If you’ve been following our installers series or have recently become a qualified electrician or plumber, you’ve chosen the perfect time to get started. Qualified artisans are in high demand in South Africa, with the national government planning to increase the amount of qualified artisans year on year. Currently South Africa produces 12,000 qualified skilled artisans a year, but the plan in place is to increase that to 30,000 per year by 2030. This means that the current climate is ideal for you to grow your career as an installer into a fully-fledged business.
A lot of things need to come together in order for you to start your own business, including ensuring you have all the legal requirements in place to operate formally. We’ve put together 5 important considerations that you need to know before you set up your electrical or plumbing installation business.
1. Join Trade Associations
After you have become a qualified installer the best way to keep up to date with the latest developments that’s important for electrical and plumbing contractors is to join a Trade Association. Here are the associations to look up in those fields:
Electricians: The ECA (Electrical Contractors’ Association) represents all the electrical contractors in South Africa and has a membership network of around 4,000 contractors. They act as a voice of the industry at many government and industry bodies. They then disseminate the information to the members first-hand.
Plumbers: The Institute of Plumbing acts as the voice of the South African plumbing industry. It’s an active forum where plumbers can ask for advice and it has representation on national and international plumbing and legislative bodies. Also, the Plumbing Industry Registration Board promotes best practices in the plumbing industry that protect the health and safety of the community and integrity of the water supply and waste systems. They have a registration system for qualified plumbers and monitor performance by auditing in order to issue Certificates of Compliance.
2. Register your company or trade as a sole proprietor?
You will need to decide whether you want to register your company or if you are going to keep it as a sole proprietorship. A sole prop means that you do not need to create a company name or structure, it’s the simplest form of business. A company (or Pty Ltd.) is the most popular structure in South Africa among small businesses, and requires you to register your company name with CIPC (Companies and Intellectual Property Commission).
You might be wondering which one is better for your business; here are some advantages about trading as a sole proprietor vs a company.
|Sole Proprietor||Company (Pty Ltd.)|
|It is very simple to establish and you can start operating immediately.||Your business appears more professional.|
|Only the sole proprietor (owner of the business) has the authority to make decisions for the business.||Small companies require annual accounting reviews, which has the bonus effect of ensuring things are run properly and lawfully.|
|There are minimum legal requirements for starting a sole prop and you do not require audited financial statement, accounting reviews each year.||You can have other companies or legal structures as shareholders of the company.|
|As the owner you receive all the profits from the business.||You are able to share the ownership or sell portions (or all) to buyers.|
|If you no longer wish to continue with the business, it is easy to discontinue.||In the case of the business failing, the debt belongs to the company and not to you as an individual (your personal assets are safe).|
Apart from trading as a sole proprietor or company, there are other options available to you which include small business corporation (SBC), micro business, small, medium and micro enterprises (SMMEs) etc. Information on SMMEs, details of various assistance schemes, rebates, incentives and information about how to start a business, types of business entities and requirements of registration of a business entity, can be obtained from depending on Department of Trade and Industry or on its website www.dti.gov.za.
3. Register with SARS
No matter what the structure of your business is, it needs to be registered with SARS (South African Revenue Service). If you registered your business with CIPC, you will automatically be on record as a taxpayer. Registered companies have 60 days to get an income tax reference number, which you will get by completing an IT77 form online or at SARS. You only need to register as a VAT (Value Added Tax) vendor if your expected turnover is more than R1 million a year. If you choose a sole proprietorship you will need to register as a provisional taxpayer directly. We encourage you to speak to a professional accountant about your best options regarding SARS registration. An accountant will also provide advice around business expenses, how to know what % of income to “save” for tax payments and will ensure you meet all the requirements and deadlines stipulated by SARS.
4. Take out business insurance
Starting a business comes with all kinds of risks, especially as a plumber or electrician. You will want to look at business insurance to cover all your commercial vehicles, building and contents, as well as liability insurance. That way you will be covered in the case of damage, theft or accidental injury, which could otherwise bankrupt you.
There are a number of business insurance packages available, some are tailored specifically for artisan industries, from well-known insurance brokers such as Budget, OUTsurance, MiWay, FNB, Santam, Old Mutual, and Hollard. Ensure you receive ample quotations first and weigh our the pros and cons of each one; remember the cheapest insurance package may not always mean the best one for your business.
5. Open a business bank account
Opening a bank account for your business has multiple benefits, it enables you to keep your personal finances separate from your business records. This means that you have clean and accurate bookkeeping, operate more professionally, and it proves your business is not just a hobby. It also provides a clean audit trail for accountants.
There are a number of documents that you will need to provide when you go into the bank, and they will depend largely on what type of business structure you have. Ideally, call ahead to check what documents you need to provide as all financial institutions vary slightly. However, these are generally the standard:
- Proof of CIPC registration
- Valid ID documents for the business owner and other signatories (if there are any)
- Proof of address for the owner (if a sole prop) or the business
- Banking history of the business – usually 3 months bank statements
Starting a business is a very exciting time and although there is quite a bit of admin needed in the foundation phase, but we promise that it’s worth it. Look out for the next posts in our installer series which covers sales, marketing and branding. We will provide useful tips on lead generation and how to market and brand your new business to success.