Understand the basic legal and tax requirements

Not every business needs to be registered as a company immediately. Some people start as sole proprietors, especially when testing a small business idea. However, if you want to operate as a company, you register with the Companies and Intellectual Property Commission, usually known as CIPC.

You should also check your tax responsibilities with SARS. If you register a company with CIPC, SARS can generate an income tax reference number for the company.

It is important to understand the basics early so that your business does not run into problems later.

Check whether you need a licence or permit

Some businesses need a municipal licence, permit or approval before they can operate legally. This is especially important for food businesses, informal trading, spaza shops, salons, accommodation, childcare, entertainment, street trading and some businesses operating from home. Requirements differ from one municipality to another, so you should check with your local municipality before you spend too much money.

This step is important because a business that ignores local rules may face delays, fines or closure.

Understand VAT basics

Many very small businesses will not need to register for VAT at the beginning. However, you should still monitor your turnover as the business grows.

VAT registration depends on your level of taxable turnover. If your sales increase, you may reach the point where VAT registration becomes compulsory. Keeping proper records from the beginning will help you know when this may apply.

Open a separate business bank account

Even if you start small, it is useful to separate business money from personal money. A separate account makes it easier to track sales, expenses, profit and cash flow.It also helps if you later apply for funding, because funders often want to see bank statements and proof that the business is active.

The account does not have to be complicated at the beginning. The important thing is that you can clearly see what money belongs to the business and what money is personal.

Consider funding only when you are ready

Funding can help a business grow, but it should not replace planning, testing and customer demand. Before applying for funding, make sure you understand your costs, your market, your pricing, your cash flow and your repayment ability.

There are government and development finance options in South Africa. These may include support from the Department of Trade, Industry and Competition, the National Youth Development Agency and the Small Enterprise Finance Agency. Some schemes may offer grants, incentives or cost-sharing support, but applications are usually competitive and may have strict conditions.

Funding is most useful when it supports a tested business model. It is less useful when it is used to rescue an unclear or unproven idea.