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The story of how the owner of Pietermaritzburg-based football club, Royal AM, has come under the fire by SARS for alleged tax evasion amounting up to R40 million, is a key lesson for any business owner in South Africa. Besides facing the shame of owing the State so much money, Shauwn Makhize has also had her Durban mansion raided with a Rolls Royce and Lamborghini confiscated.
“The action of willfully or negligently failing to be tax compliant can result in material damage for the reputation of your business, and yourself,” says Stefan Kritzinger, Head of Compliance & Support at Govchain.
To help entrepreneurs and business owners avoid the shame of such a scandal, and stay on the right side of the law, Govchain is sharing their 10-step business success package for all aspiring entrepreneurs in South Africa.
Kritzinger added that “business owners should always start off their journey by registering their business with the Companies and Intellectual Property Commission. This gives a business a legal identity – a vital need to operate legally.”
From there, an entrepreneur can choose from a variety of company types of what is best for their business model.
“Each one comes with pros or cons that any new business owner needs to be aware of. Whether it is a sole proprietorship that has less legal protection than the others, or a partnership that requires a formal written agreement, or a private company that allows the owner to separate their assets from the debt of the business, this must be decided on carefully to avoid consequences down the line,“ Kritzinger described.
Like poor tax compliance, poor labour law adherence can be very costly for your business as well. There are still businesses today that fail to provide formal written employment contracts to their employees, which is a non-negotiable legal requirement, and must include basic details such as the job roles, salary, and terms of employment. Compliance with other labour matters such as minimum wage and different types of leave are also mandatory.
Depending on the type of business, there are various requirements that must also be met to keep the workplace safe.
“If you’re in the business of selling products or services, you have the Consumer Protection Act to also be afraid of. Misleading advertising, deceptive sales tactics, or refusal to refund, replace or repair a customer’s goods within a reasonable time as defined by the Act, will have you summoned by the Consumer Commission,” Kritzinger commented.
Even in an age of digital acceleration, many small businesses still do not know that all records of income, expenses, invoices, receipts, bank statements and other financial documents must be kept for at least five years. SARS could still call on you to do an audit for previous tax years, underscoring the need to keep these documents safe.
While not diluting the importance of all the above, protecting customer data is not just ethical, and good PR, it is also the law. Collecting only the information you need, getting explicit consent from customers to collect their info, and keep that information tightly secured on a system protected from cyber cowboys will go a long way to ensure you remain on the right side of the Protection of Personal Information Act.
“The above points only scratch the surface of what a business owner needs to know to stay on the right side of the law. Fortunately, service providers do exist to help new business owners adhere to all the above and a lot more. With many of them offering reasonable rates, you can protect yourself from landing up like MaMkhize,” concludes Kritzinger.
