Starting your own business in South Africa – A Guide

The global trend towards entrepreneurship seems to be hitting South Africa, as more and more choose to start their own business, either in the hope that one day it might allow them to quit the day job, or as an alternative to the nine-to-five.

Running your own enterprise comes with a host of benefits, including being your own boss, working towards your own benefit, doing something you love and as time goes on and the business develops, the chance to employ others and help them to achieve their goals.

Starting your own business requires first and foremost an idea. Whether it is a gap in the market, or a determination to better what is already out there, you need a unique idea that has the potential to earn money. Think through a detailed business plan to see if the idea has a future.

[TBN has a number of resources to help you develop and write a business plan – click here to access them]

Once you have chosen your idea, you need to think about some legalities. Principle among them at an early stage is the legal structure for your business. The new Companies Act 2008 came into force on 1st May 2011 and essentially allows you to form either as a sole proprietor (essentially working for yourself) or registering a private company (PTY Ltd).

Both types of company structure have their advantages that you should consider. Sole proprietorship is easier and quicker to set up and creates fewer ongoing obligations. Registering a company with the Companies and Intellectual Property Commission (CIPC) is more time consuming and expensive, but separates your company trading from your personal finances, and looks far more professional. This is the way to go if there are others interested in starting the business with you.

Once you have decided on this step you need to think about other formalities, which include registration with the Receiver of Revenue for tax purposes. This may include VAT registration (for companies projecting revenue above ZAR 1m), and registration for taxation on any employees you may have (SITE and PAYE for example). If you do have employees you will also need to register with the Department of Labour and the Commissioner under the Compensation for Occupational Injuries and Disease Act 1993.

Certain companies may have additional legal obligations depending on the type of business, for example, those selling food may have to register with their local authority or District Council.

Many businesses operate from home in the beginning, but for retail, food and beverage and many other clerical businesses, business premises are essential. This involves negotiating a commercial lease and ensuring you have the appropriate local authority permissions to conduct your business at a particular place. This can be technical, so enlist help from a lawyer if you are unsure of the legal requirements in this, or any other area.

This article was provided for TBN by Contact Law

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