Before you start a small business it’s important to know what legislation your business needs to comply with and how it impacts your business.
One of the essential auditing and accounting services we offer our clients is the review of legislation and the effects of such legislation on the clients’ operations. In our years of experience we’ve built up competent knowledge on this topic, so we decided to share some of this knowledge with you in this blog post.
Before beginning the registration process for your business, you really need to think about what type of entity it will operate as. There are different types of business entities as recognised by South Africa which include: close corporations; sole proprietorships; private or public companies; partnerships; NPOs or co-operatives.
Each of these types has their own different legal structures and implications. For example, if you register your business as a sole proprietorship you would be held personally responsible if anything were to happen to your company.
Contact the Companies and Intellectual Property Commission (CIPC) to find out more about registering your business. Relevant legislation:
- Companies Act of 1973
- Close Corporations Act of 69 of 1984
- Non-Profit Organisations Act of 1997
- Non-Profit Organisations Amendment Act of 2000
Businesses are legally obligated to pay tax. This means you’ll have to register with SARS – the tax collecting and administering agency of the SA government.
It’s important to consult with tax specialists or your accountants to be properly assured of the various requirements for paying tax. If a business’s revenue exceeds R1 million per annum then it has to register as a TAX vendor.
Small businesses differ from other business entities as their income revenue is generally lower. This means that they are exempted from paying VAT and qualify for certain tax rebates. There are other levies such as Skills Development Levies and Unemployment Insurance, which businesses also need to pay. Relevant Legislation:
- SARS and SARS Tax Guide for Small Businesses 2005/ 2006
- Skills Development Act, 97 of 1998 (as amended) and Skills Development Levies Act, 9 of 1999
- Unemployment Insurance Act, 63 of 2001 and Unemployment Insurance Contributions Act, 4 of 2002
Employment and Labour Laws
A business’s employees are an important asset and should be valued and protected. Many small businesses face consequences that could have been avoided if proper research had been done and employment and labour laws were complied with.
The Basic Conditions of Employment Act is the fundamental legislation as it covers payments, leaves, working hours, deductions, notice periods, administration as well as the prohibition of victimisation and exploitation of workers. Relevant Legislation:
- Basic Conditions of Employment Act, 75 of 1997 and Labour Relations Act, 66 of 1995
- Unemployment Insurance Contributions Act 4 of 2002 and Unemployment Insurance Act 63 of 2001
- Occupational Health and Safety Act 83 of 1993; Compensation for Occupational Injuries and Diseases Act 130 of 1993; and Compensation for Occupational Injuries and Diseases Amendment Act 61 of 1997
- Skills Development Act 97 of 1998 (as amended) and Skills Development Levies Act 9 of 1999
Licenses and Permits
Depending on what type of products or services your business plans on offering, you’ll need the licenses and/ or permits required to do so – legally.
This applies especially to businesses making or selling food, offering health-related services such as massages or selling alcohol. You’ll need to contact your local municipality and your required business license from them. Relevant Legislation:
- Businesses Act
- Informal Trading Permit Guidelines
- Liquor Act 27 of 1989 (provincial) and Liquor Act 59 of 2003 (national)
- Public Operating License Guidelines
- Tourist Guide Registration Guidelines
We hope that by reading this blog post, you are now informed and aware of the various South African laws and legislation your business has to comply with.
It’s always best to do as much research as possible and consult with professionals to help you fully understand the impact these laws have on your business. Here at Brendmo Incorporated, we’re committed to assisting and consulting our clients – it’s why we offer the best comprehensive audit and accounting services.