As the accountant for small businesses, I very often come across small business owners that opened a business because they had a wonderful business idea and are happily running this business without any knowledge regarding the responsibilities legally required of them as the owner of a South African business.
I am afraid that as much as the ownership and management of a South African business comes with great reward, it also comes with a long list of duties and responsibilities. Too many business owners are unaware of these responsibilities – the dereliction of which can actually lead to jail time in some cases!
It is vitally important if you own a business – or are thinking of registering a new business – that you take some time to research all things legally required of you as the owner, public officer and manager of this entity.
Apart from the fairly obvious requirement of being a generally law-abiding citizen, the following items are legally required when operating a business in South Africa:
- If you want to trade officially as a business, not as a person running something on the side, then you have to register your business with the CIPC (Companies and Intellectual Property Commission).
- You are required to submit an annual return to the CIPC proving that your business is still operating.
- Your business needs to be registered for Income Tax with SARS within 60 days of starting operations.
- You are required to submit tax returns and provisional returns to SARS and make sure that all tax payments are up to date.
- If your business employs just one person (including yourself!) you have to abide by the Basic Conditions of Employment Act
- If your business employs one person (including yourself), you have to register with the Department of Labour for COID – Compensation of Occupational Injuries and Diseases. You will also have to register with the Unemployment Insurance Fund (UIF) department. It is exceptionally rare that income in South Africa is not subject to UIF.
- If you employ staff, you are legally required to deduct PAYE from their salaries and pay it over to SARS on their behalf.
- If your total payroll is more than R500,000 per year, you are required to register with SARS for the Skills Development Levy.
- If your income in a twelve month period exceeds R1 million then you are legally required to register for VAT (Value Added Tax).
- If registered for VAT, you are required to submit returns periodically and make payments on time. It is very vital as business owner to understand that VAT in South Africa never belongs to you or your business – VAT belongs to SARS and withholding VAT payments is a criminal offence.
- Compliance with the Acts governing business in South Africa: Companies Act, Basic Conditions of Employment Act, Income Tax Act, Consumer Protection Act and the National Credit.
- Compliance with Acts governing privacy in South Africa: POPI and PAIA.
- Although not a legal requirement, it is recommended that all business owners familiarise themselves with the King (IV) principles for good governance.
In addition to the above, if you register a Private Limited Company and list yourself as a director, you are subject to the duties, responsibilities and requirements of a director as they are laid out in the Companies Act. It is highly recommended that you familiarise yourself with the contents of this act and the obligations placed upon you by the title of Director.
The list of requirements and their associated red tape can feel overwhelming, especially if you have been trading for some time without knowing that certain things are required of you. This is an area that many companies outsource for peace of mind, however, if you are not in a position to outsource the best way to approach the situation is slowly.
Tackle the items one at a time, making sure you have read the relevant Act (and understood it!) and implemented all requirements before moving on to the next one. You will find you can get yourself compliant much faster than you realised and with far less stress than you expect!