What are the benefits of registering your small business?

[Dave A]

This article has me begging the question - what are the benefits of registering your micro/small business?

THERE are more than six million small businesses in South Africa but only 17 percent are registered because their owners do not know the benefits of doing so, a national survey has revealed.
full story from The Sowetan here

I hear rumours of state-funded financial assistance programs - wouldn't know where to find one. Are there any other real benefits that offset the freedom of being in the "informal sector?"

The story also gives a pile of stats which as a small business owner myself I find more appalling than surprising or shocking. For example

Entrepreneurs work about 63 hours a week.

and for most of us (especially given the hours) the pay isn't that hot either.

"Poor exploited civil servants" that go on strike for far-above-inflation pay increases think they have it tough - try being a small business entrepreneur!

[adrianh]

63 hours a week - must be half day workers...

[BusFact]

This article has me begging the question - what are the benefits of registering your micro/small business?

Not many in my opinion. For the micro guys I wouldn't bother. The only 2 reasons I can think of off hand are:

1) Where there is more than one business owner" who will be pooling resources (money, time , expertise, etc) into the venture.
2) Where you want an element of protection from losing your personal assets in the event of business failure.

[murdock]

the small bussiness owner doesnt benefit from registering only all the collection people like the eca...ecb...bargaining council...sars...uif...workmans comp...and boy the list goes on everyone trying to get their piece of the action for doing nothing...just taking your hard earned income...and if you are a mambe rof the eca then you have to pay additional fees to the bargaining council you get my drift.

the question you need to ask...how do "you" benefit from paying all these people...trust me when i tell you after 19 year i have never and i mean never benefited from any organisation which has taken my money for as many years as i have operated...even when i started my bussiness i had been paying uif for years...i had no claim against a cent i had contributed for more than 10 years.

as a sole prop if you are injured on site nobody pays you out...because you dont fall under the cover...only if you are a cc and registered as a worker in the company...so being a small bussiness...one man band...trust me there are no benefits...you just pay...so my advice...keep a low profile and keep your nose clean...you save thousands...if you get caught and as the stats indcate only 16 % are registered what are your chances.

even the bargaining councill have changed their rules and now even if an employee works for 1 day a week you still have to pay the fees...one labourer will cost you almost R500 per month...and something to watch out for is they charge you some fee just because you register with them for yourself...i complained and they removed the fee because they could tell me why i had to pay it...as i didnt benifit in any way from it.

i believe a one man...sole proprietor and your turnover is less than lets say R50 000 er month and you employ less than 2 people you should be exempt from all these fees...like turnover tax...we should have to pay a small fee for our turnover which covers everything...like the bargaining council... tax.... uif... etc

and even better still if you run at a loss until your bussiness starts making a profit you get paid out...wouldnt that be great...because i feel when my bussiness has made money i have paid everyone but let me not have a good month everyone still wants their money...regardless.

i know what you are gona say but it would never work because like medical aids... tender document there are always the crooks who mess it up for everyone else.

t

[Dave A]

the small bussiness owner doesnt benefit from registering only all the collection people like the eca...ecb...bargaining council...sars...uif...workmans comp...and boy the list goes on everyone trying to get their piece of the action for doing nothing...

Agreed for the most part, except I'd rate being covered by workmens compensation as a real benefit of incorporating. As you point out, the sole proprietor and partner isn't covered.

But then the sole proprietor or partner's salary isn't included in leviable wages/salaries paid either. Mixed blessings

[alexwang]

Hey,Dave
how clever you are
you are talking about what is really important on each topic
how can to be like you
can you share some skill
how to follow
how to be attracted by others
thanks dude

[adrianh]

@alexwang - you is learn spoke engrish no.one and put capital and points and commas in sentences befor you get clever with South African man, dude

[alexwang]

hi,adrah
don't be so strict
i tried to do it well
so i follow Dave and try to learn from him
but thanks all the same for your answer

[adrianh]

Hey Alex, no problem. We all have a lot to learn from each other.

[adrianh]

Alex, I misread your first posting, I thought you were being rude, now I realize you were giving Dave a compliment.

You see, I learned something today...

[Dastan Kieton]

Sole proprietors are easily established by simply opening a bank account. The risk however is that personal assets are at risk if company is in financial trouble. Personal tax and income tax are combined which can be a hassle to submit. As well as no continuity in the company.

PTY registration portrays a sense of professionalism and has advantages for you as a shareholder and directors of the company:
Company is a separate legal entity to shareholders
Limited liability for shareholders
The company is continual
Capital is easy to raise

The characteristics of a private company, PTY are:
May have up to 50 shareholders
Minimum of one director
Shares are easily transferable
If turnover exceeds 5 million rand turn over annually, annual financial statements are audited

Despite common believe PTY's are not expensive to register and although there are a few legal steps to take when registering your PTY it can be hassle free with some assistance.
Steps you will need to take to comply with legal requirements when you register a PTY:
Register PTY
Once registration is complete you will receive a PTY company number and memorandum of incorporation from all directors which will be required to open a bank account for your company
You will then apply for SARS registration for company. This will include registration of Income tax, PAYE & UIF
Then you will apply for a SARS tax clearance certificate
You will register for VAT from SARS
*A company only qualifies for VAT if it has a turnover of more than 5 million annually, or 50 000- 60 000 monthly turnover, further more a company will have to have proof that they will attain these turnovers by quotes or tenders they have received.

Its not as hard as it may seem

[Dastan Kieton]

I hear rumours of state-funded financial assistance programs - wouldn't know where to find one...

Department of trade and industry launch ISP for micro- enterprises

The incubation support programme has been launched to boost small enterprises,The Department of trade and industry has launched ISP, the incubation support programme. The aim of the incubation support programme is to assist in the creation of successful enterprises to strengthen local and national economies.

This an incentive to financially assist SME development. Through ISP all small, micro and medium enterprises will be integrated into the mainstream economy. ISP establishes partnerships with macro enterprises and government to assist SME's.

The purpose of the ISP is to provide self sustaining funding to support small enterprises with the following aspects: Business development services, market access, equipment, infrastructure, ICT, Operational costs and more.

To qualify the enterprise must be a registered legal entity in South Africa in terms of the Companies Act, 1973.

“The government of South Africa also recognises and acknowledges the role that big business can play in boosting the development and growth of our small enterprises.”Minister of Trade and Industry, Dr Rob Davies

The ISP will be open for applications from 1 October 2012; a web-enabled application facility for online applications will be available from 26 October 2012.
Department of Trade and Industry. ISP application form: http://www.dti.gov.za/isp_form.pdf

[PlatinumWealth.co.za]

/boomarked for later reading, was gently googling and came accross this.

[Dave A]

I see the Incubation Support Program referred to above is "no longer open for applications". I wonder what the program stats ended up being?

[Greig Whitton]

I see the Incubation Support Program referred to above is "no longer open for applications". I wonder what the program stats ended up being?

I think it was a bit of a flop. There were a number of approved applications (e.g. Bandwidth Barn in Cape Town and Launch Lab in Stellenbosch), but most of them lacked the offtake agreements that the DTI was really looking for (and subsequently made explicit in revised versions of the program guidelines). Also, ISP wasn't aligned clearly enough to the DTI's primary agenda (i.e. industrialisation) since industry focus was never a qualification criterion. That's why the DTI repackaged it as the Strategic Partnership Programme which is limited to manufacturing and related sectors.

That all said, the Department of Small Business Development is busy reviewing an incubation funding program that they recently piloted and which is essentially an offshoot of ISP but with an emphasis on youth-owned startups.