|Guidelines for small-scale fruit and vegetable processors. (FAO Agricultural Services Bulletin - 127) (1997)|
|Part 2 - Processing for sale|
|2.4. Legal aspects|
Before starting registration procedures, aspiring entrepreneurs should seek professional advice from small enterprise advisors, accountants or solicitors on what is the best type of enterprise to establish, as this varies according to the legal framework and economic structures prevailing at a given time in a particular country.
The form that a business takes is influenced by both the wishes or needs of the owner and also by the types of product that are to be made. Very frequently, new businesses are established by a family member or by a farmer who wishes to process the crops to add value. It is usually simpler and cheaper for these people to register either as personal business with unlimited liability or as a limited company with a single owner/director. However, this may not be appropriate if additional partners are required to contribute capital or specific skills.
Other types of business that can therefore be considered include a limited liability company with several directors or an un-incorporated association that has no limited liability (see Glossary for the meanings of these terms). If the proposed enterprise has a larger number of interested investors, for example a farmers association, or if the aims also include social benefits (see Part I, Introduction), the form of the business could be a co-operative association, a not-for-profit organisation or a registered charity. However, it should be noted that charity law in many countries prohibits trading.
Once the form of the business has been decided, there are a number of registration procedures that need to be taken before it can begin trading. Again, these vary in both the number of steps and the degrees of complexity and bureaucracy in different countries and it is not possible to be comprehensive in a book of this nature. Professional advice is needed to guide the entrepreneur through each stage, from a solicitor and an accountant who are experienced in the national law in the particular country.
However, as a general guide it is necessary to register a processing business with some or all of the following authorities:
· notify the taxation authorities (e.g. the Sales Tax Commissioner or VAT Office) and complete Notification of Business Intention forms or their equivalent
· notify another branch of the taxation authorities to get an Approval Certificate to indicate that no unpaid income tax is outstanding
· apply to the Local Government Office (e.g. a Town Council or District Council) for a Business Licence
· apply to the Ministry of Health or Bureau of Standards, requesting that a Food Inspector visits the premises to examine the facilities
· when the inspection is completed and a satisfactory report is made, apply for registration as a Food Premises and the issuing of a Food Producers Licence or Certificate or equivalent
· apply to the Bureau of Standards or equivalent, sending a sample of product for chemical analysis. This will be tested to determine whether it conforms to national legislation on food composition (see below). If it conforms, a Product Approval Certificate or similar will be issued and a Standards Authority symbol may be placed on the product label
· apply to the Ministry of Finance, Department of Customs and Local Government Tax Authority or VAT Office if there are opportunities for remission of taxes on imported ingredients, packaging materials or equipment. This is also necessary to reclaim VAT.
· register the business at a bank and open an account for trading.
If export is being considered it is also necessary to apply to:
· the Ministry of Trade and Industry or equivalent for a Business Licence
· the National or Central Bank for an Export Licence
· the Customs Department for clearance to export.
The majority of these stages require a fee to be paid and there is clearly a considerable expense in both time and travel costs to complete the registration procedure, particularly when the business is located away from the capital city. For inexperienced entrepreneurs, this is a daunting process and many either do not complete it or attempt to bypass it. However, incomplete or fraudulent registration leaves the entrepreneur open to later complications and possible prosecution.
More positively, there are schemes in many countries that are operated by National or Local Governments to encourage small enterprise development. These can vary from subsidised electricity, tax-holidays (tax-free periods of up to ten years), free land for enterprise development, support from a Small Business Advisory Service, or special bonuses if the business aims to employ women, rural people or social and ethnic minorities. The business should therefore be registered with the Ministry of Trade and Industry or other authorities that operate the schemes, in order to obtain these benefits.
Similarly, a number of international development organisations (Appendix IV) operate schemes to encourage small enterprise development and they should be contacted to find out whether credit, training or business support are available. Their local offices are often located in the Capital city, but some may have sub-offices in District Centres. Where donor countries operate bilateral development programmes, information about the available assistance can be obtained from the Aid Section of their Embassies or High Commissions. Finally the new entrepreneur should contact the local Manufacturers Association or Chamber of Commerce to find out what assistance they can offer to get a new business established.