[Question] Assistance with new small business

[ShaunK]

Hi guys, I need a little help and your combined expertise.

For little over two months I've been running a small unregistered IT Service Sole Proprietor business. An example of how I would operate is:

Client calls with a PC problem, I bill them R100 for the call-out and then between R200-R500 for the actual job.

What I need to know is:

1. What would be the best way to personally do my books and keep track of things?
2. Can I claim anything back as a Sole Proprietor?
3. As a purely service orientated business, what can I expect to be taxed percentage wise using the above example?
4. What exactly do I need to keep as far the business goes in terms of paperwork?
4. How can I save money doing all the above?

I'm the kind of guy that simply just wants to go and see clients and honestly have very little patients for admin work but at the same time, I can't really afford someone to do it for me at this point so I'm willing to learn and quite simply HAVE to do it myself for now.

Any and all help will be appreciated guys.

- Shaun

[AmithS]

1. Use a basic accounting package or spreadsheet to keep track of income and expenses
2. All the normal things related to your business use that a cc\pty would
3. The full companies tax 28% (Small business tax does not apply to service businesses)
4. Invoices mostly
5. keep good records in an orderly manner and hand to an accountant to do yearly taxes\provisional taxes

This is to the best of my knowledge

[Mark Atkinson]

3. The full companies tax 28% (Small business tax does not apply to service businesses)

Sorry to interject Amith, but I believe as a sole prop he will not be taxed at the companies tax rate of 28%. Income from the business will be added to any other income streams he may have and he will be taxed in his personal capacity according to the applicable tax bracket which he finds himself in.

So, Shaun, your taxation percentage will all depend on how much taxable income you are generating per annum. See: Tax Brackets for the 2012 financial year

[ShaunK]

Thanks for the reply guys, very useful info there.

Anyone else wanting to add anything of note?

[Mark Atkinson]

Actually, yes.

Make sure you keep records of everything relevant to the business. Invoices to customers, till slips, receipts etc. If you are planning on deducting vehicle/petrol expenses for your business, you need to keep a log book for all your business travel. You can only deduct the business portion of your travel expenses for tax purposes. Any marketing/stationery expenses can be deducted at year end because they are in the production of income, so keep a record of these.

If you don't want to learn the ins and outs of an accounting package. I believe that for your purposes setting up a simple Excel spreadsheet where you record all your income and expenses should be sufficient. Make sure you keep all the relevant documents and then hand this all to a tax consultant/accountant at year end. If you're expecting a highish taxable income, you may wish to apply to be a provisional tax payer. (To avoid having a large sum of tax to pay at the year end)

[Dave A]

Anyone else wanting to add anything of note?

Be disciplined. Do the stuff you don't like first.

If you don't enjoy admin, make a point to get it done first thing in the morning.
Every morning.

[AmithS]

Mark, you are right.

Completely slipped my mind, I was actually just discussing this with my accountant 2 weeks back

This is where the turnover plays an important part. Below a certain level you can score being a sole prop.

[ShaunK]

Thanks for all the advice guys, was really helpful and appreciated.

[mbsmit]

Hi there,

Find below, my response to your post.

1. What would be the best way to personally do my books and keep track of things? - I personally make use of a very nice, and free ;-), accounting suite called Adminsoft Accounts (Google it). Works real nice and easy to learn.
2. Can I claim anything back as a Sole Proprietor? - I would guess you could claim back exactly the same as you would as a individual taxpayer. Even though, I would suggest that you consider registering a (Pty) Ltd, with fixed tax rates of 28% (provided you ascertain that you will be taxed more than 28% as an individual), Suggest you visit www.register-a-business.co.za as I used them a while ago, and they really make the process a lot easier.
3. As a purely service orientated business, what can I expect to be taxed percentage wise using the above example? See above.
4. What exactly do I need to keep as far the business goes in terms of paperwork? Just retain all invoices, statements, ect.

Thanks,
Mr. Smit