Article by listed Accountant: Imtiaaz Patel
The eThekwini Municipality recently held a trade fair at the Durban Exhibition Centre (DEC) for potential and existing SMME’s. I was invited to present in my capacity as a Chartered accountant and provide insight on getting back to the basics.. The response I received from participants has prompted me to address some basic issues facing businessmen and accountants.
Most accountants these days just want to get through the regulations but they lose sight of the basics. The importance of the correct business type for your entity is the first crucial step to success in the business arena. Imagine that you need to cross the Atlantic. If you buy the best, most expensive Lamborghini, with the safest driver, you will still be doomed to failure. Your accountant needs to assist you get that cruise liner / ship / yacht – in essence you need the correct business vehicle for your business journey.
Important tax benefits may be missed; you may need to backtrack at considerable expense (and irritation) simply because the business vehicle initially selected did not suit your business type or vision for the future.
By way of example, if your taxable income for the year amounts to R250 000, the tax you pay to SARS:
Sole proprietor: R38 000 in tax
Small Business Corporation: R12 800 in tax
Private Company: R70 000 in tax (this will hit your pocket hard)
Firstly, electing the correct business structure at the initial setup phase of your business can make a huge difference in your business’s profitability, growth and eventual success.
Secondly, your accountant needs to be familiar with the fine print on business structures (both in legal and tax forms). For example, if your business vehicle is a company and you own shares in another company where the assets are greater than R5000, you will be disqualified from being a Small Business Corporation and will automatically be treated as a normal company for tax purposes.
Furthermore, we’ve heard cases of business owners paying amounts directly to the accountants instead of SARS. The accountant neglected to submit returns to SARS and disappeared with the money. This resulted in additional costs – obtaining a new accountant, penalties from SARS for late payment etc. My advice is to request a statement of accounts from SARS which will detail all submissions, penalties and age the outstanding amounts – call it your creditors statements from SARS. You can contact SARS directly if you want to – 0800 00 7277 – and request a statement of accounts.
Imtiaaz Patel CA(SA)
KZN BUSINESS CONSULTING (PTY) LTD
Innovative Ideas | Traditional Values
Smart Xchange building, 5 Walnut Grove, Durban, 4001
Phone : 031 825 5169 l Cell: 072 190 9498