Construction World October 2020

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TOP 7 LEGAL CONSIDERATIONS fornewconstructioncompanies As an entrepreneur in construction, starting your own business is an exciting prospect. However, construction is a complex industry and there’s a lot you need to understand in order for your business to succeed. By Adine Abro, a Director of Adine Abro Attorneys.

W hile dozens of experts out there could write books on HYHU\WKLQJ \RX QHHG WR NQRZ DERXW SURGXFW PDUNHW ͤW ͤQDQFHV insurance, permits – and the list goes on – we’d like to focus on what you need to know legally about starting a new construction business. The following are the top seven legal issues to be aware of,

Adine Abro, a Director of Adine Abro Attorneys.

for all debts and judgments against the partnership as a whole, regardless of whether the debt was incurred by the organisation or one of the individual partners. On the other hand, if you opt to take the Pty Ltd route, the business will stand separate to you, and you, as a shareholder, will have limited liability. However, according to SARS, should tax payment deadlines not be met, you, as a shareholder or director who FRQWUROV RU LV UHJXODUO\ LQYROYHG LQ PDQDJLQJ WKH FRPSDQ\̵V ͤQDQFLDO affairs, will be personally liable for employees’ tax, value-added tax, additional tax, penalty or interest. Financing a new business venture )LJXULQJ RXW KRZ WR ͤQDQFH D QHZ FRQVWUXFWLRQ FRPSDQ\ FDQ EH hard considering the large sums of money that are required to rent or EX\ HTXLSPHQW PDLQWDLQ WRROV DQG NHHS D ͥHHW RI YHKLFOHV UXQQLQJ ̰ amongst other things. Not many people have massive reserves of cash at their disposal, so it’s common practice to take out a loan. Luckily, there are several business construction loans out there that cater for different needs. For example, a business line of credit (LOC) loan offers great ͥH[LELOLW\ ZKLOH VPDOO EXVLQHVV ORDQV DUH GHVLJQHG WR SURYLGH ELJJHU sums of cash upfront.

and some tips on how to navigate them. Selecting a business entity

When you start a business, you need to decide what type of business it’ll be. This will inform how the business is structured, how you run it and who you answer to. There are three ‘types’ of business entities that exist: • Sole proprietorship: Where one founder owns and runs the business. This is the simplest form of business entity because the business is not separate from the owner. • Partnership: Where two or more co-owners run the business together. Partners pool their money to contribute towards a common goal and share specialised skills and resources. They weather the storms of the business together. • Pty Ltd – Proprietary Limited company: Where the business is treated as a separate entity – in other words, it is separate from the owner and registered as a separate legal entity. If you’re considering launching your company as a partnership, it’s useful to bear in mind that each individual partner is personally liable

Taking out a loan is a big responsibility and you must never over-extend yourself because, at the end of the day, you will be liable to pay it back. The interest that is attached to loans can quickly cause your repayments to spiral out of control if you’re not careful. You never want your loan to count against you, so, to avoid having to pour all your capital into monthly repayments, take out the smallest loan that you can comfortably afford to pay back, while still having some spending money left over. Deferring business risks Being prepared for the unexpected when starting a new business is vital. Construction is a particularly risky industry to be in, so it is crucial to insure against risks that could impair or even bankrupt your company. These could include things like safety hazards that lead to worker accidents and injuries, managing change orders and the availability of building materials. Luckily, there are many different policy types that you can take out to insure you against different risks. In the construction industry, these are useful ones to look into:

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