how to register a business in South Africa

 

If you’re planning on starting your own business, no matter what size or shape, there are always things that need to be considered; such as your own strengths and weaknesses, your considered business type (one of the most important steps may be noting and understanding the differences and limitations to each), and ultimately understanding the processes involved in the registration of your chosen business model.

 

It is estimated that over 70% of start-ups fail within the first five years, and a lot of those owe their failure to the mistake of entering into the wrong business structure from the beginning. There are several structures that differ in size and nature, and understanding these will help you to make your decision easier.

 

The Sole Proprietor/Trader is the most basic form of business, and consists of (as the name suggests) one owner. This structure makes no requirements of the owner other than having to meet basic tax/legal requirements. However, because the owner is the sole member of the company, all liability and possible legal action falls to him and his personal assets, should the business accrue any unpaid debts. Once the owner passes away, the business will cease to exist. This type of business is the simplest, as it does not need to be registered as a legal entity. All legal matters are referred personally to the owner.

 

The Partnership paradigm closely resembles the Sole Trader, but can consist of up to 20 partners, each of whom must have it clearly stipulated what their specific role, share, profit cut and liabilities will be. Every facet of this type of business must be agreed upon and every liability must be shared, as losses, legal action and security are all placed upon the group as a whole. This type, as with the Sole Proprietor, does not need to be registered, but all legal documents must be correctly drawn up between partners, as stated above.

 

Close corporation (CC):

This is a popular and widely used structure that gives a business a separate legal identity without the formalities of the Companies Act that governs (Pty) Ltd companies. This structure is ideal for for a business that purchases stock on credit. A CC can have between one and 10 members, each of whom owns an agreed percentage of the business and who is liable for managing it properly. A CC cannot be owned by a company or be a subsidiary of another CC or company. A CC (rather than its members) can sue and be sued. The Close Corporation in the past, would need to be registered through CIPRO. However, under the new amendment to the Companies Act, CC’s no longer have to be registered under the act. Fees and applications still apply to CC’s registered before May 2011. Visit the CIPC website for more information.

 

This is also a separate legal entity in which directors are protected from individual liability. A company can make shares available to staff as a private company (Pty) or to the public as alimited company (Ltd), and these are easily transferred from one owner to another. (Pty) Ltd companies are subject to an annual audit. This is the best legal structure for people who ultimately want to sell their business to a large competitor, or list on the stock exchange.

While the Company must still be registered under law, it has now been simplified by the CIPC, information on which can be found here.

 

For any extra information on how to register a business, and for anything regarding businesses and possible business to business networking, Roodepoort Chamber of Commerce information, member information or business tips, visit the ROCCI (Roodepoort Chamber of Commerce) website.