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Setting up your business
Owning your own business can be very rewarding, and yet can also be very frustrating. There are so many pitfalls along the path to success that we’ve made this, not-so-short guide to help you, the first time business owner along this path to success. Many first time businesses fail due to lack of knowledge and planning, and although this guide is not a substitute for a business course or diploma, it will hopefully be able to impart some knowledge onto you – after all why make your own costly mistakes, if you can rather learn from the mistakes others have made? Many people think you start a company buy some machines and the money starts dropping from the sky. It’s not as simple as this – apart from actually making the product or providing the service you also have a lot of government red tape to get through. Every year they say they want to cut down the amount of red tape but they do the opposite. Type of Legal Entity to form Before you start trading you need to decide whether you want to form a company or just produce your product informally from home. From 2011, the new companies act came into force, and the only type of small company you can form is called a private company, and the suffix “(Pty) Ltd” comes after the name. This new form of (Pty) Ltd does NOT need to be audited (audits cost a fortune), but still needs an accountant to produce financial statements at the end of every tax year. The new (Pty) Ltd must have a Memorandum of Incorporation which prohibits the offering of its shares to the public and restricts its transferability. CC’s no longer exist under the new companies act, but if you have one, it can be used indefinitely (or until some government official with nothing better to do, changes the law). If you’re just going to work from home part time and are not going to want to sell into the corporate world, and expect your yearly turnover to be under the threshold you need to register for VAT then not registering at all should work fine. There are however two main downsides to this” 1. You are trading in your personal capacity, although the admin is less, you enjoy little or no legal protection if the venture runs into trouble. 2. It can be difficult to raise finance – Many finance houses won’t finance that shiny new machinery you need if you’re not a company.
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