A Guide to Starting a Business in South Africa
All you need is one good idea to kick start your entrepreneurship journey. Starting a business has many highlights, rewards, and aspirations, but there’s some real work to be done when you’re trying to get started. Starting a business in South Africa begins with building the right foundation that can help ensure you have a model for success.
There are a few steps you need to follow when launching a business in Africa in order to ensure you’re headed in the right direction.
1. Develop a Business Plan
Developing a business plan is the chief step to launching your business anywhere in the world. A business plan comprises the mission of your business, along with the following:
- The pitch
- Short, medium, and long term goals and objectives
- Your target market and potential audience
- Your experience and skills
Besides acting as a guide to help keep you on the right track towards your goals and objectives, a business plan can also help you open your corporate bank account.
2. Write Down Your Company’s By–laws
By-laws help govern your company’s operations. The by-laws of your company include the Articles and Memorandum of Association, and the ideas and objectives of your business. While you can certainly write the by-laws of your company by yourself, it is preferable to have a lawyer write them to ensure that they are compliant.
3. Reserve Your Company Name
Registering a name for your company isn’t a mandatory step but is highly recommended. A company can be registered without a reserved name as its registration number becomes the company’sname. However, if you have a particular name in mind for your company, you will have to check with the Companies and Intellectual Property Commission (CIPC) to see if the proposed name is already registered or not.
4. Decide the Structure of Your Business
One of the main steps of the process is deciding the legal entity you plan to register under. This means defining the structure you want your business to have.
Here are some company structure types in South Africa:
A sole proprietorship is a business owned and operated by an individual. This is the simplest form of business structure where the income of the business is included in the owner’s income tax return and the owner is responsible for all payments and liabilities.
Partnerships a flexible type of company structure where individuals partner up with other individuals to run a business. Depending on the nature of the business, a partnership can have limited liability or unlimited liability.
Private Limited Company (LTD)
Private limited companies are large business entities that haveno minimum threshold for share capital and don’t have to hold annual general meetings (AGM). This type of business has limited liability.
Public Limited Company (PLC)
PLCs are a popular business structure as they can have an unlimited number of shareholders.
5. Register Your Company
Once you’ve decided on the structure of your company and all other major aspects, it’s time to register it. A company has to be registered with the South African Registrar of Companies within 21 days of the initiation of the business. This can be done by filling the available forms on the Companies and Intellectual Property Commission (CIPC) website. The Notice of Incorporation and Memorandum of Incorporation along with other supporting documentation must be lodged to register a company.
The CIPC allows entrepreneurs to register their companies online through the CIPC website. Once you’ve registered yourself as a CIPC customer, you can access their transactional website. After logging into the transaction website with your credentials, search for your company’s name in the ‘New Companies’ link under the ‘Companies’ tab.
6. Open a Corporate Bank Account
It is mandatory for every company to open their corporate bank account through which they can conduct business transactions. When starting your business in South Africa, there are no currency restrictions in terms of ZAR deposits into this account. This is mainly because the company is seen as a legal identity that possesses its own right and is incorporated in South Africa.
When opening a corporate bank account in South Africa, you will generally need to provide the following documents to the bank:
- Founding statement and certificate of Incorporation (Form CK1)
Any one of the following documents containing the name of the business and physical address:
- Letterhead of the company
- Lease or rental agreement
- Water or electricity bill
- A bank statement (from another financial institution)
- Telkom account
- SARS tax return statement
You may also have to provide information regarding your source of income and the type of transactions and activities that can be expected on the account. All members of a corporation must provide the same information and documentation as mentioned above, along with written confirmation that they are authorized to act on behalf of the CC.
7. Register for Taxes
A business must register for VAT and income tax once the company is registered and the corporate bank account is set up. It isn’t mandatory for businesses to register for VAT unless their yearly company turnover is projected to exceed ZAR 1 million.
Moreover, any company or business that employs at least one employee must register for Standard Income Tax on Employees (SITE) and Pay As You Earn (PAYE) with the South African Revenue Service (SARS). There may be a few additional taxes that you have to register for, so it’s best to discuss it with a SARS representative. They will be able to guide you about the requirements to determine that taxes you need to register for and the process of registering.
The Bottom Line
Over the past few years, South Africa has become an alluring destination for entrepreneurs looking to kick start their entrepreneurial journey. We hope that this guide will help you start a business in South Africa with more information on hand.
If you’re looking to learn more about starting a business in South Africa or exploring potential business opportunities, please contact our team.