The biggest legal issues you are likely to encounter running your own business are dealing with contracts, ensuring your business is registered and compliant and protecting your intellectual property.
To help South African entrepreneurs navigate the legal minefield, Cézanne Britain, CEO of Britain Renecke, a boutique corporate commercial law firm gives advice on how to approach these four challenges.
1. Legal advice
One of the most common pitfalls for small business owners starting out is not getting the right advice from the start, because you think the right advice costs a lot of money. When trying to find someone to assist with the formation of a company, one of the best ways is to look for a specialist, through recommendation or referral.
You might be married to your business but getting advice from a divorce lawyer might not be the best decision if you’re trying to set up a company – a corporate and commercial lawyer is more advisable. If you have no referral and have no choice but to go with someone new, do your homework. Review the Companies and Intellectual Property Commission’s page on their website that houses how to step by step guides, webinars and presentations because you may find that you can assist yourself or at least put yourself in the position of being more informed about the process of starting a company.
Tax and labour law compliance should be at the top of the list for all businesses
The issue of compliance, or lack thereof, is another common pitfall of business owners, because having a compliant business is time-consuming and can be costly, but it should not be neglected.
Once you have completed your company’s registration process and understand what all your documents say and what is required of you as management and owner of the business, the next step would be to ensure that your company is compliant.
While there are general compliance obligations that apply across the board, compliance is very much industry specific. Tax and labour law compliance should be at the top of the list for all businesses. If you have a manufacturing business, do you have a manufacturing licence? Does your product require SABS/SANS certification? Have you complied with health and safety regulations, and municipal by laws governing noise levels and hygiene?
You may not recognise the importance of compliance immediately but ensuring that your business is compliant is even more important for small businesses, as failure to do so can result in spending money to fix it, undesirable legal action and costly fines.
As business owners, you need to consult your trusted legal advisers to understand regulations and laws that you need to comply with.
Contracts can be tedious and hard work, but they are the backbone of strong business relationships
In business, it’s generally a good idea to have things in writing, this is especially important when contracting with various third parties, where either you are rendering a service or providing a product or where you are on the receiving end of a service or a product.
Contracts can be tedious and hard work, but they are the backbone of strong business relationships. The sooner the bewilderment around them is taken away, the better. In a basic sense, contracts entail addressing essential legal requirements, without which your contract will not be valid. This includes formalising what you want out of the agreement, how you see things working between you and a third party, how payments will be made and by when and covering various other legal aspects that will regulate the business relationship.
An important aspect which can’t be left out of a contract but is often overlooked, is what happens in a breach. Does your contract make provision for what happens when a contracting party does not do what is required of them? For example, if a third-party leaves you aggrieved at some point because they failed to make payment for services rendered, an effective contract should provide for interest to be paid on outstanding amounts, give you the right to cancel the agreement, cease rendering services and claim immediate specific performance and/or claim damages. While, the actual dispute may not be avoided, stating what would happen in that scenario in your contract lets you know what your remedies are and how parties to the contract need to deal with it.
A lot of businesses go to lawyers and ask for a one-pager contract because they don’t want anything complicated, they want it urgently and are looking to avoid high legal fees. Unfortunately, the reality of the matter is that a one-pager can only cover basics and not all the specifics comprehensively, leaving you open to possible loopholes and difficulties in the future. Investing in comprehensive and tailor-made legal advice when entering into contracts can mitigate against many risks and save money in the long run.
Ensure that when sharing any business ideas with third parties, you have a written non-disclosure agreement in place
4. Protecting your intellectual property
Intellectual property is your know-how, what you do, your business ideas that form the basis of your business and it is important that it is protected. If you have a unique business or product name, consider registering the names as trademarks with the Companies and Intellectual Property Commission.
Ensure that, when sharing any business ideas with third parties, you have a written non-disclosure agreement in place. This ensures that you have a written record binding the person to keeping your intellectual property confidential and safeguarding that information. An attorney can guide you on what is worth protecting and how to go about doing it.