Connie, Elizabeth, Phumlani and Themba want advice on how to start their businesses.

Connie has two sewing machines. She wants to start sewing clothes for people in the community and perhaps some uniforms for a hotel in town. She will employ one person and work from her home. She will ask her clients for a deposit and buy materials with the deposit. She wants to know how to register the business and what kind of business it should be.

Elizabeth, Phumlani and Themba want to start a business making furniture. They have borrowed money from the bank to buy materials to start. They will work from a shed which they will rent from a farmer. They want to know what type of business they must have.

WHAT CAN YOU TELL THEM?

CONNIE

Connie’s business will not be very big and she does not have the money to start a company. Advise Connie to be a sole trader and explain as follows:

• What a sole trader or sole proprietor is. Explain that she can call the business something and she would write it on forms as, for example, Connie Ndube t/a Krazy Fashions.
• She should open a bank account
• She must register herself as a provisional income taxpayer (See Income tax)

If she employs someone, she will have to register for SITE/PAYE tax, UIF, Skills Development Levy and Compensation for Occupational Injuries and Diseases (See Formalising the employment relationship with employees; See Registrations as a new employer)

If Connie’s business becomes very big, for example, she sells clothes to shops in Cape Town and employs 30 people, she should think of registering her business as a close corporation. (See Chart: The differences between the four types of businesses)

ELISABETH, THEMBA AND PHUMLANI

Three owners can choose to be a partnership or a company. Explain what a partnership is and what a company is. (See Chart: The differences between the four types of businesses)

Explain the advantages of a partnership (cheaper and easier to run) and the dangers of a partnership (the court can take away the things belonging to the business to pay a partner’s debts, or take away partners’ goods to pay the business’s debts). (See Advantages and disadvantages of the different types of businesses)

Explain the advantages of a company – the court cannot take away the company’s possessions (assets) to pay the debts of the members and it can only take away a member’s assets to pay the business’s debts if the member has signed surety. Also explain the disadvantages – it is more expensive and complicated to run a company than a partnership.

If your clients decide they want a partnership, tell them:

• To go to a lawyer to help them write a simple partnership agreement
• They should open a bank account in the name of the partnership
• They must register as provisional taxpayers (See Income tax)
• All the things they have to do if they employ someone (See Registrations as a new employer)

If your clients decide they want a company, tell them:

• To go to a lawyer or accountant to register the company, and to find out what records they must keep
• They must always put ‘pty’ behind the name of the business and the registration number of the company must be on any letterhead
• They should open a bank account in the name of the company
• They must register themselves and the company as provisional taxpayers
• The things they must do if they employ people (See Registrations as a new employer)

RUNNING THEIR BUSINESSES

Give Connie and Elizabeth, Phumlani and Themba contact numbers of organisations that help small businesses. (See Support for SMMEs)

You could explain to them about filling in forms, filing forms and writing out cheques. (See Administration skills for small businesses)

If they plan to employ people, they should also know what the duties of employers are under the labour laws. (See Formalising the employment relationship with employees; See Registrations as a new employer)