SA GUIDE Starting up a new business can be very exciting but also very challenging! There are many factors which all entrepreneurs need to consider and whether you are starting up or have been operating for a while now, you can be sure that there are many regulatory and legislative requirements which will impact your business. This guide serves as a business tool to assist owners of businesses to understand the basic accounting, tax and related legislation which will affect them. This guide is not intended to be exhaustive and should only be referred to as a quick reference guide. IN THE BEGINNING The starting point for any new business is to decide on the form which the business will take. It is essential to understand the pros and cons of operating various legal entities (companies, close corporations and trusts) as opposed to trading as an individual or partnership. The big advantage of trading as a legal entity is that a larger part of any legal risk rests with the legal entity and not the individual. The business owner will therefore have less risk with regards to personal liability. On the flipside, the disadvantage of trading as a legal entity is the additional administrative burden applicable to such entities. Other factors, such as differing tax rates will also influence the final decision. The Tax Shop Accounting. Payroll. Taxation. We are able to assist in advising you on the best option to choose and also to help with registering a legal entity if needed and to submit all the necessary documentation on your behalf!
BASIC CHECKLIST FOR START-UPS 1. Background work and investigations: Assess your strengths and weaknesses. Establish business and personal goals. Assess your financial resources. Identify the financial risks. Determine the start-up costs. Decide on your business location. Do market research. Identify your customers. Identify your competitors. Develop a marketing plan. Prepare a business plan. 2. The next steps: 3. Final considerations: Select an accountant. Order business cards. Select a lawyer. Review local business codes. Choose a form of organisation for your business. Obtain a lease (if applicable). Create your business e.g. incorporate a company. Line up suppliers (if applicable). Select a banker. Order furniture and equipment. Set up a business bank account. Obtain a business license or permit (if applicable). Apply for business loans (if applicable). Arrange employer registrations (if applicable). Establish a line of credit. Arrange SARS registrations. Select an insurance agent. Finalise all other necessary registrations. Obtain business insurance. Join a professional organisation if needed. Set a starting date. PAGE 2
ACCOUNTING REQUIREMENTS ACCOUNTING USING ACCRUAL BASIS Accounting for transactions should be performed using the accrual basis and not the cash basis. This basically means that transactions should be recorded when they occur irrespective of whether the cash has been received or paid. RECORD KEEPING Accounting records, financial statements and invoices should be kept for a period of five years in order to comply with tax and company legislation. ANNUAL FINANCIAL STATEMENTS The annual financial statements of a company comprises a statement of financial position (balance sheet) at the end of the reporting period, statement of comprehensive income for the period (income statement), a statement of changes in equity for the period, a statement of cash flows for the period and notes comprising a summary of significant accounting policies and other information. The annual financial statements should be drawn up annually within six months after the company s financial year end. The annual financial statements must fairly present the state of affairs and business of the company. Not all companies need to be audited or have an independent review performed. For businesses not incorporated as companies the rules may be different. However, SARS requires that all businesses prepare annual financial statements. POINTS TO NOTE Bookkeeping should be performed on a regular basis e.g. weekly or monthly and not only once a year when the annual financial statements have to be drawn up. Regular bookkeeping eases the burden at year end and also places a business in a position to evaluate its financial performance and financial position a lot quicker. Owner-managed businesses are often complicated by personal (owner) expenses. These need to be clearly separated from business expenses. The bookkeeping and accounting function is a key factor in the success of your business. We provide professional and relevant accounting services to accommodate the needs of small, medium and large businesses, including the provision of cloud-based accounting software! PAGE 3
TAXATION REQUIREMENTS TAXES WHICH MAY IMPACT A The following may affect a business and require separate registration with SARS: 1. Income tax. 2. Provisional tax. 3. Capital gains tax. 4. Value added tax. 5. Employees tax (PAYE). 6. Unemployment insurance (UIF). 7. Skills development levy (SDL). 8. Turnover tax. 9. Dividends tax. 10. Customs duty (if importing/exporting). Some of the above are not strictly taxes but still require registration with SARS. It is important to register for the necessary taxes well in advance as failure to do so may have financial repercussions for a business. FREQUENCY OF TAX SUBMISSIONS The frequency for submitting tax returns depends upon the tax type. For example, income tax returns are submitted once a year whereas provisional tax returns are submitted twice a year. PAYE is submitted monthly whereas VAT is usually submitted every second month. POINTS TO NOTE SARS now levies massive penalties (and interest) for nonsubmission and late submission of tax returns. It is important to diarise all submission dates in order to submit returns on time. The submission of most tax returns requires an efficient bookkeeping/accounting function within the business in order to generate data for the purposes of the tax return. We strongly recommend a consultation with a Tax Shop professional in order to determine the taxation requirements of your business! PAGE 4
OTHER REQUIREMENTS BE ON THE LOOKOUT FOR THE FOLLOWING 1. Implementation of an efficient payroll system, even if there is only one or a handful of employees in the business. 2. Registration with the Department of Labour for UIF (in addition to registration with SARS for UIF). The Tax Shop accounting. payroll. tax. much more. www.taxshop.co.za 3. Registration with the Department of Labour for Workmens Compensation. 4. Submission of Employment Equity reports to the Department of Labour (if applicable). 5. BEE requirements including employment equity plans and BEE certificates. 6. PAIA manuals in terms of the Promotion of Access to Information Act. 7. Adherence to FICA (Financial Intelligence Centre Act) requirements and FAIS (Financial Advisory and Intermediary Services Act) requirements. 8. Adherence to the CPA (Consumer Protection Act). Accounting. Payroll. Taxation. National: 0861 370 220 Email: enquiries@taxshop.co.za Fax: 086 696 6174 Whether your needs are for a payroll system or simply to check that you have covered all your bases in terms of legislative and regulatory requirements, visit a Tax Shop today! DISCLAIMER: The information supplied in this document is not intended to be a guarantee of fact. In no event will The Tax Shop Franchise (Pty) Ltd be liable for any lost revenue, profit, or for direct, special, indirect, consequential, incidental or punitive damages however caused and regardless of theory of liability, arising out of the use of this document, even if The Tax Shop Franchise (Pty) Ltd has been advised of the possibility of such damages. PAGE 5