What is Business?
Business is the practice of making one’s living or making money by producing or buying and selling products.
Business Registration In South Africa
Many start-up entrepreneurs launch and begin trading without registering their businesses. While this is perfectly legal, there will come a time when you’ll need a more formalised company if you want to land some big clients and build on your start-up success.
The sooner you register your business in South Africa, the sooner you’ll be taken seriously – and the sooner you’ll be able to focus on growth.
WHAT’S IN THIS GUIDE:
- Where can I register my business?
- Do I need to register my business before I launch?
- What are the benefits of registering my start-up?
- What type of business should I register?
- How do I register my business?
- How do I make sure I get the company name I want?
- When do I need to register with SARS?
- When can I open a business banking account?
- What do I need to know about trademarks?
- What do I need to know about domain names for websites?
Where can I register my business?
In South Africa, all businesses are registered with the Companies and Intellectual Property Commission (CIPC) here.
Do I need to register my business before I start trading?
No, you don’t need to register before you start trading, but there are benefits to formally registering your business.
What are the benefits of registering my start-up?
Registered businesses have access to things that informal companies do not, including:
Business banking accounts
Separating your personal and business accounts keeps your finances safe.
More importantly, you need a business banking account because:
- It helps you keep a record of payments and profits.
- It keeps you and your business separate, so you can focus on what it will take to build the business, and not just on your personal bank balance.
- It provides a track record that’s important when applying for a loan or funding because it shows investors how well the business is doing. Read more about what funders are looking for in our article, Build a business that funders will back
Applying for loans
Running a business requires money – cash you don’t always have on hand. If you need a loan, you’ll have to prove that you’re a registered business. Unless you want to borrow money from unsafe (or even unscrupulous) lenders, get your papers in order before you need a loan.
Building trust through legitimacy
Would you be comfortable going to an unregistered doctor? Or taking advice from an unregistered lawyer? No. Your customers feel the same; they want to do business with someone trustworthy and legitimate. A registered business sends trust signals that your start-up can leverage.
What type of business should I register?
Before you can register your start-up, you first need to know what type of business you want to open.
The type of business you have will depend on two key things:
- How many founders are in your business?
- How many people do you want to have control over your business?
Here are the four different types of businesses that can be registered:
1. Sole proprietorship
This is for entrepreneurs building businesses alone without any partners or co-founders. Many businesses start as a sole hustle and eventually grow into a larger, more complex business type.
A partnership is when there are two or more founding partners running the business together. Having partners has its advantages if you don’t have all the skills necessary for running a business. For example, a charismatic salesperson might partner with a chartered accountant to ensure there is a strong sales-focused partner and someone who handles the finances.
3. Proprietary Limited company (Pty Ltd)
A private company is a separate legal entity from you, the business owner. This means you can start a private company by yourself, and if things don’t work out, you won’t run the risk of having your assets seized by a sheriff of the court.
4. Public Company
A public company trades its shares on a stock exchange. How the share is trading will measure the value of the whole business. Anyone can become an equity owner in your business by buying stocks.
How do I register a business?
Once you’ve determined which type of business you will be registering, you can begin the process.
To register your company, you’ll need the following documents:
- Notice of Incorporation
- Memorandum of Incorporation
- Plus a few supporting documents.
Notice of Incorporation
This document needs to contain the following:
- Type of company
- Incorporation date
- Financial year-end
- Registered address (where your head office is based)
- Number of directors
- Company name
- Whether the company name serves as the registration number
- The reserved name and reservation number
- A list of four names to be checked by the Commission.
Memorandum of Incorporation
This document needs to contain the following:
- Details of founders
- Number of directors or alternate directors in the business
- How much share capital exists
You’ll also need the usual admin papers when registering your business, along with the CoR 14.1, CoR 15.1A for a normal private company, or CoR 15.1B for a customized private company. These can be downloaded from the CIPC website here.
Other documents you’ll need are:
- Certified copies of your ID and all indicated initial directors and incorporators.
- If you’re absorbing a business into your business, you’ll need a power of attorney as a representative to incorporate the new business and sign all the documents.
- If you’ve already reserved a business name before submitting your incorporation documents, you’ll need to submit a valid name reservation document.
Fees and timelines
Depending on the type of business, registration can cost you anything between R125 and R475. You can register your business within 24 hours if you aren’t reserving a name first.
You can use the CIPC website to register your company online. Once you’ve registered as a CIPC customer, you now have access to their transactional portal. Register your business through the Companies – New Companies tab.
How do I make sure I get the company name I want?
- Selecting a name. During the business registration process, you can either select the name for your business during the process or you can register without a name, and the CIPC will generate a name for you to use as a placeholder.
- Choose a few options. You can’t use a name that another business has already registered, so submit a few names at the same time.
- Costs. You can apply for up to four names during the application process, but each name will cost you around R50.
Business name versus trading name
You may have heard the term ‘trading as’, which means the business is using its ‘trade name’ instead of its legal business name.
What’s the difference?
A trading name is often more customer-friendly. It doesn’t need to have Pty Ltd after it, or other legal endings. For example, McDonald’s is a trade name. The global fast-food giant’s real legal business name is McDonald’s Corporation, which doesn’t have quite the same ring to it.
But, if you’re planning to operate under a different name from your legal business name, you’ll need to register your trade name as well.
Using defensive names
- Protect your name. You can also register a ‘defensive name’ to stop it from being used by another business.
- Be prepared. This is normally a good idea if you’ve chosen the name of your company, but aren’t yet ready to launch.
- There’s a time limit. You can register your name as a ‘defensive name’ and keep it safe until you’re ready to launch. This only lasts for two years. If you still aren’t ready to launch, you’ll need to re-register your defensive name.
When do I need to register with SARS?
- Get a tax reference number. As soon as you launch your business, you need to register your company with SARS to get an income tax reference number. If your business is too small you won’t pay tax, but you must still be registered.
- You have about 3 months to get sorted. You need to do this within 60 business days of starting your business, whether you’re registering your company with CIPC or not.
- Register with SARS. You can register to be a taxpayer with SARS by completing an IT77 form at your nearest SARS branch. Keep in mind that if you have employees or are importing/exporting goods you could also be liable for other taxes, duties, levies, and contributions such as:
- Value Added Tax (VAT): This is an indirect tax on the consumption of goods and services. Vendors charge VAT on the supply of goods and services and imported goods.
- Pay As You Earn (PAYE): This is an employee tax that is deducted from their salary or wages and is treated as advance payments of income tax.
- Customs: If you are importing products they will need to pass through customs, you may also have to pay duties or taxes on the products.
- Excise duties and levies: You’ll need to pay excise duties and levies on high-volume daily consumable products, as well as some non-essential or luxury items.
- Skills Development Levy (SDL): This is a levy that employers must pay to encourage learning and development in South Africa. The funds are used to develop and improve the skills of their employees.
- Unemployment Insurance Fund (UIF): This fund is for all employees. How it works is, that you’ll put money aside from your employees’ salaries so if they ever find themselves unemployed, they can receive short-term relief from the fund.
For more information access SARS’s tax guide for small businesses here.
When can I open a Business Bank Account?
Once you’ve registered your business and you’ve been running your start-up for a few months, you can apply for a business bank account.
What type of account you need and which documents to take when applying will depend on what type of business you’re running.
Confirm which documents you need to open a business bank account by calling ahead to check. Most banks are looking for the following:
- Proof of CIPC registration: This can be a certificate or a group of documents depending on what type of business you’re running.
- Identity documents: Current ID documents for you and your partners and anyone else who needs access to the account.
- Proof of address: You’ll need a valid proof of address that’s less than three months old. You can use utility bills.
- Personal bank statements: The bank will also want three months’ worth of personal bank statements to see how your business is doing and if money is coming in and going out.
What do I need to know about trademarks?
- What it is: A trademark is a brand name, a slogan, or even a logo. You use a trademark to make your business recognizable and stand out from your competition.
- .What it means: When you register a trademark, no one else can use it, or even use something that is too similar, and if they do, you can take legal action against them.
- Why you need it: If you don’t have a registered trademark and someone copies you or uses something similar, the law might not go in your favour.
When must I register a trademark?
- How you do it: You can register your trademark with the CIPC, who have the records of every trademark ever registered in South Africa.
- When to do it: You should do this as soon as your business is registered, to prevent others from registering your business name, logo or slogan as their trademarks.
- What happens next: Once registered the CIPC will then give you a certificate of registration. This certificate gives you ownership over the registered trademark and exclusive rights to use it.
How long does a trademark registration last?
- You’re protected for life. You can protect your trademark forever as long as you renew the registration every ten years and pay the renewal fee.
- You need to stay up-to-date. Trademarks that are not re-registered will eventually fall away and become available for someone else.
Should I register my trademark overseas?
You may benefit from registering your trademark overseas if you want to:
- Stand out internationally. If you’re operating online your products are likely to reach a global audience. You’ll want this audience to recognize your branding, but you’ll also want to be the only business operating under that branding.
- Protect yourself against counterfeiters. If you don’t register your trademark overseas you could be vulnerable to counterfeit-operators who will profit off your name and reputation.
- Make sure your trademark isn’t compromised. Your trademark can be compromised through your manufacturing supply chain. For example, if you’re manufacturing your product overseas, your manufacturer or even their subcontractors could use your name and branding to profit from their relationship with you.
On the other hand, if you’re manufacturing your product locally and only planning to sell it locally (for now), a local trademark should do the trick until you start looking for international growth opportunities.
What do I need to know about domain names for websites?
- Your name. A domain name is the name of your website. These are also up-for-grabs, as you can’t have two companies with the same web address.
- Easy to remember. Keep in mind that you’ll also want the catchiest and simplest version of your business name to be the domain name, which means you’ll need to register that name early on to avoid someone else taking it.
- Get started. You can register your domain name with multiple institutions, each one will have different options available to you, and may even offer services that run sections of your website for you. You can find them all by Googling how to register a domain in South Africa.
Should I register defensive domain names?
- Look to the future. A defensive name is essentially calling dibs on future names by registering them as ‘defensive names’. If you know that you’re going to need other website addresses or you’re going to expand your business in the future, you might want to register defensive domain names as well.
- Protect your IP. Another reason to register defensive domain names is to protect your intellectual property from copycats.
- Protect your profits. Other companies can use similar website addresses to try and profit off your business, brand, and trademark. Not only will you lose profits, but they can also cause reputational damage to your customers.
Now that you know everything there is to know about how to register a business you can get started. Launch your business, if it’s a success, if it starts to grow, or even before you launch, register your business and legitimise your start-up.