Connect with us

Jakarasi

In our previous discussions I highlighted that your choice of a legal structure for your business is very critical because it will affect operating efficiency, transferability of ownership or shareholding, the control of the business, the way you report income, the taxes you pay and your personal liability. An entrepreneur can choose from these basic structures, namely, sole trader/proprietorship, partnership, private or public limited company. All business legal structures are regulated by governments in terms of initial registration, annual reporting, taxes and operating licenses. So the type of structure you choose has future implications. Some laws make it difficult to change your legal structure once you have commenced operations. To avoid these potential problems, it is advisable to consult your accountant or lawyer who will help you to make well-informed choices.

The simplest of the legal structures for any business is the sole trader/ proprietorship.  With this type of business the owner is not legally separated from the business. The business is controlled by one person. Because the business is not separated from the owner all liability rests on the owner. Business creditors can sue the owner for any debts incurred for the benefit of the business. This business structure exposes the business owner’s personal assets. If you want to protect your personal possessions then this structure is not ideal. If you have to raise capital through equity contributions it’s impossible because the structure does not allow outside investors. You will have to change the structure.

The owner is responsible for the taxes. A sole proprietorship does not continue in perpetuity. As soon as the owner passes on the business stops existing. Ownership can be transferred by selling of the assets. The advantages of a sole trader is that it is inexpensive to start and simple to run and when paying tax you don’t have to make separate tax returns. However the disadvantages are that personal liability is unlimited and ownership is only limited to one person.

The second structure is a partnership. It is almost like a sole proprietorship in that the owners are not legally separate from the business. The only difference between a sole proprietorship and partnership is that a sole proprietorship has only one owner and a partnership has two or more owners. The owners pay taxes in their individual capacity after sharing profits. The partners have equal management rights and control, or their responsibilities and control can be spelt out in a written partnership agreement. If a partner dies or leaves the partnership, the partnership will be dissolved unless the agreement specifies or provides for the continuation of the business by the remaining partners.

All partners have equal ownership of all business assets and liabilities or in proportions defined in the partnership agreement. The partnership agreement determines how a departing partner will be paid for part ownership when he or she leaves, dies or retires. The advantages are that ownership is not limited to one person, you can have more than one owners. The disadvantages are that the partners have unlimited personal liability, each partner is legally responsible for the business acts of other partners. On tax issues each partner is required to submit separate tax returns.

The third legal structure is a private or public company which is registered as a separate legal entity from its owners. On registration you have to file company documents with the registrar of companies to effect registration. A fee is paid for the company to be registered. The company will have a separate corporate bank account and all transactions for the company are recorded separately from the owners’ personal transactions. The money generated from the transactions is owned by the company. The company will be required to pay income tax on its profits and also whenever it pays dividends to its shareholders.

The operations of the company are governed by the articles of incorporation which would have been approved by the shareholders. The shareholders appoint directors who will be responsible for overseeing the running of the company and would be responsible for major decisions, including selection of company officers. A company can exist in perpetuity even if one or more of the shareholders/owners dies. The ownership of the company can be transferred by sale of shares. The advantages of a company are that shareholders have limited personal liability and ownership is easily transferred by sale of shares. Other investors can be added by sale of shares. The company can exit in perpetuity. The company submits separate tax returns. The disadvantages are that it is more costly to set up and maintain a company.

The type of business structure to use will depend on a number of factors, from the type of business you are operating to tax implications.

About the author

Stewart Jakarasi is a business & financial strategist and a lecturer in business strategy and performance management. He provides advisory and guidance on leadership, strategy and execution, preparation of business plans and on how to build and sustain high-performing organisations. For assistance in implementing some of the concepts discussed in these articles please contact him on the following contacts: sjakarasi@gmail.com or +266 58881062 or on WhatsApp +266 62110062

Continue Reading
Advertisement

Business

Start-up companies win big

Published

on

TEN start-up companies were awarded about M130 000 each as capital at a ceremony held at the Limkokwing University of Creative Technology yesterday.
The companies include Rosemore Couture, Techno Map ICT Company, Nkhekhe Innovative Solutions, Travel Tag Lesotho, Weekly Observer Electronic Newspaper, Media Lab Multimedia, and Green Lovers.

The awards were given under the Limkokwing Entrepreneurship Acceleration Platform, part of higher education institutions and corporations and companies that spearhead incubation programme for start-ups.

These Enterprise Support Organisations are from the Limkokwing University through its LEAP, the National University of Lesotho’s Innovation Hub, Basotho Enterprises Development Cooperation (BEDCO), The Entrepreneurs Network (TEN), and Gem Institute.

Each of these organisations was awarded M1.9 million, totalling M9.5 million.

The initiative sprang from Lesotho’s acquisition of a loan from the International Development Association (IDA) of the World Bank to execute the Lesotho Competitiveness and Financial Inclusion (CAFI) Project.

CAFI’s purpose is to enhance the availability of business support services and financial products for Small and Medium Enterprises (SMEs) and entrepreneurs, with a special emphasis on women and youths.

Limkokwing’s Enterprise Support Organisation manager, Lisema Ramaili, said the ceremony marked “a significant milestone into our journey and highlights the impactful work we are doing to support entrepreneurship and economic growth”.

“It also marks a significant step forward in our allegiance to foster innovation and entrepreneurship,” Ramaili said.

“I look back in all the journeys that we have travelled, from application to this programme, consolidating our proposals,” she said.

Limkokwing University’s Vice Chancellor, Advocate Tefo Macheli, said it is good that the small businesses are being helped to stand on their own as Lesotho marks its 200th anniversary.

Advocate Macheli said Limkokwing and the government awarded more than M1.2 million to small businesses.

“The Limkokwing University of Creativity Technology and innovation in cooperation with the Lesotho government made history that small Basotho enterprises are supported,” Advocate Macheli said.

“It has always been a challenge to the youths to start or have their own businesses because they were not supported financially” he said.

He said the Lesotho government is working hard to promote small Basotho enterprises which has not been happening in the past.

The university also provides business space with all necessary resources like water and electricity for its students in the understanding that “students are fresh from school and do not have any means of funds to have their own resources”.

Moleboheng Rose Molatelle, co-founder of Rosemore Couture, said that they first filled application forms with their business ideas and bankable business plans.

“Very fortunately I was among the top 20 that were to pitch and was able to meet the requirements,” Molatelle said.

Rosemore Couture is a clothing company.

Molatelle said the company needs equipment to grow its clothing footprint in the market.

“We need to go on with the production and add more workers so that at end of the day we could have a big company,” she said.

Staff Reporter

Continue Reading

Business

Khemisi bags the big prize

Published

on

HOA Hlamatseha is a Sesotho expression that means lots of riches. Econet Telecom Lesotho is running a campaign by that name.

This week, Mamiki Khemisi struck the jackpot after she won the M150 000 prize during the Hoa Hlamatseha #EconetBlueOceans campaign for January.
The winner, from Masowe in Maseru, was announced at an event held at the Sefika Complex on Monday.

The Hoa Hlamatseha campaign allows customers to participate in a series of engaging activities, ranging from sending SMSs to opting-in as they purchase data or calling bundles.

Each participation earns customers points, contributing to their overall tally and increasing their chances of winning the grand prize.

Beyond being a celebration of connectivity, the campaign demonstrates Econet’s commitment to fostering a sense of community and shared joy.

“This campaign, a hallmark of Econet Telecom Lesotho’s commitment to celebrating and giving back to its loyal customer base, represents a culmination of joy, generosity, and community spirit,” ’Mapusetso Ntšekhe, Econet’s General Manager for Marketing, Communications and Customer Experience, said.

Ntšekhe said Econet recognises the importance of cultivating lasting relationships with its customers and understands that customer loyalty goes beyond the quality of service alone.

She added that by organising such campaigns, the company aims to foster a sense of belonging and appreciation among its customer base.

“Handing over this M150 000 grand prize winner for the month of January symbolises Econet’s dedication to make a meaningful impact in the lives of its customers and the broader community,” Ntšekhe said.

“In a world where communication is crucial, Econet is not only bridging the digital gap but also creating a bridge of shared joy and celebration,” she said.

Khemisi joins a distinguished list of individuals who have been positively touched by Econet Telecom Lesotho’s commitment to excellence and innovation in Lesotho’s rapidly evolving telecommunications industry.

Her selection as the grand prize winner serves as a testament to her loyalty and the enduring bond between Econet and its valued customers.

“I’m overwhelmed and equally excited to be announced by Econet as the winner of the M150 000 grand prize,” Khemisi said.

She further noted that “this amazing reward for my involvement in the campaign will be essential towards establishing a juice bottling company that’s already in the pipeline in partnership with my mom”.

By unveiling staggering cash prizes of M100 000, M150 000 and M200 000, Econet is setting a new standard for corporate generosity aimed at alleviating challenges faced by individuals and families in tough economic times.

In addition to the grand prizes, Econet customers also have the chance to walk away with M500 in daily prizes, M2 000 in weekly prizes, and smartphones.

Staff Reporter

Continue Reading

Business

Chicken import ban lifted

Published

on

BASOTHO will finally have chicken on their dinner tables after the government lifted a ban on poultry products from South Africa imposed four months ago.
The Department of Livestock Services said the decision was with effect from yesterday.

Keneuoe Lehloenya, who is the Director of Livestock Services, said the department had decided to lift the ban imposed on poultry products from South Africa “except Gauteng, Mpumalanga, Limpopo, and Western Cape provinces”.

She said import permits will be issued only for compartments certified free from the Highly Pathogenic Avian Influenza (HPAI), a serious bird disease that requires a rapid response because it is highly contagious and often fatal to chickens.

Lehloenya said it is South African veterinary authorities that will issue certificates for farms that are free from HPAI.

The import permits by Lesotho authorities will not be given for poultry products from “farms situated near or epidemiologically linked with affected farms”.

“They will not be considered for import,” she said.

The lifting of the ban comes after Agriculture Minister Thabo Mofosi temporarily banned imports of all poultry and poultry products from South Africa due to the bird flu outbreak last November.

The highly infectious bird flu had struck several provinces in South Africa, affecting major chicken farms.

There were reports that South Africa had culled 7.5 million birds, between 20 and 30 percent of its production chicken stock.

Mofosi issued the directive revoking all import permits for poultry and poultry products with immediate effect.

The bird flu outbreak came as South Africa’s chicken industry was already grappling with power shortages which have hit their production.
Chicken is the most imported meat in Lesotho.

In the 2019/2020 season, chicken constituted 81.1 percent of meat imports from South Africa.
Pork was at 15.8 percent, beef at 2.3 percent and mutton at 0.7 percent.

Nkheli Liphoto

Continue Reading

Trending