to run a business independently without ge...
Entrepreneurship is the dream of most driven and passionate professionals. It gives them the opportunity to run a business independently without getting hassled about answering to others. It makes them give wings to their dreams and follow their ambition. It is fairly easy to set up a business in South Africa because of the support offered by the government and the availability of grants for start-ups.
Besides funding, aspiring entrepreneurs need to comply with various legal requirements to ensure conformity to the regulations. They must hire a lawyer to understand the industry-specific obligations that must be fulfilled to avoid penalties and regulatory sanctions. So, here is everything you need to know about starting a business in South Africa, keeping the legal regulations in mind. The information below will help you steer clear of pitfalls that can lead to losses and affect the brand image.
Legal Requirements for Staring A Business in South Africa
Many budding entrepreneurs want to start a business but are unaware of the laws that must be complied with to operate legally. Some avoid the hassle of getting into the details by acquiring a business for sale in South Africa, which helps them grab an entity with all the permits and legal requirements. However, start-ups must follow the steps below.
To set up the business, the entrepreneur must define its structure to get it registered. There are four main types of structures that business owners can choose. These include sole proprietorship, which is owned by an individual and has no employees. The second type of business structure is a partnership, wherein two or a group of up to twenty people work in a partnership as the owners.
The third type of business structure is a close corporation (CC) which operates as a separate legal entity from the owner. The fourth type is the private company (Pty Ltd) structure, which is a separate legal entity with one director and shareholders. Thus, entrepreneurs can choose their business structure based on their requirements and business plan.
After deciding the structure, entrepreneurs need to register the business name. The process can be completed on the Companies and Intellectual Property Commission (CIPC) website by providing the identity number and contact details. The name must align with the brand’s vision and offerings and should be easy to remember.
Entrepreneurs can also register their business name through the First National Bank and Nedbank. It is necessary to complete the required documents and pay the registration fee, which ranges between R125 and R350 for companies. The next step is to open a business bank account and record all financial transactions to file accurate taxes as per the law.
Entrepreneurs looking for business opportunities in South Africa should know that different businesses need different licenses and permits. They must ask their lawyer to identify the regulations for their industry and business type and apply for them. For example, cinemas, arcades, nightclubs, etc, require a trade license as per the Business Act 71 of 1991.
Licenses are required by entities that have to maintain optimum health and safety standards, such as those selling perishable food items and those operating in the health or entertainment industry. The business license can be applied at the local municipality by complying with the laws related to zoning, health and safety. Businesses that sell or manufacture liquor also need a liquor license.
Business owners have to register for taxes with the South African Revenue Service (SARS) within 60 days of starting their operations. SARS will provide them with an Income Tax reference number, which can be used for registering on eFiling to start filing income tax online.
Entrepreneurs must use the assistance of their accountant to register for income tax, value-added tax (VAT) and pay-as-you-earn (PAYE) if they have employees. Businesses with staff must also register with the Unemployment Insurance Fund (UIF) and Compensation for Occupational Injuries and Diseases Act (COIDA) to fulfil the statutory requirements.
Whether you have a start-up or have purchased a business for sale in South Africa, you will need to keep your intellectual property safe from competitors. The brand materials, logo, tagline, colours, symbols, etc., are unique assets that should not be copied to maintain its exclusive image.
Thus, entrepreneurs must register their patents, copyrights and trademarks with the Companies and Intellectual Property Commission (CIPC). They must have the required license if they intend to use any copyrighted material. Copyright infringement can lead to criminal penalties, including a fine of up to R5000 or three years imprisonment.
Unforeseen circumstances like floods, theft, fire, storms, etc., can damage the commercial property and its contents. It can lead to downtime and loss of sales, which can negatively impact the business. Thus, it is vital to secure business insurance to protect the entity from unexpected challenges.
Besides natural disasters, the insurance policy must cover legal liability to help pay for the legal expenses if the business gets sued. Many insurance policies offer product and public liability that can reduce risk and protect the entity during a crisis.
Entrepreneurs who purchase businesses for sale in South Africa or launch a start-up must know about the labour laws. It helps to adhere to the regulations related to paying minimum wages and restricting work to maximum working hours. The employees’ leave entitlements must be safeguarded, and they must sign employment contracts based on fair labour practices.
In addition, businesses that are involved in risky processes that can lead to injuries to employees must register for the compensation fund. Entrepreneurs should also comply with the environmental regulations that forbid setting up a manufacturing plant in a residential zone. They must also adhere to the waste management and pollution control regulations to address the issue of climate change.
Wrapping Up
Laws are vital for maintaining controls and keeping businesses under check. Entrepreneurs should be aware of the legal requirements of starting a business to prevent getting penalised. A law-abiding business can grow quickly and gain the support of its community and government easily.
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