How to Register your Business for FREE… Well… Almost

Have you ever wanted to register your business and thought to yourself “Damn… This is going to cost me an arm and a leg”. Or maybe just never had the time to get around it. Well, it’s actually easier than you may think. In fact, there is a way to register your business for free… Well… Almost. It’s quite simple too.

Understand what you need

This time around we talk about how you can register your business to be successfully operational such as:

• Company registration
• Tax registration number
• Domain name registration
• B-BBEE Certificate
• Compensation Fund Registration
• Unemployment Insurance Fund Registration
• Business bank account

Type of Businesses

In order to understand the type of business you want to register, here are the most commonly used for-profit Company Structures in South Africa:

• Sole Proprietor
• PTY Company (A Private Company) Partnership
• Personal Liability Company
• Foreign Company
• Public Company
• State-owned Company

Below is an overview of some advantages and disadvantages of the most common start-up Company Structures in South Africa.

I am going to color the advantages, the disadvantages and the sections that might be both as follows:

• Red – Disadvantage
• Green – Advantages
• Orange – Interchangeable

Advantages and Disadvantages of a Sole Proprietor

You don’t have to do a formal Company Registration. If you have your own business, you automatically fall into this category; you don’t need to register. This is often called an informal business and we find many of these in the Republic of South Africa.

Your business and personal finances are considered as the same. Yes, it requires less admin but the disadvantage is the financial chaos that results in mixing your personal finances with your company’s finances. SARS requires you to pay your tax by submitting your business income and expenses as part of your personal finances to SARS. This then result in having to pay Income Tax Rates. In short, this will benefit you if you earn very little and be a disadvantage to you when you don’t. You’ll probably pay the least amount of tax with this structure if you earn roughly less than R205 900 taxable Income per year. If you earn more, you might pay more tax with this structure. It’s a complicated matter, so be sure to check with your accountant.

You will be personally liable for your business debts. You and your business are considered one entity and as result you may be excluded from many Tender, RFQ and Contract opportunities. Many companies have Company Registration as a prerequisite for all their applicants.

Advantages and Disadvantages of a Private Company / Pty

Your Company is a separate legal entity with shareholders and directors. This means you can allocate yourself 100% of the share and list yourself as the only director. Alternatively, you can sell shares to investors, you can have more than one director and you can allocate shares to a partner. Depending on your needs and aspirations, the structure is very flexible. You probably won’t be liable for your company’s debt and shareholders won’t be liable for the Company’s debt if your company ever becomes insolvent. Directors may be held accountable and you would lose all the investments but financially, your bank account will remain untouched. However, this depends on their contract and also whether they participate in fraudulent or reckless behavior that instigated the insolvency. You qualify for many Tender, RFQ and Contract opportunities.

You pay a standard rate of 28% Tax on your yearly profit and depending on your yearly taxable profit, this might be more or it might be less than you would pay as a Sole Proprietor.

A formal Company Registration is required because your business is a separate legal entity to you, which is why you need to formally register as a separate legal entity. However, the registration process doesn’t need to be tedious, hence the purpose of this all-in-one article.

Advantages and Disadvantages of a Partnership

You don’t have to do a formal Company Registration. You don’t need to do a formal Company Registration at the CIPC to assume this structure. If you and a partner run your own business together, you automatically fall into this category. However, a written partnership agreement, preferably set up by a lawyer, is the best way to establish a partnership. This will ensure there’s an agreed way to resolve any disagreements that may arise in the future.

You’re responsible for sharing the profit. Profit-sharing can often cause disputes because both partners don’t always contribute equally.
Your business and personal finances are considered one entity. You must submit your business income and expenses along with your personal finances and this can be quite complicated because it needs to be divided between two partners fairly.

You pay Income Tax Rates the same way as the Sole Proprietor.
You’re personally liable for all your business PLUS your partner’s business debts, because in the eyes of the law, your personal finances and your business finances are one. Lastly, you and your business partners share the debt responsibility. If your business partner creates excessive business debt, you can be held accountable.

You may be an exclusion from many Tender, RFQ and Contract opportunities because most companies require their contract applicants to have Company Registration documents. You won’t have that with a Partnership.

A Foreign or External Company

This is an incorporated company outside of South Africaband the company may be a profit or non-profit company or carrying on business in South Africa. A foreign company can not offer security services to the South African public unless it follows the specific provisions of the Companies Act, 2008, relating to offers to the public.

A foreign company must register with the CIPC if it conducts or intends to conduct business in South Africa as it states in Section 23 of the Companies Act, 2008, lists a series of activities which will be regarded as conducting business.

This list includes:

• Holding a meeting or meetings with shareholders or board of the foreign company, or otherwise conducting the internal affairs of the company
• Establishing or maintaining any bank or other financial account
• Establishing or maintaining offices or agencies for the transfer, exchange or registration of the foreign company’s own securities
• Creating or acquiring any debts, mortgages, or security interests in any property
• Acquiring any interest in intellectual property
• Entering into contracts of employment

Public Company

A public company is a company that may offer its shares to the public, but restricts in its right to make pre-emptive share offers.

The public company must have at least three directors and may be listed on the Johannesburg Securities Exchange. Public companies must be audited and must produce audited financial statements which are tabled with their shareholders annually. Depending on the size of the public company, the company may also be required to have an Audit Committee and a Social and Ethics Committee.

Personal Liability Company

A personal liability company must end with the word “Incorporated” (Inc.), and meet the criteria for this type of private company. The directors and previous directors of the company, are equally and legally responsible together with the company for any debt and liabilities of the company contracted during their respective terms of office. Imagine how awkward it must get when things go sideways in this kind of environment.

A Personal Liability Company is a private company that many professional associations use, such as consultation services or accounting.

Advantages of a Personal Liability

Limited Liability organizations provides security for their owners. If the organization has outstanding debt, the individual owners will not be held responsible for those debts. If the organization has to file for insolvency, the individual owners are still not personally accountable for any of the liabilities the company has. Taxes in the corporate profits are not payable, as well as on profits that pass through to your members. One only pays once on the profits given to individual members. Furthermore, owners can choose to have profits in any way they would like them to be distributed and give whatever percentage they wish to give to a member.

Disadvantages of a Personal Liability

New challenges in terms of the way your organization files taxes. Your status may be chosen for you. The existence of the company is based on the life of a members because company will no longer exist if any member goes bankrupt or passes away.

Where to Register your Business

The best place to register your business is at http://www.cipc.co.za.

How to Register

You may need to set up a profile. This profile, you will use it to log into the cipc database and register as many businesses as you wish and a lot of other cool stuff that you will need for your businesses. You will need a certified copy of your ID for verification so ensure that you have a digital copy In case you need to email it. Registration is free.

Register Your company

Before you select the type of company you want to register, you will need to deposit money into the cipc account that will link to your profile.
Visit their website to follow the prompts.

Cost implications

• Private Company – R175.00 (with a company name)
• Public Company – R475.00 (with a company name)
• Personal Liability – R475.00 (with a company name)
• Foreign Company – R400.00
• State-owned Company – R475.00 (with a company name)

After you make the relevant deposit you need to log back into the CIPC website to officially start the registration process. If the money does not immediately reflect on your profile don’t panic. It will take at least 2-4 hours. During this time, you could think of unique names that you will reserve for your business. I always recommend that you apply for a business name the same time that you register your company. It’s just easier that way and cheaper too because it only costs R50 from your deposited amount. When the money reflects onto your CIPC profile, you are back in business.

Ensure that you register your company with a name reservation. There will be some documentation that will require your signature. Ensure that you send them back to the correct email address. The registration process will take a couple of hours to at least a month, give-or-take, after you submit all the required documents. Remember humans processes these applications. A little consideration and patience goes a long way.

You will receive more documents to sign. After registration is complete you will be bombarded with an email with a variety of attachments. What you should focus on is the Incorporator signature form and the standard/customized MOI (Memorandum of Incorporation). Once you submit these. You have officially registered your business but that’s not the last of it.

BEE Certification

It’s now time for you to log back into the CIPC website. Under your company profile you will find a tab to download a BEE certificate. This one is free. But there is often no guarantee when you climb up the ladder.

What is a BEE certificate South Africa?

A Black Economic Empowerment (BEE) certificate is a document that spells out the level at which a company complies with the BEE initiative. The certification lists various critical information including the name of a company, the address as well as the details of registration of the company assessed. Other information that are contained therein are the category of the company, sector code, element scores and points relating to the Black Economic Empowerment scorecard of the company, and the date in which the testimonial was issued.
The Perfect Cocktail will have another segment that discusses the BEE initiative and its importance in the upcoming week.

Tax Certificate and SARS Tax Clearance Certificate

A Tax Clearance Certificate is essentially a piece of official documentation that your business can get from SARS as proof that you have no outstanding Tax at SARS. Having a Tax Clearance Certificate in South Africa means your business is in good standing with SARS. It goes without saying that a Tax Certificate is your way of telling SARS that your company, is a legal body that contributes its earnings towards the countries laws and regulations the same way that you pay tax in your job.

This one is very simple and easy to get. You have one of two options.

Option 1:

Request your Tax Compliance Status via eFiling. You will need to visit http://www.sars.gov.za

Option 2

Visit your nearest SARS local branch which at this point in our current world health situation Of the COVID-19 virus, it is really not advisable to be going out to stand in long queues. You can also find these application form under the same website as stated above.

Let’s take a moment real quick to calculate how much money you have spent so far… Let the thought of Tha amount of money sink in as you think about how much you thought it really cost and how much you were charged by some other person looking to make a quick buck for something that you could have done yourself.

Hint. Should you need assistance to register your enterprise, kindly email us on services@yfapublications.co.za.
Just kidding. We wouldn’t charge you for the service because we don’t offer it however, we will charge you for the Domain Registration and Website for your organization.

Domain Registration

Using the CIPC portal you will be able to register your business domain for R51.75. Now a domain is the identification/address of your company in cyberspace. Example. Our website domain is yfapublications.co.za. Our email this becomes @yfapublications.co.za. The “@” is as Symbolic as your profile in social media. This is your space.

You may choose to have a “.org” or “.com” signature as a domain. It is entirely up to the availability at that point in time. However, you will only register the domain, this is far from developing and maintaining a website.

For this service, YFAP offers an exclusive package including domain registration, content development and web maintenance. You may email us on services@yfapublications.co.za.

Compensation Fund Registration

Why?

To cover your workers against occupational pdiseases, injuries and death, you must register with the Compensation Fund. You can register online.

The fund covers an employee who is:
permanently employed
a domestic worker in a boarding house
an apprentice or trainee farmworker and
a worker paid by a labor agency.

How?

• The easiest way is to follow the link https://www.gov.za/services/compensation-fund/register-compensation-fund
• Click on the Hyperlink Registering with the Compensation Fund.
• Once there, you might want to switch to the PC version for a better display.
• Follow the instructions indicated.
• The Department of Labor administers this particular aspect. Ensure that you find a contact person and touch base with them regularly for guidance.
• Please do not be tempted to use the lessons learnt on our previous article How to manipulate your way. This is not the situation but of course, it wouldn’t hurt to use a little of your charisma to smooth the path.

Unemployment Insurance Fund Registration

Yes, UIF.

What is the UIF?

The Unemployment Insurance Fund (UIF) gives short-term relief to employees when they become unemployed or are unable to work because of maternity, adoption leave, or illness. It also provides relief to the defendants of a deceased contributor.

The unemployment insurance system in South Africa is governed by the following legislation:
Unemployment Insurance Contributions Act, 2002 (the UIC Act)
Unemployment Insurance Act, 2001 (the UI Act)
These Acts provide for the benefits, to which contributors are allowed, and the imposition and collection of the contributions to the UIF.
See as a business owner, you also have a sense of responsibility to the financial livelihood of your employees. In a way, securing this puts you and your business in a positive position of growth. Happy employees reduce staff turnover. Less staff turnover means you save more money with any recruitment process for the same positions which give you more opportunity for skills development within your organization. Besides, you will have an abundance of people knocking on your door begging for your job, all of them unique in their skills, thoughts and advantageous to you. This means you will have options to select the best of the best to align with the vision of your business.

How?

The link below directs you to the website to register online. Follow all the instructions and documentations required for you to submit.

Bank Account

This goes without saying. You registered a new business with tax certifications, it’s only fair that you give this new entity its own bank account. Fortunately this is the easiest process. All you need are your registration documents, ID copies of the owners and about R500 Minimum in your pocket to get started. The R500 anyway goes into your new account. It is advisable to stick to one person handling your business transactions so you might want to employ someone who deals directly with the bank. However, if you have trust issues, doing it yourself is also perfectly fine.

So lets Talley how much you have actually spent to fully register your business all on your own… Less than R1000 give or take? So what are you waiting for?