Though these examples are known because they have been exposed in the public domain, forensic research shows that some small businesses are just as bad, and are using smarter ways to conceal bribes to win contracts, tenders, and appointments.

Good guys come last?

The reality is that one wrongdoing can ruin it all. You may believe that in business it’s about “dog-eats-dog” or that “good guys always come last”, but the reality is that if your actions are not consistent with what society and individuals typically think are good values, you may slowly drive yourself out of business.

Individuals and communities want to do business with “good” people. If they are supporting you with their hard-earned money, they expect you to be honest, fair and to treat everyone with dignity and without prejudice. If you are charging unsuspecting customers more than you reasonably should, or if you are not honest with your business partners and suppliers about your operational and financial standing, you are likely to get caught up in your web of deceit sooner rather than later.

Similarly, evading tax or helping someone else to write non-existing business expenses, or being involved in unlawful activities, such as price fixing, means that you are not operating within the parameters of the law. There is truth in Aldo Leopold’s statement that “ethical behaviour is doing the right thing when no one else is watching – even when doing the wrong thing is legal”.

Sewing moral fibre into all your business decisions will help you build a good reputation and offer the peace of a clear conscience. You’ll also stand a better chance to retain good employees, giving you a competitive edge.

Applying ethics in your business dealings

Negotiations: Every business owner knows that there is always room for negotiating a business deal. But some bully their smaller suppliers into reducing their mark-up to the point that the transaction is not beneficial to the other party. Ask yourself if you are looking for a win-win outcome where all parties will benefit.

Taxes: There is nothing wrong with looking at legitimate ways to reduce your tax bill. But as soon as you pay less tax than you are legally obliged to or avoid paying tax altogether, you are in breach of the law. Failing to declare any income, claiming deductions for expenses that you didn’t incur, creating false invoices or not registering for VAT when you exceed the exempted threshold are some of the unethical business practices that amount to tax evasion.

Creditor payments: You should be paying your creditors and suppliers on time and not use them as a bank. Late payments can cause your smaller creditors to collapse. A survey by accounting firm Xero found that late payments were a source of cash flow problems for 32% of surveyed small businesses, while 16% felt that chasing invoices reduced productivity.

Invoicing: Do you bill for actual expenses and a reasonable mark-up or do you charge some clients more than others?

Government regulations: Are you operating within the ambit of all local authority regulations?

Software piracy: Do you have official licensing agreements in place to use proprietary software?

Staff: Are you paying your staff a market-related salary for their services and do you have formal employment contracts in place? Do you comply with the department of labour’s regulations requiring businesses to employ not more than 40% foreign labour?
Also, make sure that you comply with the minimum wage and the provisions of the Employment Equity Act.

Business partners and associates: The saying that if you lie with dogs you will catch fleas sums up the importance of choosing your business partners carefully very well. If you get into business with people of compromised ethical standards, you might be setting yourself up for future challenges.

 By Jannie Rossouw, Head of Sanlam Business Market. 

Functions of the Commission

• Registration of Companies, Co-operatives and Intellectual Property Rights (trade marks, patents, designs and copyright) and maintenance thereof
• Disclosure of Information on its business registers
• Promotion of education and awareness of Company and Intellectual Property Law
• Promotion of compliance with relevant legislation
• Efficient and effective enforcement of relevant legislation
• Monitoring compliance with and contraventions of financial reporting standards, and making recommendations thereto to Financial Reporting Standards Council (FRSC)
• Licensing of Business rescue practitioners
• Report, research and advise Minister on matters of national policy relating to company and intellectual property law
• Licensing of Business rescue practitioners
• Report, research and advise the Minister on matters of national policy relating to company and intellectual property law.

Contact Details:

Head Office:
The dti Campus, Block F77, Meintjies Street, Sunnyside, Pretoria

Call Centre: 086 100 2472

Click here for the CIPC website

Source: CIPC

1. PTY (LTD)
2. Non-Profit Company (NPC)

FOR PROFIT COMPANIES

Private Companies must have at least 1 director. At least one of the appointed directors must also be appointed as an incorporator. You cannot appoint an alternate director if a full director is not appointed.

Most common structures:

• Public (name ends in “Ltd”) or private (“Pty Ltd”) company
• Personal Liability Company (“Inc”)
• Partnership
• Business trust
• Sole proprietorship
• External company (branch of a foreign company)

These types of business offer directors protection from individual liability. A company can make shares available to staff as a Private company (Pty) or to the public as a Limited company (Ltd), and these are easily transferred from one owner to another.

(Pty) Ltd companies are subject to an annual audit. This is the best legal structure for people who ultimately want to sell their business to a large competitor, or to be listed on the stock exchange.

NOT FOR PROFIT COMPANIES

Non-Profit Companies must have at least 3 directors. All directors will also be appointed as incorporators. You cannot appoint an alternate director if a full director is not appointed. Only South Africans can be appointed as directors/incorporators using this channel, foreign directors must make use of the manual process.

COMPANY REGISTRATION

The CIPC (Companies and Intellectual Property Commission) registers Companies and Co-operatives.
It is not necessary for all businesses to formalise by registering with the CIPC. For some businesses, such as informal businesses and sole proprietors, there may not be sufficient benefits. Businesses that wish to transact with government and the formal sector, or that wish to access certain types of government support, are generally required to be registered with the CIPC. For these businesses, there may also be tax benefits to registration, as registered businesses have a lower tax rate than individuals. Even though you may not be registered with the CIPC, you will still have to be registered with the South African Revenue Services and will still be liable for tax if your turnover exceeds the prescribed threshold.

Registering a business is simple and inexpensive if you follow the steps outlined on the CIPC website, the first step being registered as a CIPC customer. However, it brings with it certain responsibilities, irrespective of whether the business is trading. For example, you will need to file an annual return and pay an annual fee.
In terms of the Companies Act, 2008, a company may be registered with or without a company name. When a company is registered without a reserved name, its registration number automatically becomes the company name. This is the quickest way to register a company.

Such a company may transact with a trading (business) name, or may apply to add a reserved name at a later stage. In this case, the company will need to first reserve a name and then apply for a name change, which constitutes a change to its Memorandum of Incorporation (MOI) (refer to Maintain a Business).

If your initial name reservation application is not approved, you will need to apply for new names. You may apply for between 1 and 4 names during each application process. Each name reservation application costs R50. A company registration may vary between R125 and R475 (R125 for a private company, R475 for a non-profit company registered without members).

Click here for Application forms from the CIPC

Sole Proprietor/Trader

The Sole Proprietor/Trader is the most basic form of business and consists of one owner. The only requirement is meeting basic tax and legal paperwork. Because the owner is the sole member of the company, all liability and possible legal action falls to him/her and personal assets, should the business accumulate unpaid debts.

Once the owner passes away, the business ceases to exist. This type of business does not need to be registered as a legal entity itself. All legal matters are referred personally to the owner.

Partnership

The Partnership paradigm closely resembles the Sole Proprietor, but can include as many as 20 partners. Each must have a clearly stipulated role, share, profit cut and liabilities. Every aspect of a business partnership must be agreed upon and every liability is shared.

Losses, legal action and security are all placed on the group as a whole. A business partnership does not need to be registered, but all legal documents must be correctly drawn up between the partners.

Private (Pty) and Limited (Ltd) Companies

These types of business offer directors protection from individual liability. A company can make shares available to staff as a Private company (Pty) or to the public as a Limited company (Ltd), and these are easily transferred from one owner to another.

(Pty) Ltd companies are subject to an annual audit. This is the best legal structure for people who ultimately want to sell their business to a large competitor, or to be listed on the stock exchange.

Specific information regarding SA company structures can be found at the Companies and Intellectual Property Commission (CIPC) website www.cipc.co.za

It is also a good idea to contact the local Chamber of Commerce in your area for advice and networking opportunities.

_{‘Life is like a cash register, in that every account, every thought, every deed, like every sale, is registered and recorded.’ –  Fulton J. Sheen}