The business registration process entails far more than just registering a company name and business entity with the Companies and Intellectual Property Commission (CIPC) in South Africa. Though it is possible to register the business at CIPC without assistance from tax practitioners and accountants, it is certainly not recommended.
Knowing exactly which documentation is required, how to draft the Memorandum of Incorporation, which business entity to select, how to reserve a business name and how to search for verifying availability of a business name, form part of the expertise that accountants offer. Instead of making mistakes during the registration process, which can lead to the situation of the registration being rejected, it is best to get professional help right from the start.
The introduction of the New Companies Act has complicated the process further with new rules and regulations regarding the business entity type, name reservation and legal implications. Below is a basic breakdown of what is needed as part of a business registration process in the country.
Register with CIPC
If you plan on setting up a business in South Africa, such as a private company, you must first register it with CIPC as a legal entity and reserve a business name – where relevant.
Register the Business Entity with SARS
Irrespective of what type of business entity you register, it must also be registered with the South African Revenue Services. The business, once registered with CIPC, will be registered with SARS as well when registering with CIPC and you will be a tax payer. If you are a partner or a sole proprietor, you will need to register as a provisional tax payer and this must be done separately with SARS.
You may not operate the business entity without an income tax number and the tax registration must be done within 60 days from commencement of business. Our tax practitioners are here to assist with the entire business registration process.
Register for VAT if Relevant
If you realistically estimate that the business turnover for the financial year will be R1 million or more, you are required to register for Value Added Tax at SARS. If not, then you don’t need to, but may also not charge VAT and may not claim VAT back from SARS. Monthly VAT calculations and submissions must be made to SARS if registered for VAT.
PAYE, SDL & UIF Registrations
If you have one or more employees with any of them earning over the threshold amount in an employment year, you need to register your business for contributions of Pay As You Earn, also known as PAYE tax. You will need to make the PAYE deductions, reflect such on the employee payslips, submit the information and make payments to SARS.
In addition, if the payroll is in excess of the threshold amount a month as stipulated by SARS, you will also need to register for SDL, which refers to Skills Development Levy. You will have to make calculations, submit the information and make the relevant payments monthly to SARS.
Note that Unemployment Fund (UIF) registration must be done and contributions of your business entity and that of the employees must be reflected on their salary advices. You must make the necessary payments to the UIF.
The business must be registered with the Regional Services Council, called the RSC, in the specific area in which it is located and operates. You will need to pay monthly levies to the RSC of which the amounts are determined according to the gross sales of your business and the total of all the salaries and wages.
Register as Employer
Irrespective of how many employees the business entity has, you must register it with the Department of Labour to ensure protection for the business entity and the employees in terms of injuries or disease at the workplace as the result of the tasks performed by the employees. This is in compliance with the statutory requirements of the Occupational Injuries and Diseases Act.
From the above information it becomes clear that the business registration process doesn’t stop at registering of the entity at CIPC and, to avoid non-compliance with statutory requirements, it is thus recommended that you get professional tax and accounting assistance when planning to open and operate a business in South Africa.