Business Registration in South Africa

By | June 2, 2021
Business Registration

The South African economy is regarded as the second-largest in Africa. Doing business in the South African market is quite easy once you know the ropes.

This country attracts entrepreneurs from all over the world who come to invest and extend the tentacles of their businesses. Several indigenes are starting up their businesses within the country.

If you are a foreign investor or local planning to start a business in South Africa, you have to register. It is, therefore, important that you understand the process of business registration in South Africa before you do. In this post, we will show all you need to know about registering a business in South Africa.

Levels of Registration

The first step to starting a new business is getting the idea. This is also known as the conceptualization stage which is more important than registration. How can you register a business that you are not sure of?

When registering the business, you will be asked to provide information about the nature of the business. You will also need to provide information about what industry your business falls under. Currently, in South Africa, there are 3 levels of business registration and they are:

  1. Sole proprietorship
  2. Partnership
  3. Private company

A sole proprietorship is run by a single individual hence the name “sole proprietor.” A private company, on the other hand, has shareholders and a board of directors who govern its affairs. According to “The Companies Act (2008)” the South African law recognizes two categories of companies. They are:

  1. Profit companies
  2. Non-profit companies

You should also know at this point that this same act recognizes a company as a legal entity.

Business registration in South Africa

You don’t need to carry out company registration is what you plan to do falls under the SME set of businesses. SME is an acronym that stands for Small-Medium Enterprise. The same goes for a small startup.

A business that begins as an SME is most likely a sole proprietorship or partnership. Regardless of how you start, you need to satisfy some tax requirements for you to operate without embarrassment.

Here is a summary of the business registration process South Africa split into different stages:

  1. Documentation – In this stage, you will be providing documents that back up the registration process. These documents include:
    1. ID card or passport of the applicant
    2. Power of Attorney appended on the related documents.
    3. Certified copy of ID identifying the power of attorney who appended the documents in the previous step.
    4. Valid name reservation if there was a previous filing for incorporation.
  2. Reserving the company name – This involves searching to see if the business name is available. It is usually carried out with the CIPC. The steps include:
    1. Carrying out a name search for availability with the CIPC.
    2. After approval, there is a validity period of six months.
  3. Registration with the SARS – This process is carried out with the South African Revenue Service (SARS). The process requires the following steps:
    1. Fulfill your legal obligation requiring the remission of taxes.
    2. Registration with the SARS which must be within the first 60 days of operation of the new business.
  4. Registration with the CIPC – This is the final registration of the business with the CIPC. It entails the following:
    1. Visit the official website of the CIPC (cipc.co.za).
    2. Select Register a new company.
    3. Select the name reservation option.
    4. Print out the form that was emailed to you and append your signature on it.
    5. Attach all the necessary supporting documents and forward them in a mail to eServicesCoReg@cipc.co.za.

If you are running a small business, you don’t have to register with the CIPC. CIPC stands for the Companies and Intellectual Property Commission (CIPC). Immediately you begin operations, you have to register for an income tax reference number. You have 60 days from when you first begin operations to get this number.

Partners of your business will also be taxed based on their share ownership. If you will like to legalize your SME business, you need to apply for the right business licenses and permits from the local authorities.

Registering a sole proprietorship in South Africa

Like you know, a sole proprietorship is a one-man business. It means the business is run by a single entrepreneur who bears the risks and liabilities of the business alone. One of the major disadvantages of this business is that when it is entangled in a legal case, the owner may lose their property.

A sole proprietorship is not a legal entity and as a result, it is not necessary to register in South Africa. The major requirement is satisfying the tax and legal requirements of the South African government.

This means that you will have to register with the South African Revenue Service (SARS). When you do this, then it is easy to pay taxes and provide information about your tax returns. To calculate how much a sole proprietorship pays, the SARS combines the proprietor’s income with the business revenue.

As a sole proprietor, you have two options for registering your business with the SARS. You can either register using your name or register under a fictitious name. The fictitious name acts as your trading name. For this reason, when you use a false name, you must register the name with the Companies and Intellectual Property Commission (CIPC). This registration should be done in the region where the business is located.

Conclusion

The contents of this post provide you with the standard practice regarding the registration of business in South Africa. As you have seen, the process is very straightforward and shouldn’t pose any challenges if you do it right. So whether you want to start a small business, a law firm, school, or church, you can go ahead and register. Make sure you provide the correct information when registering your business to avoid complications in the future.

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