Setting up business in South A

Setting up business in South Africa

South Africa can be challenging business environment, but the country offers plenty of possibilities for entrepreneurs preparing to set up a business.

Setting up business in South A

Since the end of apartheid, South Africa has opened up to the world. After two decades of slow-but-steady economic growth, the country has taken its place in the international business community – and was ranked 43rd in the world by the World Bank in 2014 for ‘Ease of Doing Business’.

Today, South Africa continues to offer opportunities for entrepreneurs in a spectrum of industries. If you are planning to start your business in South Africa, what are the steps to a successful set-up?

1) Determine structure

The legal structure your new business assumes will affect the way it handles tax, legal and financial obligations. The Companies Act 2008 sets out the legal entities available in South Africa – while the list includes ‘close corporation’, ‘trust’, ‘non-profit’ and ‘public company’, the three most popular new businesses are:

  • Sole Proprietorship: An entity with a single owner, controlling every aspect of the business. With no separation of personal and business assets, the sole proprietor is responsible for all tax payments and liabilities
  • Partnership:  An entity controlled by two to twenty owners, splitting profits in proportion to interests. Unless part of a ‘limited liability’ arrangement, partners are personally responsible for business liabilities.
  • Private Company: Run by a director, with up to 50 shareholders, private companies (Pty) have become the most popular form of new business entity in South Africa. A Pty offers the added protection of separate personal and business liabilities.

2) Reserve a name

Prior to registering with the Companies and Intellectual Property Commission (CIPC), you must reserve and register a company name. You may choose to register a name as part of the company incorporation process (see below) – or register your name first, and company at a later date.

The name registration process costs R50 – it is worth entering a number of ‘possibles’ to ensure at least one is approved.

3) CIPC registration

Formal registration of your new business may take place in person at a self-service terminal, in one of the CIPC service centres in Johannesburg, Pretoria and Cape Town, or at an authorised bank branch. The process can also take place by email, or on CIPC’s online portal. If you are planning to register a company and name together, the process will cost R175, while registering a company alone costs R125.

To complete CIPC registration, you will need the following information:

  • Contact information for all business owners and directors.
  • Owners’ personal identification documentation, such as passports.
  • Company information, including financial details, email and physical address.

After initial document submission, the CIPC will request certified copies of directors’ ID documents – and those of the registration applicant (if they are not a director themselves).  CIPC will also request signed copies of the registration forms.

4) Open a bank account

Your company must have its own bank account in South Africa. To open an account, proof of identification, original company documents, and proof of residence in South Africa should be provided. Although opening an account is straightforward, providing proof of residence can pose problems for foreign companies – ensure you meet the requirements ahead of time.

Depending on the type of business you are setting up, further information may also be required.

5) Register for tax and social security

Income Tax: The South African Revenue Service (SARS) is linked electronically to the CIPC, so will be able to access business information previously provided. However, to register for income tax, PAYE and various other taxes, you will still need to visit a SARS branch with documents including your registration certificate and a bank statement.

VAT: Businesses with a turnover of more than R1 million, will need to register for VAT by appointment at a SARS branch. SARS requires a completed VAT 101 form, certified copies of financial and identification documents, and registration documents.

Social Security: South Africa’s social security schemes include the Unemployment Insurance Fund (UIF) and the Commissioner for the Compensation of Occupational Injuries and Diseases (COID). UIF registration can take place by email, but COID forms must be downloaded and submitted to a COID office.