Registering a Company In South Africa

Don’t Waste Anymore Time And Money.

When registering a company, the best advise that we can give is to do your planning well, but also to only register the company when you are ready to start trading. There is a minor registration fee at CIPC for the company registration and then a minor annual return fee to keep the company open. If you keep the company open without trading, which is called a shelf company, the costs for something that’s not profitable can pile up along with the various requirements. A company needs to submit annual returns to CIPC, income tax returns and provisional tax returns to SARS on an annual basis (bi-annual basis for the provisional tax returns). Yes, this doesn’t sound like much, but your accountant is going to charge you for each submission, if you don’t have the knowledge and the access to the submission of these returns. This is only for dormant companies, companies that are not dormant requires financial statements as well, thus it can get costly. So be sure before registering a company.

If you do decide to register a company, then you need to supply your accountant with four preferred company names (a company can also be registered without a name, thus using the registration number as the company name), the identity documents of all the directors and incorporators, the preferred financial year end month (we always prefer to use the financial year end of SARS as many companies do, which is February), registration date, who the shareholders will be, who will have what stake in the company, company general details, directors general details, incorporators and shareholders general details. General details in this case refers to the physical address, postal address, email address and telephone numbers. The four preferred company names will be used to do a name reservation. The name reservation will be submitted to CIPC and they will then select the first available name that meets their criteria and reserve this name for you. You can then commence with your company registration using the reference number CIPC supplied to you for the reserved company name. The registration process usually takes less than 5 business days. After the registration has been finalized, you will receive a registration certificate and memorandum of incorporation amongst other relevant documentation from CIPC.

This registration certificate together with the identity documents from all directors and proof of address of all directors can be used to open a bank account in the company’s name. As far as we are aware, all directors need to be present at the bank for opening the bank account. The company must also be issued with share certificates when the company has been registered.

About one day after the company registration has been finalized by CIPC, they will automatically inform SARS of the company registration and its details. At this point SARS will register the company for income tax and provisional tax. With this income tax number, you can now register for PAYE, UIF, SDL and VAT at SARS if this was included in your business plan. Take note that when the company’s turnover (total gross sales) reaches R 1,000,000.00, it is mandatory to register for VAT. Also take into consideration the legislation regarding the registration for UIF and Workmen’s Compensation at the department of labour. These registrations are mandatory when an employee works for your company for more than twenty-four hours in a month. Always remember the company is taxable at twenty-eight percent of its taxable profits at this point in time. For a detailed description and calculation of the income tax impact on the company and other entities, read the income tax article.

The company’s option to declare and pay dividends to its shareholders is at the director’s discretion. The declared dividends are currently taxed at twenty percent but are paid to shareholders from the distributable reserves of the company. Distributable reserves are capital of nature and not expense, meaning that the amount declared as dividends can not be deducted from the taxable income of the company. Thus, the amount declared as a dividend (assuming there are no non-taxable income items generated by the company) will be taxed at both twenty-eight percent company income tax and twenty percent dividend withholding tax. The dividends withholding tax must be deducted and paid over to SARS by the company on behalf of the shareholders. The dividend is then declared by the shareholder as a nontaxable income, because it was already taxed by means of dividends withholding tax.

We really hope that this is the detailed explanation that you require when deciding to register a company. If you still have any questions regarding this topic, please don’t hesitate to contact us. And if your decision is to register a company and start your journey as an entrepreneur, we are standing by to assist you in this journey towards your dream and profits.

 

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