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Starting a business in 2016? 3 steps to get you going

A4BIn the middle of difficulty lies opportunity” (Albert Einstein)

It seems as though 2016 has a rough ride in store for us but as the wise old saying has it: “Fortune favours the brave”.  Just remember to mix a good dose of realism in with the bravery.

That said, if you’ve been sitting on a brilliant business idea, and if you’ve ever dreamt of leaving your 9 to 5 job and starting up on your own, this could well be your year!

(Tip:  Don’t ever lose sight of Rule 10 “Enjoy Yourself”!)

  • All done?  Stage 3 is to choose the right trading vehicle to suit your particular needs and those of your new business.  This is important – starting off with one legal entity and then later moving the business to another type risks all sorts of unhappy legal and tax issues (quite apart from all the obvious practical ones, like wading through piles of red tape at SARS, Telkom and your bank’s “please hold, your call is important to us” call centre).

Choose the right legal entity!

In South Africa you have these four main options to choose from :

  1. A sole proprietorship (“sole trader”).  Only one owner – you are the business.
  2. A partnership of 2 to 20 owners.
  3. A private company (“Pty Ltd”) for any number of owners (“shareholders”).  Note that CCs (close corporations) still exist, but no new ones are registered.
  4. A business trust (also any number of owners).

There are other specialised types of company available only to non-profit organisations (charities and the like), and to professionals (lawyers, accountants, doctors etc) and various ways in which different legal entities can be combined, but to start with let’s stick with the four basic options above.

In future articles we’ll look in detail at each of these four options but, and this is vital, don’t make any decisions without first seeking professional advice on the legal and tax implications of using each type of entity.  There are a lot of minefields here!

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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