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Online company registration has become easier through enhanced processes by the Companies and Intellectual Property Commission (CIPC) and online agents delivering online company registration as a service. There are however several considerations that you need to think about before just going ahead and registering your Pty Ltd.
There are various legal forms of entities that you need to consider before your online company registration.
Perhaps to start off with – you do not necessarily have to incorporate a business. In South Africa you can trade as a Sole Proprietor or Partnership (where two or more people come together to form a business), which means you trade in your own name and not within a company structure. There are many advantages and disadvantages but can be a great way to start. Later, you can incorporate your trade. However, if you prefer to go the legal form route, you have the following options:
Private company – this is the most common type of company and is abbreviated as a “(Pty) Ltd”. It is separate from the owner/(s) in that it has its own rights and duties. Shares for this type of company is not publicly traded. There should at least be one director and one shareholder.
Public company – this form of company is similar to that of a private company. The major difference is that its shares may be traded publicly, and it must have at least three directors and seven shareholders. It is abbreviated by “Ltd”.
Personal liability company – this type of company is generally used by professional associations such as attorneys, engineers, accountants, and medical doctors. It is abbreviated by “Inc”.
Non-profit company – as the name suggest, this type of company does not have a profit motive. It is established for the benefit of the public or for a social objective. It is abbreviated by “NPC”. To incorporate this type of entity there should at least be three directors.
What will the company name be?
Not any business name can be chosen for your incorporated business. A name search should first be done to ensure that it is not in conflict with current business trading names in South Africa. If your name is available, it can be reserved, or filed with the business registration.
This is something that can be changed later but to save you the effort, it is useful to think about this early on. A share is the right of ownership that a shareholder holds in a business. The more shares, the greater the claim to ownership. So, if you are thinking about bringing in other shareholders later it may be worth issuing less shares than what is authorized in the Memorandum of Incorporation. This may be for various reason such as bringing in more funding or acquiring more specialized skills.
The way the shares are held my have an impact on the Founders exit strategy. This must be planned from the very beginning. The tax consequences may be different for having shares in your personal name, a holding company or trust. Selling shares carries capital gains tax consequences and this may impact your liability to the Receiver of Revenue.
Be aware of other regulatory requirements.
Various industries have specific requirement before you can start trading, for example, if you are starting a security company, you also need to register with The Private Security Industry Regulatory Authority (PSIRA). There are also various state level registrations that apply to all business that you will need to consider, for example, If you are an employer, you will be required to register for payroll taxes and Unemployment Insurance (UIF). Make sure you know what these industry and state level requirements are before your online company registration.
If you need assistance online company registrations, get in touch with us here.