Introduction
Starting a business in South Africa can be both exciting and challenging. With the right preparation, you can turn your entrepreneurial dreams into reality. In this blog post, we’ll explore essential factors to consider before opening a business or registering a new company in South Africa.
1. Develop a Comprehensive Business Plan
A well-structured business plan is crucial. It outlines your goals, strategies, action plans, and financial projections. Developing a business plan in the prescribed format will assist in thoroughly thinking through your business idea and preparing for trade.
2. Choosing the Right Business Structure
Decide on the best business structure: sole proprietorship, private company, or partnership. Each has its pros and cons. Ensure you understand the implications of each one and select the most suitable fit and the most tax efficient structure.
3. Tax Efficiency
Consider tax implications. This point is often overlooked yet it can make or break your business. Be sure to plan for tax before opening your business as tax consequences differ per business structure. It is worth consulting a registered tax practitioner in this regard!
4. Selecting a Business Name
Your business name matters. Brainstorm relevant, memorable names that align with your brand. Check availability of the legal name (and be sure to comply with legal criteria) and domain. A name that reflects the nature of the business is recommended.
5. Compliance with the Companies Act 71 of 2008 (South Africa)
When a company is registered, the Companies Act comes into play and compliance is mandatory. The most basic of which is:
- Section 24 and 28 mandates accurate and complete maintenance of accounting records. Keep financial records in one of the official languages, meeting prescribed formats.
- Section 30 mandates preparing annual financial statements
- Section 33 mandates the submission of annual returns to CIPC
- Section 36(1)(a) provides that a company’s Memorandum of Incorporation (MoI) must set out the classes of shares and the number of shares in each class.
6. Compliance with the Income Tax Act 58 of 1962
Upon registration of a company, an income tax number will be generated. There are tax implications from the time the company is registered. For instance:
- Regardless of whether your company trades, provisional and income tax returns are compulsory.
- Supporting documentation is crucial to deduct expenses. Ensure you are aware of the nature of the documents required and the retention period of the documents (usually 5 years).
A Parting Note
Starting a business in South Africa requires careful planning. Although the points above are not comprehensive, it serves as a guideline of the most important factors – in my view.
By considering the factors above, you’ll be better equipped to run your business successfully and manage your stress levels!
Yours in Business,
Thirusha Govender