Starting up a New Business With a partner.. What to look out for

[Snoopy_inc]

Hi All,

Just wanting some feed back from you all as to what i should be looking out for within a Partnership when it comes to the legal and binding side of things within the contract etc.

As well as your personal experiences and what you think should be instituted as a control medium etc. (3rd party representation when disagreements are concerned etc?)

Many thanks

[duncan drennan]

Just wanting some feed back from you all as to what i should be looking out for within a Partnership when it comes to the legal and binding side of things within the contract etc.

Just a question here: what form will the business have? Partnership, CC, Pty?

[Dave A]

As well as your personal experiences and what you think should be instituted as a control medium etc. (3rd party representation when disagreements are concerned etc?)

Having a clause that deals with this is quite common, and a really good idea. The clause deals with deadlocks, and normally provides for the appointment of an arbitrator.

As Duncan points to above, the structure of the entity affects the partnership agreement and just what the "hot spots" might be.

[Snoopy_inc]

Just a question here: what form will the business have? Partnership, CC, Pty?

The business will be an online venture, it will be a CC but we are currently going to give it a test run under the current CC and make it a devision for the first 6 months.

what i would like to know is; Can there be something in writing that says i have x% share in the devision, but that i dont have % in the holding company?

IE if we had a company called "xyz holdings" and this company is the major company and now we create "abc group" as a devision of "xyz holdings" (to save costs on start up, registration, all the nessesary documentation) but hold a different set of books for the devision.
The point of this (in my opinion) would be to see if the venture takes off.

Your thoughts ?

[duncan drennan]

Is there a particular reason, other than CC registration costs (which are very cheap), that you would prefer it as a division of xyz?

[Snoopy_inc]

the hassel of starting up the company costs etc.

To be deadly honest i dont see a reason why it should be a devision, was talking about it to the other partner and he recons we should start it as a devision for now till it takes off. Majority of that thought was based that we would use the holding companies suppliers etc without having to reregister with the suppliers etc

[Snoopy_inc]

hrm... no response?

Would have thought this is kinda a good topic to talk about as im sure others will come across this type of situation.

[Dave A]

To some extent it's tricky to steer you in the right direction on such thin information, Snoopy. But I also know that you might not be able to say too much. My thought prompter would be this, though.

the hassel of starting up the company costs etc.

Balance that against the hassle of fighting for your fair share if/when the "division" really takes off.

[duncan drennan]

Balance that against the hassle of fighting for your fair share if/when the "division" really takes off.

I agree with Dave on that one. Sorry Snoopy, this slipped off my radar.

A comment on the supplier issue: setting up contracts etc. etc. with suppliers can be quite a big schlep AND expose you to a lot of nasty sureties and so on. How about setting up a new company, and then buying supplies from the current company? Then there is no need to register with all the various suppliers again, and you get the benefits of clearing up ownership up front.

[Snoopy_inc]

Thanks for the help.

As a matter of interest what are we looking at costs for starting up a company?
Hidden costs etc.

Thanks

[duncan drennan]

As a matter of interest what are we looking at costs for starting up a company?
Hidden costs etc.

That is really difficult to say with the limited info at hand. You can buy a shelf company or CC (not sure of the cost, google for it), or set one up from scratch. For a PTY from scratch it can vary depending on who you get to do it — I used Highway Corporate Services to set up my PTY (they also do CCs). Browse around their site, and CIPRO's for more info.

Trickier thing is whether the product needs protection, and if you want to register trademarks etc. etc. This is all HIGHLY dependant on what you are selling.

[Snoopy_inc]

well i tried to say that it would be a new venture.... so lets just for arguments sake say im starting a cc from scratch. what am i looking at cost wise and documentation wise.... give us the 101 guide to starting a business from nothing

[Dave A]

Consider using Swiftreg for getting the cc sorted. I had an associate use them and (from memory) cost was well under R500.00 including change of name and members interest.

The cc will have to register for income tax - Additional registrations depend on crossing thresholds. In brief:

Got employees
Regardless of size of payroll, you will need to register for UIF and Workmans Compensation

Got employees earning a taxable income
You will need to register for PAYE

Turnover higher than R300 000.00 per annum
You will need to register for VAT

Payroll higher than R500 000.00 per annum
You will need to register for SDL

Turnover higher than R5 million
You will be a Qualifying Small Enterprise and will need to get a QSE scorecard in terms of BEE legislation

Turnover higher than R30 million
You will have to produce a full BEE scorecard

20 or more staff
You will have to appoint a safety representative

50 or more staff
You will need to establish a horde of committees...

Can I please stop there?

Please note, this list is in brief and there are wrinkles. For example, you can apply for a voluntary VAT registration once your turnover is past R20 000.00.

Also, I might have missed some and we haven't got to the "really should have" category yet, such as public liability insurance and partnership agreements.

EDIT: You will have to open a bank account. Welcome to the FICA challenge for a new business with no history.

[duncan drennan]

Use CIPRO's website to figure out whether your name for the CC is available. You will have to submit a list of 5 possible names (in order of preference), which they will evaluate and then reserve a name for you.