Topic 6 Notes

CHAPTER 6: Resource requirements and legal and related
aspects
Hannelize Jacobs
Part B: The entrepreneurial process
Chapter 6:
Resource requirements,
and legal and related
aspects
© VAN SCHAIK PUBLISHERS
LEARNING OUTCOMES
 explain the requirements of registering with the

Department of Labour when starting a business
 explain the service levies applicable to small businesses
 demonstrate your understanding of the importance of
taking care when concluding contracts
 explain how entrepreneurs can use licensing to their
advantage
 explore the major labour legislation governing employment in
South Africa
 explain how B-BBEE impacts on small businesses in South
Africa
LEARNING OUTCOMES
 discuss the requirements of the Consumer Protection Act

 appreciate the regulations pertaining to standards when
starting a small business
 understand how competition regulations can influence the
establishment of a small business
 appreciate and explain the environmental regulations
pertaining to starting a business
 give your opinion on the Promotion of Access to Information
Act
 explain the purpose of the National Credit Act

RESOURCE REQUIREMENTS IN
ESTABLISHING A NEW BUSINESS VENTURE
 The nature of resources

– What are entrepreneurial resources?
https://www.dumblittleman.com/theory-scarcity-can-change-life/

RESOURCE REQUIREMENTS IN
ESTABLISHING A NEW BUSINESS VENTURE
Major types of resources

Physical
Human resources
resources
Financial Personal Information

resources resources resources
RESOURCE REQUIREMENTS IN ESTABLISHING A NEW BUSINESS VENTURE
Major types of resources continued
Financial resources
– Equity finance
– Debt finance
– Revenue (once operational)

– Other sources
- Credit Guarantee Schemes

- Credit for Youth in Business
- Namibia Youth Credit Scheme
- etc. Find out what other financing
options are there in Namibia.
https://businessnav.com/understanding-business-finance/
Human resources
– Forecasting human resource need
– Recruiting candidates and select best person
List the Recruit by: Interview

tasks
Group
logical tasks
Determine
qualification Hire

Physical resources
– Fixed assets
– Location! Location! Location!
– Raw materials
– General supplies
Information resources
– External environment
– Internal working of business

LEGAL REQUIREMENTS FOR
ESTABLISHING A BUSINESS
 Legal forms a business can take in South

Africa/Namibia
– Sole proprietorship
– Partnership
– Close corporation
– Company

LEGAL REQUIREMENTS FOR ESTABLISHING A
BUSINESS
Legal forms a business can take in South Africa continued
Sole proprietorship
– One owner
– Owner is legal entity (not business)
– Limited statutory requirements – no audit
requirements,
– Easy to start
– Disadvantages: Personally liable (debts, loss,

injuries), Business life is link to that of the owner –
i.e. Business not separate from the owner.

BUSINESS
Partnership
 Minimum of two and maximum of 20 partners
 No major formalities
 Partnership agreement
 Requirements for a valid partnership agreement:
 Partners must share common purpose of financial
gain.
 The business must be handled for common
advantage of all its partners.
 Each partner should contribute to the partnership.
 Recommended: Have the agreement drawn by a

lawyer  Names, name and nature of business,
contributions and remunerations, profit division.

BUSINESS
Partnership
 No protection of limited liability

 The exit of one partner results in the dissolving of the
existing partnership  New partnership have to be
entered into.
 Advantage  The pooling of expertise, finances and

experiences.
 Three types of partnerships:

 Ordinary partnerships (the conventional type)
 Universal partnerships (All properties)
 Extraordinary (1 or more partners not liable for debts)
 These cannot represent the partnership
BUSINESS
Partnership
 Three types of partnerships:

 Ordinary partnerships (the conventional type)
 Universal partnerships (All properties)
 Extraordinary (1 or more partners not liable for debts)
 These cannot represent the partnership in any
way:
Types of extraordinary partnerships

 Silent partners
 En Commandite

BUSINESS
Close corporation
– At least one and not more than 10 members
– Members must be natural persons
– A legal entity
– Act 26 of 1988
– Name of business with abbreviation CC
– Registered as a legal entity
– Minimum formation and administrative requirements
– Limited liability
– No board of directors
– Perpetual succession

BUSINESS
 Legal business forms and the new Companies Act

– Entities that administrate and enforce the Act
– Treatment of existing Closed Corporations
– Companies Act provides for 2 types of companies
 Profit
• State-owned companies (SOCs)
• Private companies
• Public companies
 Non-Profit
– External companies
– Domesticated companies

BUSINESS
Legal business forms and the new Companies Act continued
Figure 6.1 Companies under the old Companies Act

(Textbook page 149)

BUSINESS
Legal business forms and the new Companies Act continued
Figure 6.2 Companies under the new Companies Act

(Textbook page 149)

BUSINESS
 Other legal business forms available

– Business trust
– Co-operative
 Primary
 Secondary
 Tertiary

BUSINESS
Other legal business forms available continued
Tertiary continued
• Link to primary and tertiary with:

– Agricultural
– Consumer
– Social
– Worker
– Services
– Marketing and supply
– Housing
– Co-operative burial society
– Financial services
 The pre-registration meeting

BUSINESS
 Criteria for selecting a business form

Considerations:
– level of formality required
– number of owners
– tax considerations
– continuity
– cost
– personal liability

https://www.bipa.na/business-registration/
BUSINESS
 Types of intellectual property

1. Inventions ( protected by patents)
2. The unique name of symbol identifying a business

or product (protected by trade marks)
3. The original works of authors, composers, artists,

musicians, film makers and software developers
(protected by copyright)
4. Creative aspects of articles that are beautiful, such

as jewellery (protected by registering design)

BUSINESS
 Laws protecting Intellectual property rights

Copyright
– Berne Copyright Convention
– Copyright Act and Copyright Amendment Act
– Copyright protects the author of original works
from others making a reproduction of the copyright
work
– Works that qualify
– Automatically obtained
– Registration with CIPRO/BIPA
– Endures for lifetime of author

BUSINESS Intellectual property rights continued
Designs
– Registration essential
– Design Act grants protection for:
 Aesthetic designs
 Functional designs
– Registrar of Designs at CIPRO/BIPA
– Design registration gives the owner the right to prevent
others from making, importing, using or disposing of
the
article in South Africa
– Application need to filed for protection in other
countries

Patents
– The registered exclusive right of an inventor to make,
use or sell an invention
– Two types of patents
 Design patent: the appearance of a product
 Utility patent: a new process or function of a product
– Registrar of Patents (CIPRO) / BIPA
– 20 years protection
– Patents Act
– Patent Corporation Treaty
– Inventions marked with “Patent Applied For” or “Patent”

Trademarks
– Any work, phrase, symbol, design, sound, smell, colour,
product configuration, group of letters or numbers, or
combination of these, adapted and used by a business to
identify its products or service and distinguish them from
others
– Primary purpose: to prevent consumers form
becoming confused about the source or origin of a
product or
service
– Registrati
on at
CIPRO /
BIPA
– Registrati © VAN SCHAIK PUBLISHERS
Licensing arrangements
 This revolves around a contractual agreement in which

one partner makes intangible assets such as technology,
skills and knowledge available to another partner in
exchange for remuneration, such as royalties.
 The licensor usually has little or no control over the

licensee beyond the agreement.
 A patent license agreement specifies how the licensee

would have access to the patent. Example: The right to
market a licensor’s product under licensor’s label in non-
competitive market or all under licensee’ label.
Licensing arrangements
– Licensing under trademark – Generally involves
franchising (paying royalties) e.g. Coca-Cola, Shell, KFC
etc.
– Copyright – Involves the right to use copywritten books,

software, music etc., images of celebrities, e.g. Mickey
Mouse etc.

Counterfeit goods
– The manufacturing, production or making of any goods,
in SA or elsewhere, without the authority of owner of the
intellectual property rights
– Counterfeit Goods Act
– Examples: Designer labelled clothing, chart-topping film
and music on video tapes, artistic works, computer
software
Customs and Excise Act 1998

Trade licensing
– Businesses that need a trade license:
– Health facilities
– Food providers
– Entertainment facilities
– Escort agencies
– Adult shops Additional requirements
– Zoning
– Health
– Certificate of acceptability
– Liquor license
– Music usage license

BUSINESS
 Taxation
– Taxes in SA levied by South African Revenue Services
(SARS) and in Namibia by Namibia Revenue Agency
(NAMRA)
– Two main types of taxes:
 Direct
 Indirect

Taxes and levies, and related legislation
Two Types of
taxes
INDIRECT
DIRECT TAX TAX
Income tax Company tax Value Transfer duty

Added tax
Dividends Capital Excise and Stamp

tax Gains tax custom duties
duties
BUSINESS Taxation continued
https://www.namra.org.na/individual-tax/
page/i-earn-a-monthly-salary

BUSINESS
 Employer tax and levy obligation

Pay-as-you-earn (PAYE) tax
Unemployment Insurance Fund (UIF)
Skills development levy (SDL) / VET Levy
(Namibia)
Compensation Fund
– Employees included
– Employees excluded

LEGAL ASPECTS IN THE NORMAL COURSE OF BUSINESS
 Labour legislation governing employment in

Namibia
– Labour Act 1997
– Basic Conditions of Employment Act
– Occupational Health and Safety Act
– Affirmative Action Act 29 of 1998
– Vocational Education Training Levy Act 1 of 2008
– Employment Equity Act

LEGAL ASPECTS IN THE NORMAL COURSE OF BUSINESS
 Standards
 Fair trade, competition and consumer protection
 Environmental legislation
 Promotion of Access to Information Act
 Credit regulation

LOOKING BACK
1. What are the major characteristics of the acquisition and

use of financial resources? 
2. What are the major concerns of entrepreneurs when

employing people and steps they can take to address these
concerns? 
3. What are some of the major issues related to the

acquisition of physical resources? 
4. Identify the main legal forms a profit company can take in

South Africa. 

LOOKING BACK
5. Define the following terms:
 Sole proprietorship 
 Partnership 
 Private company 
6. Compare the major tax considerations of a partnership

with those of a private company. 
7. What is intellectual property, and why it is considered an

asset to a business? 
8. Patents are often imitated. What can an entrepreneur do

to protect his or her product? Procedures that must be
followed to file for a patent? 
LOOKING BACK
9. What are the benefits of a trademark to an entrepreneur?


10. Differentiate between the need for an Unemployment

Insurance Fund (UIF) and a Compensation Fund. 
11. What are the essential ingredients of an acceptable

written contract? 
12. List the conditions legislated by the Basic Conditions of

Employment Act. 
13. Explain the steps an entrepreneur should follow to adhere

to the Skills Development Act and the Skills Development
Levies Act. 

KEY TERMS
 Basic Conditions of Employment Act
 Broad-Based Black Economic Empowerment
 Companies Act
 Compensation Fund
 Consumer Protection Act
 Contract
 Copyright
 Counterfeit goods
 Debt financing
 Domesticated company
 Employment Equity Act
 Environmental legislation
 Equity financing
 External company
 Financial resources
KEY TERMS
 Human resources
 Information resource
 Intellectual property rights
 Labour Relations Act
 Licensing
 National Credit Act
 Non-profit company
 Occupational health and safety
 Partnership
 Patent
 Pay-as-you-earn
 Personal liability company
 Physical resource
 Private company
 Product liability
 Profit company
 Promotion of Access to Information Act
LOOKING BACK - ANSWERS
1. What are the major characteristics of the acquisition

and use of financial resources?
– Financial resources are cash or anything that may be
readily converted into cash.
– Financial resources can be used to acquire other resources.
– Finance can be obtained from different sources:
 Money invested by the entrepreneur, called equity
financing
 A loan from outsiders such as individuals, banks and
lending institutions, called debt financing
 Revenue generated from the sale of goods and/or services
 Other: government support programmes, venture capital
funds, companies, mortgages, long-term investments,
leasing,
etc.
2. What are the major concerns of entrepreneurs when employing
people and steps they can take to address these concerns?
Major concerns:
– Accurately forecasting human resource needs
– Recruiting candidates
– Selecting the best person for the job
Steps to address concerns:
– List the tasks to be performed
– Group each person’s tasks and describe them (job
description)
– Determine the qualifications and skills needed to perform the
tasks (job specification)
– Recruit people who can perform the tasks in the job
description and meet the job specification
– Interview candidates
– Appoint the best person for the job
 © VAN SCHAIK PUBLISHERS

3. What are some of the major issues related to the
acquisition of physical resources?
– It is important to plan the acquisition of resources
carefully because this can be an expensive exercise (e.g.
in the case of fixed assets) and timing can be crucial
(e.g. in the case of raw materials).
– The location decision is important when acquiring fixed
assets.
– The different benefits offered and types of coordination
required should be considered when deciding between
the many sources of raw materials and general
supplies.

4. Identify the main legal forms a profit company can
take in South Africa.
– State-owned companies
– Private company
– Personal liability company
– Public company

5. Define the following term:
Sole proprietorship
– In a sole proprietorship, one owner conducts business in
his or her personal capacity with limited statutory
requirements.

Define the following term:
Partnership
– In a partnership, a minimum of two and a maximum of 20
people conclude an agreement to do business together in
their personal capacities, with limited statutory
requirements and with a common purpose of financial
gain.

Define the following term:
Private company
– A private company is a legal entity that issues shares to a
minimum of one and a maximum of 50 shareholders, and
has to register with CIPC.

6. Compare the major tax considerations of a
partnership with those of a private company.
– In a partnership, each partner is taxed on his or
her individual share of the income generated by
the business, while the shareholders pay tax on
the dividends they receive.

7. What is intellectual property, and why it is considered
an asset to a business?
– Intellectual property refers to all creations or products
of the human mind. It is considered an asset to a
business because it can be used for commercial gain.

8. Patents are often imitated. What can an entrepreneur
do to protect his or her product? Procedures
that must be followed to file for a patent?
– The entrepreneur should not tell anyone about
the product invention before applying for a patent.
– Imitating a patent is a criminal offence.
– To apply for a patent an entrepreneur must do the
following:
 Search the patent office registers to make sure
that the patent does not already exist.
 Apply for a patent at the Registrar of Patents by
completing the application forms and paying
the registration fees.

9. What are the benefits of a trademark to
an entrepreneur?
– It prevents consumers from becoming confused
about the source or origin of an entrepreneur’s
product or service.

10. Differentiate between the need for an Unemployment
Insurance Fund (UIF) and a Compensation Fund. 
– Both funds are to the benefit of employees.
– Contributions to both funds are enforced by law.
– Employers are obliged to contribute to the Compensation Fund
irrespective of the employee’s annual earnings, while they only
have to contribute to the UIF if the employee’s annual income
is less than a certain amount.
– Both the employer and the employee contribute equally to UIF,
while employers’ contributions to the Compensation Fund may
not be recovered from employees.
– The UIF provides benefits to employees when they become
unemployed or deceased, while the Compensation Fund
compensates an employee who sustains an injury while on
duty.

11. What are the essential ingredients of an acceptable
written contract?
– The small print containing many stipulations and terms
of the agreement must be acceptable.
– The contracting party must not be a front company or
a representative of the real company.
– Legal advice should be obtained for the wording of
difficult agreements and for
understanding incomprehensible terms.
– All pages must be completed in full and signed by both
parties.
– A copy of the signed agreement must be provided for
safekeeping.

12. List the conditions legislated by the Basic Conditions
of Employment Act.
– Working time
– Leave
– Job information and payment
– Termination of employment
– Child labour and forced labour

13. Explain the steps an entrepreneur should follow to
adhere to the Skills Development Act and the Skills
Development Levies Act.
Skills Development Act:
– Register with a SETA.
– Appoint a skills development facilitator.
– Complete a Workplace Skills Plan.
– Submit the Workplace Skills Plan to the SETA.
– Engage in learnerships.
– Submit annual training reports.
– Claim grants from the SETA.

Skills Development Levies Act:
– One per cent of the remuneration paid to directors of
a company and members of a close corporation must be
deducted and paid to the government as a skills
development levy at the end of each financial year.

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CHAPTER 6: Resource requirements and legal and related

Part B: The entrepreneurial process

 explain the requirements of registering with the

 discuss the requirements of the Consumer Protection Act

© VAN SCHAIK PUBLISHERS

 The nature of resources

© VAN SCHAIK PUBLISHERS

Major types of resources

Financial Personal Information

– Revenue (once operational)

- Credit Guarantee Schemes

List the Recruit by: Interview

© VAN SCHAIK PUBLISHERS

© VAN SCHAIK PUBLISHERS

 Legal forms a business can take in South

© VAN SCHAIK PUBLISHERS

– Disadvantages: Personally liable (debts, loss,

© VAN SCHAIK PUBLISHERS

 Recommended: Have the agreement drawn by a

© VAN SCHAIK PUBLISHERS

 No protection of limited liability

 Advantage  The pooling of expertise, finances and

 Three types of partnerships:

 Three types of partnerships:

Types of extraordinary partnerships

© VAN SCHAIK PUBLISHERS

© VAN SCHAIK PUBLISHERS

 Legal business forms and the new Companies Act

© VAN SCHAIK PUBLISHERS

Figure 6.1 Companies under the old Companies Act

© VAN SCHAIK PUBLISHERS

Figure 6.2 Companies under the new Companies Act

© VAN SCHAIK PUBLISHERS

 Other legal business forms available

© VAN SCHAIK PUBLISHERS

• Link to primary and tertiary with:

© VAN SCHAIK PUBLISHERS

 Criteria for selecting a business form

© VAN SCHAIK PUBLISHERS

 Types of intellectual property

2. The unique name of symbol identifying a business

3. The original works of authors, composers, artists,

4. Creative aspects of articles that are beautiful, such

© VAN SCHAIK PUBLISHERS

 Laws protecting Intellectual property rights

© VAN SCHAIK PUBLISHERS

© VAN SCHAIK PUBLISHERS

© VAN SCHAIK PUBLISHERS

 This revolves around a contractual agreement in which

 The licensor usually has little or no control over the

 A patent license agreement specifies how the licensee

– Copyright – Involves the right to use copywritten books,

© VAN SCHAIK PUBLISHERS

Customs and Excise Act 1998

© VAN SCHAIK PUBLISHERS

© VAN SCHAIK PUBLISHERS

© VAN SCHAIK PUBLISHERS

Income tax Company tax Value Transfer duty

Dividends Capital Excise and Stamp

© VAN SCHAIK PUBLISHERS

 Employer tax and levy obligation

Unemployment Insurance Fund (UIF)

Skills development levy (SDL) / VET Levy

© VAN SCHAIK PUBLISHERS