Whether you are running a side hustle, starting up a new business or thinking of taking your existing small business to the next level, business registration might be necessary.
Here’s what you need to know about the process.
Starting a business venture can be so exciting: you’re building your brand, setting ambitious goals, finding your place in the market, closing deals, taking control of your future and perhaps creating new jobs in the process. But, what’s far less exciting is all the admin and paperwork that come with it!
During the early stages, you will need to decide whether or not to register your business and what you will register it as.
Start by answering these questions:
1. Are you planning to run the business alone and keep it small?
2. Are you comfortable with not separating your business from your personal assets?
3. Are you looking for the simplest way to start trading with minimal admin and accounting requirements?
If you answered ‘yes’ to these, then sole proprietorship is likely a better option for you.
As a sole proprietor you are not required to register as a legal entity before you start operating (or ever). You also won’t need to open a business bank account or file a separate tax return for your business (it will be included in your personal income tax return).
What’s the catch? There are limits to how you can operate. If you have growth ambitions, plans to land some big clients (particularly if you intend to work with government departments), need to apply for funding or bring on partners, you need to formalise (which means register) your business.
How to register your business
The first step is to figure out the type of entity you’re registering. If you’ve ruled out sole proprietorship, your options are a private, non-profit, public or personal liability company.
This is how they differ, in a nutshell:
Private company or Proprietary Limited (Pty Ltd)
This is the most common type of legal entity for small businesses. It is applicable for companies with a minimum of one and maximum of 50 owners, shareholders or directors. If you register your business as a private company, any business-related debt belongs to the business and not to you as the owner (protecting your personal assets should the business fail). While the administration and set-up costs can be higher (there is an annual registration fee and you are required to submit annual financials), you may benefit from the lower tax rates afforded to registered businesses.
To register a non-profit company, you need a minimum of three directors. It is quite admin intensive and should be set up for either public benefit or to work towards an objective relating to cultural, social or group interests.
Public companies are listed on the JSE and offer shares to the public. They have a minimum of three directors, but there’s no limit on the number of shareholders. Public companies need to appoint a company secretary, host an AGM and have their financials audited.
This type of company is usually registered by professionals such as lawyers, doctors, civil engineers or accountants. Current and past directors are jointly liable for any debts and liabilities rising during their time in office. If you are in this type of profession, it’s advisable to consult the relevant regulatory or registration authority to confirm what type of company registration is needed.
Once you have identified the correct entity for your business, you can start the process with the Companies and Intellectual Property Commission (CIPC). The good news is, if you are registering a private company you can do it all online – no paperwork required. You will need to register as a customer on the CIPC’s website and then access the BizPortal platform using the same login details.
Have this information on hand:
- Proposed name (if you plan to register your business name at the same time)
- Kind of business (only private and non-profit companies can be registered online)
- Directors’ information (ID number, marriage details, physical address, contact number, shareholding)
The cost of registering a private company is R175 with name registration or R125 without, and is payable via EFT or credit card. If your company registration is successful your company will automatically be registered for tax with SARS and you will receive your certificates via email. During the process you also have the option of signing up for UIF for your employees and apply for a B-BBEE certificate (free for companies with an annual turnover below R10 million). The BizPortal is only available to South African nationals, but foreign nationals can use the New e-Services on the CIPC website.
Other business entities have to be registered manually with the CIPC.