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Start-up Advice

Start a Successful Business

The legal considerations when starting or building a successful business enterprise.

Nicolene Schoeman-Louw

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As the future of an economy, businesses are the future of a country. It’s therefore very important that each business owner recognises their responsibility to greater society while they are considering their personal goals.

The unfortunate reality is however, that many businesses under-perform or die before they have actually lived because of poor planning.

At Schoeman Attorneys we are committed to helping our clients make informed decisions and implement strategies that consider their specific circumstances and promote their best interests. We will now briefly discuss some key considerations needed to facilitate proper planning.

Choosing the right vehicle

There are various corporate entities — also called juristic persons — available when electing to start a business. These include:

  1. Company
  2. Close Corporation (which may not be incorporated any longer since the enactment of the new Companies Act on 01/05/2011)
  3. Co-operative
  4. Business Trust (although it does not have a separate legal personality)

All companies and corporate entities (save for co-operatives and trusts), regardless of size, have been unified under one legislative banner. The Companies Act 71 of 2008 extensively regulates the formation, management, governance and deregistration or termination of companies.

There are various aspects to consider when electing which company structure (for example, a private or public) is best. Generally, however, a company offers a limited liability and separate legal personality from its members (shareholders). From an estate and continuity planning perspective, this is a great advantage. It is also useful in protecting personal assets from business creditors.

However, remaining compliant with various regulations however present some practical challenges, particularly with regard to management, accountability and administration such as directors duties (management duties).

An annual return must be filed with the Companies and Intellectual Property Commission (CIPC) each year to prevent deregistration. Some companies must meet auditing requirements, and bigger structures face more complex governance and related issues.

Another vehicle to consider is a co-operative. Regulated by the Co-operatives Act 14 of 2005, a cooperative is an autonomous association of persons who have united voluntarily to meet their common economic and social needs through a jointly owned and democratically controlled enterprise.

This is very similar to a company structure and has the same advantages. But one major difference lies in the fact that every member only holds one vote, regardless of shareholding. These enterprises are particularly useful when smaller operations want to stand together to take advantage of bulk buying or association with one another for mutual benefit while retaining their individual business autonomy.

Another vehicle that is quite widely applied, specifically in the real estate development and related industry, but not always fully considered, is a Trust. Trusts are regulated by the Trust Property Control Act 57 of 1988.

In most instances Trusts are not suitable vehicles with which to conduct business. Among other reasons, this is to the lack of limited liability or separate legal personality from its members, along with the normal income and capital gains tax obligations.

On a practical level, the administration of Trusts is generally extremely challenging because the Master of the High Court does not have a national automated system, unlike the CIPC. This lack of automation makes it extremely time consuming and challenging to amend or obtain certain documents.

In addition, unlike Companies and Co-operatives, from a due diligence perspective Trust records are difficult to research because of the nature of the Master of the High Court’s record keeping structures.

However, there are instances where a Trust can be very useful, such as broad-based black economic empowerment (B-B BEE) structures and employee share schemes. Trusts are generally still very useful and relevant in estate planning, when the purpose is to preserve assets or to look after minor children after the death of their parents. Therefore, a Trust structure may play a role in the planning process, where applicable.

It is therefore crucially important that all the appropriate vehicles are properly investigated before starting a business and again when the business is expanded. Due consideration should be given to the specific circumstances and vision of the business owner, which will inform the most appropriate vehicle to implement.

Compliance is essential

Compliance with other relevant legislative provisions is essential, including: choosing a suitable, properly zoned premises; scrutinising your commercial lease agreement before signing it; compliance with the relevant tax laws; having professionally drafted employment contracts; and implementing the relevant policies and procedures to ensure that your internal business documents — whether company documents (memorandum of incorporation), trust deed or a co-operative’s constitution — is aligned with the business plan and with legal compliance.

It is therefore essential that you engage a professional to complete these tasks.

Identifying your target market

Identifying your target market is specifically relevant when you are and contracting with government or big corporates and you are required to comply with legislation such as B-B BEE (Act 50 of 2003). If government or big corporates fall within your current or future target market, it is essential to ensure that your business plan, company documents and related employment and investment strategies align with your B-B BEE strategy.

If you are proactive and align these from the outset, you will be better able to win and retain valuable client contracts.

The next important legalisation to consider is whether your transactions will fall within the requirements of the Consumer Protection Act 68 of 2008. Generally, the Consumer Protection Act is a law of general application and therefore applies to every transaction between a consumer and supplier within South Africa.

However, because of their size, certain juristic persons (specifically large juristic persons) are excluded from the protection given to consumers under the Act. Although we do recommend that companies comply with the Consumer Protection Act and commit to rendering a high quality service towards consumers, in a certain sense lawful non-compliance does offer more contractual freedom.

Protecting wealth

At Schoeman Attorneys we specialise in a range of services designed to best serve both individuals and businesses. These services include commercial or business law, contract drafting, mining law, civil litigation, antenuptial contracts, wills and estate planning.

We believe that through proper planning in structuring business affairs and by implementing risk aversion strategies it is possible to pave the way forward for business growth that will result in the creation and sustenance of wealth.

Taking this approach, the individual behind the business will be able to structure their personal affairs most effectively to allow them to enjoy the fruits of their hard-earned money.

This is why we recommend that each person, regardless of whether they are a business owner or not, implements estate and personal planning strategies that includes a professionally drafted will. We also further recommend that you regularly update your will and appropriate estate plan so you can protect the fruits of your hard earned labour from unnecessary risk.

We often compare the integration of these services with the construction of a house. At bottom level is the foundation, which is the antenuptial contract that directs many of financial decisions that will follow in a person’s lifetime.

Above the foundation are the walls of the house, which are the business structuring, contract drafting and the personal financial planning strategies that a person will implement during their lifetime to create revenue and create sustainable wealth.

Last but not least is the roof, which is the will that protects everything that has been built up below it, keeping the contents safe and ensuring a lasting legacy. Buildings with cracked foundations, poorly constructed walls or inadequate roofs never stand for long. It is therefore essential that a professional deals with all these aspects.

Nicolene Schoeman – Louw is an admitted attorney of the High Court of South Africa, as well as being a Conveyancer, Notary Public and Mediator. She is the Managing Director of Schoemanlaw Inc Attorneys, Conveyancers and Notaries Public (Schoemanlaw Inc Attorneys) in Cape Town. Visit www.schoemanlaw.co.za for more information or email enquiries@schoemanlaw.co.za

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Start-up Advice

Where Should You Begin?

It goes without saying that the right people on your team make all this possible. But this is a topic for another day.

Peter Castleden

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When I first started what was to become IndieFin, I really didn’t know where to begin. I had been granted a tiny bit of funding – enough to last about a year – on the basis that I could figure out how to reinvent financial services for the digital generation.

The initial challenges were plentiful. My experience with technology was exclusively as a user. So, I had close to zero knowledge on how to execute anything that I dreamed up. I also was very aware that the financial services industry had a reputation for offering awful customer experiences, so the bar there was very low. And finally, having spent a good few years working on developing financial products in the industry, I realised the opportunities to improve on the industry’s products were vast.

While this sounds like a fairly ideal situation for an entrepreneur, and while I feel very grateful for the opportunity, the real challenge was that there were simply so many things that could be built, all of which would present radical improvements on the status quo.

First steps

A couple of us sat in a room and started putting ideas down on a white board.  We went wild, and kept coming up with more and more great ideas. In fact, we came up with both a very compelling retail investment proposition, as well as what turned out to be our insurance proposition.

Related: 4 Things Your Start-Up Needs When It Opens An Office

What this exercise revealed, was that ideas alone are pretty useless. And, too many ideas can paralyse you.

Our small team got stuck in that trap, which was made worse because we didn’t (yet) have the skills to bring any of those ideas to life.

Hard lessons

We wasted a good few months (and some money) simply working on the details of multiple ideas. We were generating lots of documentation, and a few pretty pictures, and truly believed we were making progress.

In reality, we were running on the spot. Things changed with the addition of some new talent – who brought with them a completely different approach and complementary skillsets. This combination of people changed how we were doing things, for the better, and we managed to launch something into the market a few months later.

If I could take out the key lessons from this early stage of our business, they are:

  1. Choose one thing to do, and focus all your energy on doing it. This does not mean you throw out the other good ideas… but put them on the “not yet” pile.
  2. If it’s going to take you longer than three months to build and deliver your one thing to the market, it’s still too big. Strip it down to its core, until you can confidently build it and ship it within a quarter. This may feel like you are watering down your idea, and maybe you are. However, working to a longer timeline than this will stall you, with the risk of never getting anything shipped.
  3. Launch what’s ready. You will know what can still be done to make it better. It’s scary to launch something that is nowhere near your mental picture of what it can and will be.  Do it anyway.
  4. Be ready to learn. The best market research you can conduct is with real people using something you’ve built in the real world. Sure, you run the risk of brutal feedback (and perhaps it’s because it was launched early), but the free lessons you learn will be priceless in developing version 1.2 and 1.3 and 1.4.

Related: 3 Dangerous Entrepreneurial Myths You Need To Ignore

Fear is your enemy at this stage of the business. Personally, I needed others to challenge that natural fear, and push “go”. And I’m glad I did. Most of what we built in the early versions of the product releases were not even on our original roadmap. The stuff we have built since launching, and which we are still going to build, have been inspired by our customers and the lessons we have learnt in launching something incomplete.

It goes without saying that the right people on your team make all this possible. But this is a topic for another day.

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Start-up Advice

4 Things Your Start-Up Needs When It Opens An Office

There are certain things you should definitely ensure your office has. If not before you move in, then as soon as you can set it up.  

Jessica Edgson

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So, your start-up is finally up and running. You’ve been dreaming about this moment for as long as you can remember. And now you have clients or customers, a small team of dedicated employees and you’re turning a decent profit. Which means it’s time to move out of your garage and into a proper office.

You don’t want your staff filling up your personal space at home. Your garage, although creatively decorated, simply is no longer big enough. Plus, there simply isn’t enough parking on your street. It’s time you go from a bunch of youngsters with a big idea to a proper business with a premises you’re not afraid to invite clients to.

But, first, you need to choose this office and it’s that’s not a task you should take lightly. Obviously, you want to keep that creative startup vibe you’ve worked so hard to build up, so a space in a corporate office block isn’t going to work for you. You need to choose something that conveys your independent nature and inspiration-led work ethic.

Related: The Unwritten Rules: Real Start-up Advice To Launch A Game-Changing Business

However, there are certain things you should definitely ensure your office has. If not before you move in, then as soon as you can set it up.

At least one boardroom

You and your employees may be all about a “shared space” where everyone knows what everyone else is up to. But, unfortunately, it’s time to face the fact that you’re going to need at least one boardroom in your new office. Why? Because you will now be hosting clients and investors and they will want to discuss their wants, needs and expectations in a quiet place where they can hear themselves think.

Of course, this boardroom doesn’t have to look like it belongs in a big corporate office. You can decorate however you want. If you want to give the appearance of transparency with your staff, so they don’t freak out every time you drag all your senior employees into the room, you can always have glass walls that are easy to see through.

You’ll also want to incorporate some impressive tech into your boardroom to wow your clients and investors. Interactive whiteboards and touchscreen tablets at each seating place will give the appearance that you have, literally, got technology at your fingertips.

Security you can trust

And with all the tech that comes with owning a startup, you’ll want security to protect all your assets. This is not an area where you can afford to skimp on costs and save money.

If you’re in an office park of sorts (the kind that still allows you to keep your creative vibe), there’s probably already a security guard doing the rounds regularly. However, it’s up to you to ensure you can monitor who enters and exits your premises.

A great way to do this is with a fingerprint scanner at your front door or a tag system. Just make sure you take ex-employees off the system as soon as they leave and are able to add new employees just as quickly.

Now you need to focus on internal monitoring. A video wall controller paired with strategically placed cameras around the office is always a good idea. That way if there’s ever an incident, it can be caught in real time and even recorded for later use as evidence.

You’re investing a lot of money in your business assets as well as your space, so it’s important you’re able to protect everything and everyone.

Related: Which Side Hustle Should You Try? (Infographic)

A kitchen with all the necessary appliances

office-kitchen

Yes, you’re going to need somewhere for your employees to make that coffee they need in order to work like the rockstar machines they are. But you’re also going to need a place for them to store their lunch, heat up food and even make food if necessary.

This is especially important if there’s nowhere near your office for them to purchase food. And if you want people to socialise while they eat, make sure your kitchen is big enough for a giant table where everyone can eat together. If that’s not possible, try setting aside space inside the office or even outside the office.

Space for people to move around

As a start-up made up of young people with bright ideas and a collaborative working style, you will likely want to have an open plan office. And that’s great. However, you have to ensure there’s enough space for everyone to move around.

Your team will eventually grow, so you can’t simply create space for the staff you have. You don’t people feeling cramped and uncomfortable.

It’s time for your start-up to move out of your garage and into your own office space. But that doesn’t mean you have to let go of that creative environment you’ve worked so hard to cultivate.

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Start-up Advice

How To Build The Right Mindset For Start-up Success

When clarity, consistency and execution become your signal characteristics, getting what you want becomes automatic.

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Mindset matters. Whether you’re a founder, CEO, first-day-on-the-job newbie, or bold, would-be entrepreneur, if your mind isn’t right then your decisions aren’t right. And with suboptimal decision making comes suboptimal results. How you show up everyday determines how you tackle the challenges that come your way.

However, oftentimes what gets in the way is ourselves – our thoughts and emotions. If you dislike public speaking, for example, what might go through your mind if asked to present in front of an audience is that little voice in your head saying something like, “I hate speaking. I’m not good at it!” Your heart skips a couple beats, your hands become uncomfortably moist so you pat them on your pants which doesn’t exactly help your self image and then you begin stammering. Congratulations, you’ve just entered the realm of weird.

Don’t let emotion get the better of you. Stay focused on what matters by learning to separate emotion from reason so you can focus on what you need and not be swayed by what you want.

Related: Smart Money For Small Businesses

Here’s how:

Clarify winning

Having the right mindset begins with identifying what you want. Without a clear picture of what winning looks like you’ll never know if you’re on the right path, which means you can’t course correct. Take the time to clarify what “success” looks like to you.

You might want to become more disciplined, improve your focus, or learn to talk to yourself more effectively (yes, self talk is a skill). Clarity creates two things. It creates meaning, and it creates guidance for you to focus on which allows you to better communicate not only with yourself but with your team as well.

It’s easy to take leadership, teamwork or any of those “soft skills” for granted, but without them a company wouldn’t exist. Get clear on what good leadership looks like; what effective teamwork looks like.

When you know what right looks like, you can make immediate adjustments to get back on track even after they’ve gone wrong.

Make consistency a habit

Being great at anything requires two things: Consistency and effort. You have to do the work to be great, and you have to do it consistently. Muscle doesn’t build itself (trust me, I’ve tried). You don’t get stronger by doing some pushups whenever you feel like it. You improve by going to the gym consistently and doing the work to get stronger.

Leading a team or a company requires the same consistency of effort. You get better at communicating by communicating. You get better at focusing by focusing. You get better at working together by working together to get better – and doing so consistently.

Now, while consistency and effort are two critical ingredients to crushing anything in life, so too is learning. After all, you can be as consistent and as diligent as you want, but if you A) don’t have a clear definition of success, discussed above, or B) don’t learn from past mistakes, then you’re only getting to the wrong place faster. Make learning a habit by consistently learning, and you’ll develop the mindset of constant improvement.

Suspend judgment to get stuff done

SEAL training

I remember in first phase of BUD/S (Basic Underwater Demolition/SEAL training) an instructor giving us an example of the type of mindset that every SEAL has – the type of mindset that gets stuff done. He told us that if he had to go run 25 miles right then and there because it was critical to mission success, he would. He would’ve done it not because he liked running or because he was ordered to, but because it was something that just had to be done.

Related: 4 Hacks To Overcome The Struggles Of A Running A Small Biz

The takeaway is that you don’t have to like everything you do. You just have to do it (whatever it happens to be). To really make an impact in your work or in life in general, suspend judgment. When you suspend judgment you forego any emotion attached to that judgment. Then, all you have left is action versus inaction, do or do not do. It’s not easy, but then again nothing good ever is. Do it anyway.

Being right in anything requires clarity, consistency and effort. There’ll be bumps in the road, no doubt, but those bumps are what make you better.

This article was originally posted here on Entrepreneur.com.

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