THE LEGAL ENTITY
Zoe Wort, Junior Director, says various legal entities have pros and cons. “The most important reason to consider registering a company as opposed to trading as a sole proprietor is to limit your liability. Directors of a company cannot be held personally responsible for the business’s liabilities, unless they breach their fiduciary duties,” she says. Wort says entrepreneurs should be aware of the upkeep required after registering a business with CIPC. For example, annual returns need to be submitted and directors’ details must be updated on the registry. Entrepreneurs may want to consider enlisting company secretary services to ensure compliance.
STRUCTURING THE BUSINESS
Gerhard Truter, Financial Director, notes that this process should begin with the entrepreneur as an individual. “I ask a person what they’re doing and why to understand how to structure,” he says. “Effective structuring starts with the end in mind. If, for example, you’re building a business you plan to build for the next 20 years, the tax structuring will be different to a business that you hope you sell within the next three years.” Truter says it’s easier to work on tax structuring from the start than to restructure later, which inevitably incurs costs. He emphasises that there’s no one-size-fits-all approach and it’s critical to develop a structure that will suit your specific business.
Many entrepreneurs have not adequately considered labour from a legal perspective, says Kylie Potgieter, Associate. “You need employment contracts in place, and formal policies and procedures that set out things like leave days and what to do when something happens.” Without these, labour cases can potentially end up at the CCMA, where they may be dismissed because due process has not been followed. “Ensure you have a summary of the Basic Conditions of Employment Act and Labour Act on the walls of every floor. Take note of occupational health and safety requirements. Ensure you’re registered with COIDA and UIF. Ensure you have an employment equity plan in place. Requirements also vary across industries. It’s definitely worth consulting a specialist to assist you.”
Compliance covers a huge range of issues, from macro issues like tax compliance, B-BBEE and POPI, to internal compliance issues – things like social media and gift policies, and company terms and conditions. Chanique Collet-Serret, Associate, says compliance is a massive risk area for new businesses. “People think they’re compliant, simply because they’re not working with the regulations every day and are unaware of changes. The consequences of non-compliance can be dire. Collet-Serret’s advice is to prioritise compliance from the beginning, and to enlist professional assistance.
Stefaans B. Gerber, Associate, says IP is a “bundle of rights”. Trademarks protect names and logos; patents protect unique products, services or methods; and content is protected by copyright. Entrepreneurs need to apply for specific rights where necessary and to understand the limitations of these rights. “For example, if you disclose a process in a flyer before you’ve patented it, you diminish its novelty – one of the three requirements to obtain a patent (along with inventiveness and ability to be used in industry), so you lose your ability to protect it. Or, if you decide to expand into a new territory, your patent may only be valid in South Africa. It’s better to apply for patents in the countries where you want to operate upfront. Certain bodies, like OAPI and ARIPO, will issue a patent that is valid in a number of member countries,” he says. “It’s a complex subject, and it’s worth finding an advisor you can trust to assist with these things from the start.”
Douw Breed, Managing Director, says the firm believes in and sincerely applies a very particular methodology. This methodology involves an audit process in order to fully appreciate and comprehend a client’s commercial interests and considerations before devising commercial legal strategies to reach outcomes which are sustainable and which truly add value. By implication, it means that sustainable solutions are provided to start-up businesses, whilst being conscious about their financial considerations.