Regulatory compliance is an ongoing process for small business. As a business owner you should make sure your business plan includes a compliance strategy. Failure to take care of your small business regulatory compliance could lead to closure of your business and in most cases a loss of income. The big questions are, how to get started and how keep your business compliant?
Keeping your registered business legal – annual returns
The starting point of regulatory compliance is keeping your registered business legal. Yes, your registered your business in 2007, but to keep your company name and company registration number active your business is required to pay an annual fee. This fee is called annual returns and is an amount of R100 for a PTY LTD and Closed Corporation.
Failure to pay annual returns includes a penalty of R50, more importantly your small business may be deregistered. This pricing applies if done by the business directly on the CIPC or the Bizportal website.
To pay your business annual returns you will need to have a customer code with CIPC and follow the process annually to keep your business active. Here two links which include user guides from CIPC to get started:
Financial compliance – South African Revenue Services (SARS)
Businesses have a legal obligation to pay tax to SARS through the tax system in South Africa. There are many categories of tax for business owners which include, turnover tax and income tax. Small business do have a options to register as a small business corporation which includes reduced tax rates.
Links with more information to financial business compliance categories will be included providing information directly from SARS. These links are extremely useful and provide a quick overview of tax compliance costs and tips to develop a compliance strategy.
Generally business entities will need to register for:
- Turnover Tax
- Value Added Tax (VAT)
- Pay as you Earn (PAYE)
- Unemployment and Insurance Fund (UIF)
- Skills development Levy (SDL)
Turnover tax and income tax paid is paid the annual turnover of your business. To get a better understanding of turnover tax review the information provided on the SARS website: https://www.sars.gov.za/ClientSegments/Businesses/SmallBusinesses/Pages/default.aspx
VAT, depending on your business turnover you may also need to register for value added tax (VAT). This is not compulsory if your business turnover is less than R1 Million per annum, there is also a voluntary option for vat registration. Read more about VAT on the SARS website: https://www.sars.gov.za/ClientSegments/Businesses/SmallBusinesses/Pages/Small-Businesses-and-VAT.aspx
PAYE, as you will be required for employees of the business. Remember that as the owner of the business you are also employed by your business. Additional information is available on the SARS website: https://www.sars.gov.za/TaxTypes/PAYE/Pages/Registering-for-PAYE.aspx
UIF, is paid to provide employees with financial support if retrenched or in the case of not been employed and is the responsibility of the business. Read more about UIF on the SARS website: https://www.sars.gov.za/TaxTypes/UIF/Pages/default.aspx
After reading the last few paragraphs you are most probably feeling overwhelmed with information. The idea is for us as business owners to understand the importance of compliance.
So just how serious is compliance? More specifically financial compliance, well over the past 10 years we have seen many businesses been blacklisted by SARS due tax evasion or failure make tax payments.
Getting started with your business financial compliance includes a few options:
Option 1: visit SARS offices in your local area and consult with a SARS official, this may be time consuming due to the number of people visiting SARS offices daily. Depending on your knowledge of taxation and finance you could consider using the SARS online platform to register and submit all your tax.
Option 2: set up an appointment with an accountant and tax practitioner to help you get your business financial compliance in order. This will include a fee for the services, try to find a company that specializes on the size of your business and your business turnover. In most cases this will be the simplest way to get your finances on track as you will have experts dealing with your business finances.
Irrespective of the option you choose, ongoing learning is important for business owners. Keep yourself up to date with changes in legislation, read books on business finance, attend workshops on finance and taxation and network with experts in the industry.
Industry specific legislation
Different industries and professions have compliance regulatory organisations supported by legislation. Medical professionals like Doctors would need to register with Health Professions Council of South Africa (HPCSA). Industry specific legislation is in most cases linked to legislation in South Africa, always ensure you have follow the correct processes to keep your business compliant. In most cases your business will be provided a licence or registration number.
Financial Services Industry Compliance
Financial institutions have a legal obligation to request personal and business information from your business as well as the shareholders, members or directors. The information required by the financial services industry (Banks) includes; ID documents, proof of address, company name, company registration number, company registration documents, tax number, tax compliance status and financial records this legislation is FICA (Financial Intelligence Centre Act). FICA is focused on preventing and combating financial crime.
This means your bank is responsible for reporting suspicious or unusual transactions on your business and personal bank accounts. FICA verification for your business is updated annually, the bank will contact you to provide updated documentation. Failure to provide documentation will lead to temporary closure of your business bank account which means you cannot access funds or bank accounts.
Business Compliance is not a once-off process
As business owners we should remember that compliance is an ongoing process in business. Government legislation can change at any time and this means, as business owners need to make immediate changes to stay compliant. Business owners and staff may be required for regulatory examinations to ensure continuous professional development. Budget for your compliance strategy to ensure your compliance cost does not present a financial burden on your business operational budgets.
Keep a network of legal and financial professionals in your circle of advisors to help you stay up to date with changes. Remember to pay annual or monthly payments if required to keep your business compliant. Keep records of your compliance documentation and keep a backup copy using cloud storage.
Continue learning more about compliance and good governance, keep an eye on government changes to regulatory compliance. Visit the Department of Labour website for updates and additional compliance http://www.labour.gov.za/DOL/
Business owners in most cases deal with client information which includes personal information of clients. Take time to understand and implement consumer protection policies in your business, read more regarding the Protection of Personal Information Act, https://www.gov.za/documents/protection-personal-information-act
Navigating the small business regulatory universe
The business regulatory environment is diverse and in most cases includes industry specific compliance. Small business should consider using the services of compliance practitioners to ensure your business is 100% compliant.
Invest time and money in developing a compliance strategy and include your monthly or annual compliance cost in your business cash flow. Consider setting up a compliance function department and audit committee in your business, to monitor your compliance requirements, compliance issues and business processes.