South Africa is among the top economies that rank as conducive markets when it comes to the ease of doing business. Being the second biggest economy in Africa, the country attracts attention from the international business community. While the business environment is regarded as challenging by some entrepreneurs haggling to have a piece of the cake, a business has to be compliant to take advantage of the opportunities in the offing. If you are planning to set up a shop in the region, you must adhere to some administrative procedures, legal rules, and statutory requirements beforehand. Read on to know how to register a business in South Africa.
A business begins with an idea. Before you even think of registering a company, you will, of course, have determined the nature of the business and the industry it falls in. We have three groups of businesses:
- Sole proprietorship
- Private Company
A single individual controls the running of a sole proprietorship. However, a company operates under the guidance of directors and some shareholders. The Companies Act, 2008, states that there are two categories of companies under the jurisdiction of the South African law; profit and non-profit companies. Note that a company is recognized as a legal entity in the same act.
How to register a business in South Africa
If one of your plans is registering a business in South Africa, especially a small business in the form of a small-medium enterprise (SME) or a startup, you will not have to register the entity like a company. In most cases, an SME can be either a sole proprietorship or a partnership. Nonetheless, you need to fulfill some tax obligations regardless of whether you will be operating the business on a personal capacity.
Unlike a company, small businesses are not legal entities. As such, you are not required to register it with the Companies and Intellectual Property Commission (CIPC).
After starting your business operations, you are required by law to register for an income tax reference number from the exchequer within 60 days. The government will tax partners in the business depending on the share of ownership. To legalize your small business, apply for the right business permits and licenses from your local authority.
How to register a sole proprietorship in South Africa
A sole proprietor registers and operates a business on his/her own. An entrepreneur who desires to go it alone will end up with a sole proprietorship.
One thing to take into consideration is that, if such kind of a non-legal entity is embroidered in a legal or financial case, the owner’s personal property can be seized or liquidated to pay debts or other pending liabilities.
Wondering how to register a business in South Africa as a sole proprietor? Considering that a sole proprietorship is not a legal entity, registration is not necessary apart from the standard legal and tax requirements.
On the other hand, you will be required to register the business with the South Africa Revenue Service (SARS) for purposes of tax returns. SARS combined individual income with the business revenues to determine what the sole trader pays as taxes.
An entrepreneur will have the choice to register the business using either a fictitious name or his/her name. The false name will act as a trade name, and hence, one is required to file for the business name with the Companies and Intellectual Property Commission (CIPC) in the location where the business is based.
Company registration in South Africa
Companies are common business entities in South Africa. The law has established them as legal entities. What distinguishes a company from other businesses is that it is a separate entity from the shareholders who own the business. Directors run the operations of the company. Company registration South Africa with the CIPC is mandatory for anyone wishing to register a private company. But before that, let us understand the process of how to register a company.
1.Having the right documentation
Some of the documents required by the CIPC to register a company in South Africa include filled copies of a Notice of Incorporation and Memorandum of Incorporation. One can download them on the commissions' website.
Other personal documents or requisites that you have to furnish are:
- Identification documents (ID) or passports of the incorporators and the directors
- Identification copy of the applicant if none of the directors is making the registration application.
- Power of attorney to sign all the related documents on behalf of the incorporator if he/she is a juristic person
- Certified ID copy to identify a power of an attorney for the previous action
- Valid name reservation in case of a prior filing of incorporation
Note that it will take almost 25 days to have fully registered companies in South Africa from the time of application. However, it will take you a day if you decide to register the company without a reserved name.
2. Reserving a company name
You will need to file for a company name that will identify your business in the Memorandum of Incorporation. There are three options to register a name- either by registering a company first using your name and file for registration of the name later or reserve the name and then initiate the company incorporation process later.
Before you even reserve a name, you need to carry out a name search with the CIPC to ensure that no other company bears the trademark or name. CIPC does not charge business owners to search patented information as long as they have registered on the main portal to access CIPC online services. The last option is using the enterprise number to register the company with the view to filing for a name at a later stage through a name amendment.
CIPC charges R75 for the manual registration of the company’s name and R50 if you file electronically on the portal. From the date of application, it will take three days to reserve the name until its approval. Once approved, the name reservation will be valid for six months.
3. Registering with the South African Revenue Services (SARS)
All businesses must fulfill the legal obligation to remit taxes. In our case, a private company will be registered with the taxpayer automatically if the incorporation of the company is done through the CIPC. Otherwise, for other types of businesses registered by sole proprietors or partners, they have to register with SARS within 60 days of starting their business operations.
4. Registering with Companies and Intellectual Property Commission (CIPC)
The convenience of business registration South Africa is that you can do it online or in person at the designated terminals. The CIPC self-service terminals are located in Pretoria, Johannesburg, Pretoria, Cape Town, or at an authorized bank like First National Bank (FNB).
The whole registration cost is R175 inclusive of the charges to reserve the name. Have with you the following document or information ready for the registration:
- Certified contact details for the directors and owners
- Owners’ Identification details or passport
- Details of physical location, email, and bank information
- Signed copies of the registration forms
To access the commission’s online services, you will need to register as a customer to transact any business on the e-services portal. Once registered, you will be given a new CIPC customer code.
The next step after securing the virtual CIPC account is to deposit some money into the account. It is from the account that all deduction pertaining to the CIPC Company registration and name reservations are carried. If you choose to register your company online with CIPC, you must first be registered as a customer on their main website. Do you want to know how to register a company in South Africa? Here is the outlined procedure:
- Visit the CIPC main website.
- Hover to the ‘on-line transacting’ and select ‘e-services'.
- You will be redirected to the main portal.
- Use your password and security code to login into the service portal.
- Once logged in, select ‘register a new company'.
- In the required field, enter the identification number of the company’s incorporator and director (s).
- You will be prompted to capture or edit the details of the directors. Click ‘save’ to confirm the information.
- Include additional personal details of the directors and incorporators including contacts, postal address, etc.
- Confirm the information and click, ‘save'.
- Head to the bottom of the page and select, ‘continue'.
- On the fields provided, include details relating to the company inclusive of authorized shares, email, website, physical and postal address.
- The next step will require you to select a name reservation option depending on the method you had selected earlier. You can choose between the following 3 options: 'applying for a new name as part of the process’, ‘use a name that has already been approved’ or ‘register the company using the enterprise number’.
- Depending on the option you selected to formalize the company, indicate all the details required.
- Verify all the information included and select, ‘lodge company'.
- If you have included the correct details on all the required fields, a confirmation notification will pop up. Within a short while, an email will be sent prompting you to provide the supporting documents.
- Print the emailed form and have it signed by the directors and incorporators as indicted.
- Attach the supporting documents (listed earlier) with the signed form and send to the email- eServicesCoReg@cipc.co.za
This post highlights the standard practice on how to register a business in South Africa. The process should not prove a challenge if you use this guide and have all the requisite documents required. Whether you are looking forward to starting a franchise business, church, private school or a law firm, you have no reason hold off on your goals. Be sure to comply with municipal by-laws and agencies like Department of Labour and South African Revenue Service.
- 11 uniquely South African business ideas
- A look at the SA business people who made Forbes' top 30 under 30
- Omphile Mabitsela, 6, starts his own handmade stationery business