By: Tebogo Mokwena
Many small businesses fail within the first few years of operating because of legal issues such as employment contracts, industrial action and bureaucracy. According to Clientele Managing Director Nazeer Hoosen and National Small Business Council (NSBC) CEO Mike Anderson, small business owners can avoid getting into trouble if they invest more time and energy into addressing these issues.
These problems were discussed during a webinar hosted by the NSBC. It covered topics including the regulatory minefield that small businesses navigate, proper employment contracts, and how to protect the business and workers during industrial action. Hoosen pointed out that owners should ensure that they addressed any legal-related issues when they start their businesses. Otherwise, they could be sued in their personal capacity for a business-related issue.
This could result in owners losing their homes and personal assets. Business owners could avoid this by not registering their entities as sole proprietors. “For a lot of businesses, if they operate as sole proprietors there are a lot of pitfalls, and one of them is (being held liable) in a personal capacity,” he said. He also encouraged small businesses to be familiar with the tax laws and register for the appropriate tax services, including those that ensured they were tax compliant.
Anderson advised participants to ensure that they were B-BBEE, financially and legally compliant to access opportunities with bigger businesses. “If you are compliant across all areas you build a solid foundation,” he said. Hoosen warned that improper employment contracts also contributed to the failure of small businesses, and encouraged owners to draw up proper contracts for their employees. This would come in handy during contractual disputes with employees, which tended to be costly. The contracts needed to state how much an employee was paid and what duties they must fulfill.
Employers must also be familiar with labour laws, which would help protect their businesses in the event of industrial action. “(Business owners must) make sure that they understand what the (employees’) rights are when it comes to being part of a union,” Hoosen said. Anderson discouraged small business owners from firing employees because they were emotional and failed to follow the correct process, as the legal battles that ensued from such decisions tended to be costly and resulted in negative publicity.