Unemployment is one of the most serious issues facing the South African economy. As a result, the government encourages people to create their own businesses in order to earn a living. However, there are a few legal procedures that must be followed before you can start.
We will go through how to register your small business as well as all of the additional services you must register for.
What Is A Small Business?
If a company wishes to be classified as a small business, it must meet all of the following criteria:
- All of the company’s members or shareholders should be natural people
- Shareholders should not own shares in any other private company
- Members should have no vested interest in other close corporations
- The gross revenue during the assessment year must not exceed R14 million
- Investment income or revenue from personal services should not exceed 20% of gross income
Examples Of Small Businesses
Here are a few examples of small businesses you can start in South Africa:
- Handyman
- Home baking business
- Gardening and lawn care
- Professional makeup artist
- Hairdressing
- Pet salon
- Interior designer
Where Can I Register My Small Business?
The first step in the small business registration process is to register with the Companies and Intellectual Property Commission (CIPC). Every South African business should be officially registered with this agency.
What Is The CIPC?
The Companies and Intellectual Property Commission (CIPC) is a part of the Department of Trade and Industry. They are in charge of registering and maintaining firms in South Africa. The Companies Act of 2008 (Act No. 71 of 2008) established the CIPC, which continues to serve as a method of public administration for businesses to this day.
How Do I Register With The CIPC?
These are the steps that must be followed to register on the CIPC website:
- Go to the CIPC website
- Log in with your credentials or sign up for e-services
- Go to “Company registration”
- Click on “register a new business”
- Click on “apply for a name” if you do not have a reserved name for your company yet and fill out the required fields
- Now click on the “type of company” and choose the appropriate option as well as fill in the required fields
- Add a director under the “manage director sector” and fill out the form
- Add an auditor and fill out the information
- Click on the shopping cart and move to the pay section and click “proceed to payment”
- You will receive confirmation that your payment was successful
- You have now registered
Alternatively, you can also register your small business through a bank, such as Nedbank or FNB.
Do I Need To Choose A Company Name?
Ideally, yes. You must ensure that your company name is completely unique and does not match any other current business name, or you may face legal complications. When you register with the CIPC, you must select a business name. You will have up to four (4) chances to pick a business name, with each application costing R50.
You can even register your business without a name; however, this is not encouraged. This is due to the fact that the name of your small business will be known as its registration number. This is not a smart marketing strategy.
What Documents Will I Need To Register My Small Business?
You will need the following documents to register your small business:
- Notice Of Incorporation
- Memorandum Of Incorporation
- Supporting Documents
What Is A Notice Of Incorporation?
This is the information that will be required in this document:
- The type of company
- Incorporation date
- Financial year-end
- Registered address
- Number of directors
- The company name / if the company name is the registration number/ list of names to be checked if available for the company.
What Is A Memorandum Of Incorporation?
What Is A Memorandum Of Incorporation?
This document will need to include the following:
- The details of the founders of the business
- The number of directors of the business
- How much shared capital exists for the business
What Are Supporting Documents?
Here is a list of supporting documents that will be needed to register your small business:
- Certified copies of the owners of the business
- If you are merging your company with another, you will need documentation proving your power of attorney
- If you have previously registered your company name in reservation, you must produce the valid name reservation paperwork
What Is SARS?
The South African Revenue Service (SARS) is the tax collection authority of South Africa. They are in charge of collecting taxes and customs revenues owed to the state as well as ensuring compliance with tax and customs regulations. They also control legitimate trade through their customer service.
All businesses in South Africa must register with SARS and pay all types of taxes directly to SARS.
Do I Need To Register My Small Business At SARS?
There is no need to register with SARS if you have already registered with the CIPC. This is due to the fact that the CIPC has registered your small business on your behalf. If you have not yet registered with the CIPC but need to register with SARS, follow these steps:
- Get the IT77 form from your local SARS office or online
- Fill out the IT77 form with all of the necessary information
- Return it to the SARS office or email it to SARS to: [email protected] and ensure to include your exact details
- You will be given a tax reference number that you may use to make payments to SARS
Alternatively, you can visit the eFiling website and fill out your personal details. You will also then be registered with SARS.
Note: You need to register with SARS within 60 days of starting your business.
For What Other Services Do I Need To Register My Small Business?
You are not finished once you have registered your small business with the CIPC and SARS. There are a number of other services that your business must register for and pay a fee for.
- Compensation For Occupational Injuries And Diseases
- Unemployment Insurance Fund (UIF)
- Skills Development Levy (SDL)
- Pay As You Earn (PAYE)
- Value Added Tax (VAT)
Service | Purpose | Do I Qualify? |
Customs | If you import goods from other countries to sell, you will need to pay duties or taxes on the products. | If you import goods, you need to pay for this service. |
A certain amount is subtracted from the employees’ salaries for UIF. If one of your employees ever finds themselves unemployed, they can withdraw from the UIF to help meet their financial needs. | All employers must deduct UIF from their workers’ salaries. | |
This is a levy paid by the employer to help support employees who want to learn and improve their skills to succeed in their jobs. | If a business’s payroll is more than R500 000 per year, they need to pay for this levy. This will be 1% of the total payroll. | |
This is the tax an employee must pay to SARS. 1% is deducted from their salary for this purpose. | PAYE must be paid if an employee earns more than R40 000 per year. | |
This is the tax levied on the company’s earnings. The current VAT rate is 15% and is computed based on the services and goods provided by the business. | If the business earns more than one million rand annually, they are liable to pay VAT. |
What Are The Benefits Of Registering My Small Business?
Not only is it a legal necessity for your small business to be registered, but there are also several advantages to having your company registered.
- You can formally apply for a business bank account
- You have the luxury of applying for business loans
- You will build a good reputation with your clients
- You will have legal liability protection
- Your business identity will be protected
How Much Will It Cost To Register My Small Business?
It will cost you R175 to register your business with the Companies and Intellectual Property Commission (CIPC). The registration fee with the CIPC will be R125, and choosing your business name will be R50. This brings us to a total of R175.
How Long Will It Take Before My Small Business Is Registered?
It might take anything from 5 days to 5 weeks to properly register your small business. This is entirely dependent on the nature of your business and your ability to provide the necessary documentation and signatures. It also depends on how quickly you register for all of the services that your company requires.
Author: Esmari Pool
Editor: Esmari Pool
Date Published: November 14, 2022