You are a proactive entrepreneur and you are ready to start your own business. You have developed the best Peri-Peri braai sauce in the country. You decided to sell it in your own store.
You have already done your research and there is certainly a need for your product. However, you do not just want to jump into the deep. You would like to be prepared and know what is what. There are a number of aspects that you must be aware of to avoid the legal pitfalls of a new business.
How do you choose premises for your business?
You thought about setting up your shop at your house. Be aware that you must comply with certain municipality regulations and take them into account. These regulations, however, differ from the area in which you live, so make sure you are fully informed.
If you are rather consider renting premises, you should take your time to go through the lease agreement. Keep the rental term in in mind. Make sure that you can afford the rental amount and that it fits into your business plan.
What will the legal structure of your business be?
Would you like to be a sole proprietor in a sole proprietorship? A sole proprietorship places all risk on the business owner and his estate. You should consider this carefully. All the assets belong to the business owner, but so does all the liabilities of the business.
You can also enter into a partnership if you are not a sole proprietor. A partnership is regulated by agreement, it may be verbal or written. However, the recommendation is to enter into a written contract with the other partners. A partnership can consist of two to twenty partners. All partners are individually and collectively liable for all the liabilities of the business.
However, most small businesses prefer to trade under the banner of a Private Company. A major advantage of a Private Company is that it has its own legal identity, separate from the owners. The assets and liabilities of the business are then separate from the owners. A Private Company is incorporated in terms of the Companies Act, No. 71 of 2008. A Private Company is incorporated by a Notice of Incorporation, a copy of the Memorandum of Incorporation and the prescribed fee to be filed with the Registrar of Companies.
When drawing up a Memorandum of Incorporation for a Company, different issues must be considered. To name a few, one should look at: shareholder rights, company goals, powers of directors and shareholders, composition of the board etc. The Companies Act is fairly flexible regarding the content of a Memorandum of Incorporation as long as it complies with the legal requirements of the Act.
There is, however, a wide variety of business structures, and not all of these structures are mentioned here. It is necessary to get professional advice so that you choose the business structure that suits your business and business plan. You must also be sure that you understand the different implications of tax on different business structures.
Is all your intellectual property protected?
What is your business name and what is your Peri-Peri braai sauce’s name?
Make sure you register your Peri-Peri braai sauce name as a trademark. Is the sauce label very unique? If you hired a graphic designer to design the label, make sure that the copyright is assigned to you by the graphic designer in writing. This also applies to any logo designed for you.
Do you continue to concoct Per-Peri Sauce yourself or do you employ employees to concoct it for you? Do you have the right non-disclosure and confidentiality agreements in place?
Businesses usually own a wide range of intellectual property, and it is important that you as a business owner can identify and protect the different types of intellectual property.
Will you be employing employees?
Do not be in a hurry when you employ someone, make sure it’s the right person for the role in your business
When you decide to employ employees, make sure you have employment contracts in place. When looking at employment contracts, the following can be considered: dismissal, remuneration and benefits, what the job will entail and what obligations will be placed on the employee, confidentiality restrictions etc.
Identify possible risks
Set up a risk management policy and make sure you have all the necessary insurance in place. What risks will your business face? Do you sell your product online, and do you have cybercrime insurance? We unfortunately live in a world with many fraudsters.
Remember protecting your Intellectual property is a major part of risk management. A business’s intellectual property is one of its biggest assets. If your Peri-Peri braai sauce recipe becomes public, what are you going to do? What do you have in place to prevent this?
Create a marketing plan
Here, your intellectual property will also play a huge part. Your business identity and brand must go hand in hand with your marketing strategy.
You’ve considered everything and more, you received advice from your lawyer, you are informed and you want to start trading. You are ready, go!
By Jana Doussy