Do research by speaking to other business owners and checking online to see what compliance requirements are needed before starting your business.
Mention the word compliance to business owners and you are bound to get all kinds of complaints from them.
Is it really that bad and does it hamper the development of small businesses in our country?
I am still trying to understand whether people complain because complying seems to be over the top or if they just want “a free for all” kind of environment where there are no rules.
Whether we like it or not, the bottom line is compliance is essential in ensuring order and stability in the economy of every country.
As much as everybody wishes that all the obstacles slowing down the development of the small business sector in this country be removed with a snap of a finger, it cannot be done without inviting chaos.
Personally, I think compliance in itself is not the problem, but the process of complying is what frustrates most people.
Compliance-related services offered to entrepreneurs could be better.
Some of you who are thinking of starting a business are probably wondering what on earth I am on about.
Simply put, compliance is the laws, rules, regulations and industry requirements that businesses must comply with in order to operate legally in this country.
As a mentor, through my dealings with business owners, I have realised that some people have limited knowledge when it comes to compliance.
I, therefore, thought it a good idea to write something on compliance to help educate mainly first-time entrepreneurs.
Hopefully, by the end of this article, nobody will be discouraged to start his or her business. I will cover compulsory compliance before and after trading has started.
Legal requirements before trading
For some businesses compliance begins even before the business can start operating. This is usually the first test of the entrepreneur’s patience and tenacity. Business owners have to comply with compulsory legal requirements when setting up a business. Depending on the nature of activities to be undertaken, you can mention examples such as a business licence, liquor licence, fishing right, permit, mining right, an environmental impact study, land use right, retail licence and others that need to be obtained before trading. This is normally followed by checking whether the premises where business activities will be conducted are correctly zoned. To meet some of the these compliance requirements, a business could be required to register as a legal entity. For example, a close corporation, company, co-operative, non-profit organisation where applicable. Individuals or trusts can also apply in their personal capacity to acquire a business licence or permit.
Regulated industries
Some industry regulations require businesses to be registered or obtain a licence from the relevant industry body to operate legally. Examples of these industries are the private security, courier services, credit providers, insurance providers, travel agencies, debt counsellors, electrical installations contractors, public transport providers and homebuilders. Certain professions require you to register before running a practise or firm.
Legislation
If the business is registered as a legal entity, then reading the relevant act governing that type of entity would be a good starting point – Companies Act No.71 of 2008, Close Corporation Act No. 69 of 1984 (with its amendment acts) and the Co-operative Act No.14 of 2005 (with its amendment acts) – to understand your obligations in terms of legislation.
Statutory requirements
Whether the business is a registered entity or not (sole proprietorship or partnership) after it starts trading the next things to comply with are registering with the South African Revenue Services (Sars) to pay taxes, adhering to labour legislation, complying with fire and safety regulations, meeting health and environmental standards set by government institutions and other compulsory laws and industry-specific requirements.
Tax registration
As far as taxes are concerned registering for income tax is compulsory and for other taxes like employees’ tax (commonly known as PAYE) and value-added tax (VAT) their registration becomes compulsory when certain conditions are met. For instance if the business has one or more employees, including directors of a private company or members of a close corporation, earning above R5 891 per month it must be registered to deduct and pay employees tax. The registration for VAT becomes compulsory when the business generates or will generate a turnover of not less than R1 million in a period of 12 months.
Labour requirements
Compulsory labour legislations you will need to comply with include registering the business with the relevant authorities to make contributions.
For example, registering with Unemployment Insurance Fund (UIF), Skills Development Levy (SDL) and the Compensation for Occupational Injuries & Diseases fund (COID), provided that the business has employees. In addition to this, businesses must also comply with the Basic Conditions of Employment Act (BCEA), the Occupational Health & Safety Act (OHSA), the Employment Equity Act, the Minimum Wage levels set for some sectors and Bargaining Council’s Collective Agreements for some industries. Research is important to identify which of these acts and provisions are applicable to your business.
Other complaince regulations
Fire safety regulations are very important to comply with and, in some instances, a business or trading licence cannot be issued without compliance being approved. These requirements include the need for fire extinguishers, clear emergency exists and signs in business premises as well as issues around how gas cylinders should be stored. Some businesses, especially those involved in manufacturing produce waste during the course of their activities either in a solid, liquid or gas form, which in some cases is toxic. The extent of waste to be produced by these businesses and disposal thereof is controlled by a set of rules and standards set by the Department of Environmental Affairs and relevant municipalities which need to be adhered to.
Licences and permits
Adhering to the conditions of regulated industries’ licences and codes of conducts is also a compliance requirement for business owners. Failure to comply may lead to the licence or permit being revoked. There is also the Broad-Based Black Economic Empowerment Act and industry charters that business owners need to pay attention to. These are becoming mandatory now since government and big corporates prefer doing business with compliant entities. Now that you have read the above, some of the key requirements are a bit clearer, but further research is important.
- Apart from servicing small business owners through his consulting work, Gcobani Ndabeni is also the managing director at Small Business Connect. Send your views to [email protected].