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Starting a Business

Are partnership agreements for spouses a requirement?

What you need to know before signing a partnership agreement with your spouse.

Darren Ryder

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In life, I believe in taking a proactive approach and being prepared rather than being reactive. Obviously things don’t always work out, but by being prepared one can eliminate a lot of unnecessary stress.

1. Is it necessary to have a formal partnership agreement with my wife?

Definitely! There is no situation that I can think of where one should not have an agreement. The reason for this is your company is a legal entity in its own right and as such needs to be managed accordingly.

Just like a marriage, a business has its own agreement, and, if the worst had to happen and you got divorced, your business would not be covered or protected. And this could potentially mean that the livelihood of your staff could also be affected.

2. What sort of contingencies should we cover in the agreement?

There are a few things to consider including capital contribution, how to distribute profit and or loss, salaries and operations.

In addition the terms of partnership and or what would happen if one party wanted to withdraw from the partnership (or if one party died). Finally a non-compete agreement (whereby either party can’t go off and start a similar business in direct competition) is also essential.

Should both spouses be equal partners in a business?

I think that this is a personal choice. However there are some important considerations such as BEE and tax structures; who is liable for what as a business partner; and depending on your business structure, who signs surety and how this would affect one’s personal assets.

How do we decide who will be responsible for what?

In my experience the person who is most experienced and has the most passion for any particular role should be given the job. This way you ensure maximum productivity. For the areas where there is a gap and neither of you can fulfill the role, employ people to help you even if it is just on a short-term basis.

My wife and I are getting divorced. How do we keep the impact on our business to a minimum?

Without any contracts in place besides your marriage agreement, this will be hard unless you can come to an amicable agreement. If you can come to some sort of arrangement I would strongly suggest getting a partnership agreement drawn up at this point in time. If your business is profitable it would make sense that both partners continue to benefit in the short term, until either partner can buy the other out.

My wife and I own a business together, how can we protect the other should one of us pass away?

The best way to do this is through an insurance policy that gets taken out by the company to protect both partners in such an event. This protects both parties in that the other can get paid out, and therefore becomes the sole owner, without risk of outside parties, and as such the business, its vision and values remain intact.

Darren Ryder is a business mentor at The Hope Factory, specialising in helping SMMEs establish and grow their businesses. He is passionate about South Africa and believes entrepreneurs will play a big role in our future economic development. Historically he has started and run his own business, having come out of full time ministry and 16 years in the manufacturing and textile industry, with a sales and analytical background.

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Starting a Business

What are the do’s and don’ts of securing an online domain name?

We asked Domains.co.za founder, Wayne Diamond, what the do’s and don’ts are when it comes to entrepreneurs registering domain names for their start-ups…

Wayne Diamond

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There’s that L-word again:

“Location, location, location”. It’s the make or break decision. Every estate agent and business owner cannot overemphasise the importance of this Critical Business Decision Number 2 (Number 1, of course, has to do with what you’re going to sell!).

Related: As a start-up, what are the most important areas I should be looking at?

 

Whatever business you’re in, being close to customers and convenient to business partners and suppliers is essential. That bricks-and-mortar wisdom is equally true in the world of online commerce. Having the right domain name and the right support for your online presence has emerged as a real driver of success.

Some figures put the scale of the opportunity into perspective: US e-commerce is predicted to reach $440 billion by 2017, showing a compound annual growth of 13.8%[1]. While the Internet economy is in its infancy in South Africa and Africa, it is growing strongly: research by World Wide Worx showed that consumers, small and medium businesses and government were already purchasing products and services worth R59 billion on the web three years ago.[2]

So how to secure the best and most profitable Internet real estate to make sure your business can ride the e-commerce wave?

It’s all in the name:

The first decision is what domain to use. One of the exciting developments is the launch of new Internet domain names, so it’s definitely no longer a choice of .com or .co.za. The proposed dotAfrica (.africa) geoTLD (geographic Top Level Domain) is one option that’s set to come online around the first quarter of next year, but what about the ZAdotCities domains of .joburg, .capetown or .durban? Domain names within these additional geoTLDs will be able to be snapped up by the public around November this year.

While .com remains a good choice for truly international businesses, choosing a domain name with some local flavour is probably going to work well for many companies.

The greater range of domain names also makes it more possible that you will be able to choose the right name for your business. When it comes to the more established domains, like .com or .co.za, chances are higher that the name you want has already been taken.

When it comes to that all-important name, received wisdom used to be that short was best, but the trend nowadays seems to have reversed—even phrases are now used. The key is to choose a name that is easily recognisable, that will stick in peoples’ minds and that describes the business well.

Perhaps a good example is the domain used by the writer of this article: www.domains.co.za is both a brand name and a name that perfectly describes the nature of the business. At just seven characters in length, “domains” is also an easy to spell, easy to remember word – keeping names under ten characters is guaranteed to help audience recall.

Something people will remember easily is absolutely vital.

Some companies use specific names for individual campaigns, but always make sure the business as a whole has its own web address.

Experience has shown that it’s probably worthwhile to register similar domain names to the one you choose, just to keep competitors from taking them in an effort to sow confusion.

My final advice: it’s always a good idea to use an ISPA (Internet Service Providers’ Association of SA) member to help you register the chosen address of your start-up. That way you’ll be sure that all the formalities are correct, and that the company you’re dealing with abides by ISPA’s code of conduct.

Finally, as there are already almost 950 000 .co.za domains registered, it’s a good idea to surf to www.domains.co.za and perform searches to see if the domain you would like is indeed available.

Related: Does the South African government award grants to franchisees?


[1] Chuck Jones, “Ecommerce is growing nicely while mcommerce is on a tear”, Forbes, 2 October 2013, available at http://mashable.com/2013/02/05/ecommerce-sales-top-1-trillion-worldwide/.

[2] “Internet 2% of SA economy”, 29 May 2012, available at http://www.worldwideworx.com/internet-2-of-sa-economy/.

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Starting a Business

How to protect your business idea when sending them to financial instituitons?

Signing an NDA, is it necessary?

Anton Ressel

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How can I protect my business idea before I submit my business plan to financial institutions and other agencies for help?

You have a few options:

Firstly, you can include a disclaimer as an introductory clause, saying that any and all information contained in the business plan and related documents remain the Intellectual Property of xxx (your name) and may not be reproduced, copied or used in any manner without express written consent. This is not legally binding, but usually enough.

Secondly, you could ask them to sign a non-disclosure agreement, which is more binding from a legal perspective. The downside of this is that it can come across as arrogant, especially from someone who is approaching us for help. Personally I refuse to sign any NDA from clients who approach me for help, it just smacks of mistrust and arrogance.

On a final note, good ideas always get copied. If you are that worried that your idea will be stolen, you may need to re-look at it and find ways to make it difficult to replicate, or better yet, make sure you are first to market.

Related: As a start-up, what are the most important areas I should be looking at?

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Starting a Business

Does the South African government award grants to franchisees?

In my experience, unless you as the entrepreneur have some ‘skin in the game’ and a reason to get up and make the business work every morning, it seldom will.

Anton Ressel

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I am considering purchasing a children’s education franchise and wanted to know if the government offers grants. The cost of the franchise is R 86 000. If so what are the criteria to qualify and how does one go about it?

Accessing grant funding for a franchise may prove challenging, unless that franchise is registered and accredited, in which case there is a fund that may consider it – see CNBC for more info.

Otherwise, you could look at www.investmentincentives.co.za and see if any of those sources of financing are of interest. It naturally depends on your own PDI (previously disadvantaged individual) status as many of these funds are focused on youth, women and PDI’s.

Finally, on an emotional level I would caution against going all out for grant funding and not loan finance. In my experience, unless you as the entrepreneur have some ‘skin in the game’ and a reason to get up and make the business work every morning, it seldom will.

 

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