Introduction
Protect ideas - Starting a business
It is exciting starting a new business venture. We are often approached by clients who want to start a new business, as most new business opportunities are likely to cover the use or registration of intellectual property. Examples include the use or registration of a business or product name, use of marketing or instructing materials which may be subject to copyright protection, the use of confidential information or the exploitation of a patent.
Although we are not business consultants, to assist our clients, we list below some aspects we regard important when considering starting a new business. In our experience, entrepreneurs often adopt the attitude that they will deal with any legal issue, if and when it arises. Such approach may lead to unexpected litigation which can be costly, unpleasant and risky. To minimise risks, we recommend that the legal aspects and requirements for protecting intellectual property be considered before or when starting a new business.
1. Planning
It is often said that if you fail to plan, you plan to fail. Starting a new venture requires a good business plan including a financial budget, a marketing plan, operational plan, customer care plan and long and short term goals.
2. Selecting a Name
Whether you are planning to sell products or render services, it would be necessary to select a name for your business to enable consumers to identify and distinguish your products or services from other businesses. It may also be necessary to select different names for your different products or services.
It is best to select a name that is distinctive and unique so that consumers will not confuse your business with other businesses. If you select a name which is descriptive of your products or services, or very common in trade, it would be very difficult to prevent other traders from using the same name. To determine whether your use of your name is likely to infringe on the rights of another, you could instruct us to conduct relevant searches and/or investigations. In this regard, we recommend that you consider instructing us to conduct searches on the Trade Marks Register, Companies and Close Corporations Registers and .CO.ZA Domain Name Register. None of these registers are currently cross-referenced.
We further recommend that we be instructed to register your business name, domain names, slogans, logos and product names as trade marks to obtain proper protection. As the cost of a trade mark registration is low compared to possible costs relating to trade mark litigation proceedings, a trade mark registration is often regarded as a form of cheap insurance to protect the name and reputation of your business.
It is best to select a name that is distinctive and unique so that consumers will not confuse your business with other businesses. If you select a name which is descriptive of your products or services, or very common in trade, it would be very difficult to prevent other traders from using the same name. To determine whether your use of your name is likely to infringe on the rights of another, you could instruct us to conduct relevant searches and/or investigations. In this regard, we recommend that you consider instructing us to conduct searches on the Trade Marks Register, Companies and Close Corporations Registers and .CO.ZA Domain Name Register. None of these registers are currently cross-referenced.
We further recommend that we be instructed to register your business name, domain names, slogans, logos and product names as trade marks to obtain proper protection. As the cost of a trade mark registration is low compared to possible costs relating to trade mark litigation proceedings, a trade mark registration is often regarded as a form of cheap insurance to protect the name and reputation of your business.
3. Forming a legal vehicle
When starting a new business, the entrepreneur must decide which form of enterprise will be used as vehicle for the business. Different rules and laws are applicable to different types of business entities. Different forms of enterprise include the following:
| • | Sole proprietorship (single owner) |
| • | Partnership |
| • | Limited company |
| • | Non-profit company (Section 21 company) |
| • | Public company |
| • | Close Corporation |
| • | Business Trust |
4. Concluding contracts
It may be necessary to enter into different agreements when starting a new business. Depending on the size and nature of your business, it may, for instance, be necessary to loan money and/or lease or buy premises, equipment or products. You may further need to set up arrangements with suppliers, distributors, manufacturers, importers, exporters or consultants. If you are employing staff, on a temporary or permanent basis, it is also important to consider local labour laws and have clear arrangements regarding working hours, responsibilities, payment and leave. It is not prescribed by law to enter into written agreements in all the circumstances listed, but it is always recommended to do so to avoid uncertainty and disputes. Oral agreements are sometimes very difficult to enforce.
5. Starting a website
With the increase of e-commerce and electronic communication, depending on the nature of your business, it is likely that you may start a website at some point. The name of the website is important as it can assist consumers to find you on the internet. Domain names are registered on a; first come, first served basis. To avoid cybersquatting or disputes, and for defensive reasons, we recommend that clients register their trade marks and business names as .CO.ZA domain names. It is also necessary to consider and add proper legal notices and/or Terms and Conditions agreement to your website.
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JANA DOUSSY
Anrich van Stryp
Aaron Balie
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