Starting a new business can be scary but it’s easier than you think. In this article, we’ll guide you through the legal and administrative steps needed to register your business.
There is a range of legal requirements for new businesses including financial regulations, tax obligations and employment laws you’ll have to comply with.
After you’ve formulated your business idea, you will need a business name. Then decide on a location (home or office) and create a business account. You can register your company online on the Companies and Intellectual Property Commission (CIPC) website or via a bank.
In this article, we list permits and licenses you’ll need to operate in South Africa.
An LLC or Corporation?
The first legal hurdle you’ll need to overcome is deciding on the structure of your company. You can choose between forming an LLC or a corporation. There are advantages and disadvantages to both types of business which ultimately comes down to the type of protection they offer owners.
LLC – Limited protection
An LLC (Limited Liability Company) legally protects you from personal liability under most circumstances. If you find yourself being sued or your business has to declare bankruptcy, your assets (i.e home and vehicle), won’t be at risk from asset seizures.
With an LLC you’ll be able to file your business income as part of your income tax. Depending on your country you will most likely need to pay a form of “self-employment tax”.
Corporation – maximum personal protection
A corporation is a company that is legally from its owner, meaning that in the event of legal action or bankruptcy, the owners aren’t liable for any loss. Forming a Corporation is very expensive, and you’ll need legal assistance to create one. You will also file separate income tax on your profits. It’s important to note that in South Africa no new close corporations (CC) can be registered.
Selecting and registering your Business Name
Brand recognition is everything and most business owners start by choosing a company name. Before you begin, you’ll have to file for a business licence. In South Africa, you’ll have to file with the CIPC or through a bank on your behalf.
Once you’ve registered your name you can move on to trademarking. Trademarking will require research on your part as you don’t want to risk operating with a name that’s already in use. If your initial name isn’t approved by the CIPC you’ll need to restart the entire process. A company registration may vary between R125 and R475 ($8 – $32.39).
Permits, licensing and compliance
The 4 primary entities you must register with:
Registering with the South African Revenue Services (SARS)
Registering with the CIPC
Proof of registration with the relevant professional body, board or council recognized by South African Qualifications Authority (SAQA) in terms of section 13(2)(i) of the National Qualifications Framework Act, where applicable.
Amazon, Google, Apple… the most important thing to remember when you select a business title is to consider whether it will work well into the future. That quirky title for your business you came up with might offend people in South America or perhaps a new event has tarnished a particular phrase; research whether your chosen title is simple and that it doesn’t offend in any language.
After you’ve decided on a title you can create a logo and supplementary communication material (i.e business cards),
Running a business from home
The 2020 pandemic has forever changed the traditional workplace. Working from home has become the new normal. Sound quality, aesthetics, distractions… If you want to start a business in your home, there are some special issues and circumstances you will need to deal with.
Depending on your business type and the location of your home, you may need to file a zoning variance to run your home business.
Fund your business
After you’ve registered your business, and received a tax number, you will be able to set up a business checking account. Having a separate business account is a deductible expense and it will also help you with your business tax reports (i.e filing with SARS). It also gives your business more credibility by having a business account for payment and helps if you need to apply for a business loan.
Every new business is required to register with SARS and registration must be done within 60 days after starting operations by completing an IT77 form.
Depending on factors such as turnover, payroll for staff, you could also be liable to register for other taxes, duties, levies and contributions such as VAT (Value Added Tax), PAYE (Pay-as-you-earn) and UIF contributions.
Don’t miss the next exciting part!
If you enjoyed this article, stay tuned for more; this was the fifth part of an ongoing series that will provide you with a step-by-step guide on how you can build a profitable business as an Introducing Broker by leveraging the award-winning tools and services of CM Trading.
Look out for our next article where we will help you create consumer profiles.