How To Register A Business In South Africa Private Company Limited
Entrepreneurs need to know how to register a business in South Africa, especially at the beginning of their entrepreneurial journey.
Once your business has been registered as a legal entity, you will be protected if any of your customers or competitors decide to take legal action against you.
If you are new to the concept of registering a business, the idea can be quite daunting. We have created this article to guide you through all the necessary steps you will need to consider when registering a small business in South Africa.
Soon you will know how to register your business and obtain the stability and legal security that people who are just starting an online business need.
Do I need to register my business?
Although you can operate a business without registering it, it is a good idea to incorporate it as your business grows. Registering businesses makes them official in the eyes of the government and ensures that both your personal and business assets are legally secure.
Steps to register a company
Registering your business is not complicated, but it does require you to follow the correct steps. The procedure to register as a legal person implies:
Naming your business
Every entrepreneur will need to take the first step in registering their business by deciding on a name for their online store.
You must come up with a memorable name for your company, something that will grab the attention of your audience and leave a lasting impression. Make sure the name is related to your niche and something you can build a marketing strategy around.
Finding a business name that will stand the test of time can be tricky. Take a look at some of your competitors and analyze the types of names they use. Take note of the business names you like, and then think about how your idea compares to them. Does your idea stand out from the crowd? If not, what can you do to make it unique?
Registration of a trading name
Once you've found an amazing name for your business, you've already overcome one of the most difficult parts of registering a business. It is essential to ensure that your company name is not already registered with the Companies and Intellectual Property Commission (CIPC). The CIPC will automatically reject any registration of a trading name that is already registered in its system. You will also forfeit application processing fees.
To avoid any of these problems, research local business directories to see if the business name you'd like to use is available. You can also use BizPortal free tool to check if your company name is available.
Preparing your company name for the future
When you've found a memorable business name that's available, take some time to think about your long-term goals for your business. Do you think your business name is ready for the future? Will it stand the test of time?
Try to avoid choosing a business name that stems from a current trend. If you were to call your business "Selfie Stick Corporation", you might see success initially, but how popular will your business be in the years to come?
It is important to consider the staying power of a name before registering your business, as it will be inconvenient to change your name later. Changing your name once you've built an established business is a legal hassle and can also lead to confusion for your existing customers.
Choose your business entity
Once you've decided on a name for your business, you'll need to choose the type of business entity that best suits your online store. There are two main options; registering your business as a Private Company PTY Limited, or incorporation. There are clear differences between these two options, so we've broken down the key points you'll need to know so you can make the best decision for your business.
Private Company (Pty limited) is treated by South African
Setting up your business as a PTY will require less paperwork than incorporation, which means you'll have more time to focus on getting your store off the ground.
When you have registered your business as a PTY, you will not be personally liable for any debts your business accumulates. This means that your assets, such as your savings, your car, and your home, will be completely safe if something were to happen to your business.
Another benefit of choosing to register as a PTY is that you will be able to rent your assets to your company. For example, if you run your business from a home office, you can claim that space as a business expense. By doing this, you will save some extra money that you can spend on other aspects of your business.
Corporation
When most think of corporations they think of multi-million companies with hundreds of employees, but incorporation merely means that you'll develop from a sole proprietorship into a company that is formally recognized as a legal business entity.
There are two main options that businesses can choose when they are incorporating; registering as an 'S' corporation, or a 'C' corporation. There are no prerequisites to registering as either, it's all down to which option is better for your business.
Registering your business as an 'S' corporation will give you the option of 'pass-through taxation, which means that your business will not be taxed on a business level. Instead, you'll pay income tax on the revenue that your business generates, but not the actual business itself.
On the other hand, 'C' corporations are considered separate entities when it comes to taxation. This means that your business will be subject to ‘double-taxation’, which means that you’ll be taxed on your business's profits and you’ll still be taxed on your income.
Whichever structure you choose for your business entity, bare in mind that it isn't set in stone. As your business matures you'll be able to move from one structure to another depending on the needs of your business.
Open a business bank account
Banks in South Africa require small business registration documents before allowing you to open a business bank account. Entrepreneurs need to know how to register a business online if they are looking to open a business bank account.
As an entrepreneur, you'll find that opening a business account is a great way to separate your finances from the ones you'll use to fund your business. Having a business account is also smart for tax purposes: you'll be able to bill certain payments and claim them as business expenses.
Opening a business account will give you a clear picture of how much money your business costs each month, and you'll know the exact amount of money your business makes.
It will also give your business more professional credibility. Customers will make payments for orders to your business account, rather than in your name. This distinction instills confidence in your customer that your business is legitimate.
How to Register a Business in South Africa 2022
Now that you’ve read how to register a business you can go ahead and get started on running a legitimate business. Once you've completed the registration process we've detailed in this article, your business will be considered a legal entity. And you'll officially be the owner of a professional business.
In summary, here are the 6 steps to registering a business:
- Choose your business name
- Register with the CIPC
- Select your business entity
- Decide on the state you'll register in
- Obtain your SARS
- Open a business bank account
If you have any further questions regarding the legalities of registering a business in South Africa, just drop us a line in the comments section. Remember, all questions are good questions!
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