Simple Steps to Set Up A Company

Before looking at the steps to set up a company, you need to decide what type of entity is most suited to your business. The following entities are available in South Africa: 1. Private Company, 2. Public Company, 3. Personal Liability Company, 4. Sole Proprietor, 5. Partnership, 6. Trust, and 7. Non-profit Organisation.

For more information on any of the aforementioned entities, or if you would like us to assess your business and help choose the best option for you, please feel free to contact us.

In this article, we look at the steps to set up a private company and discuss a company’s compliance obligations.

1. Company registration

The first step is to register a company with the Companies and Intellectual Property Commission (CIPC) -

Once your company is registered you will receive a CoR14.3 Registration Certificate as well as the Memorandum of Incorporation, which need to be kept safe for future use. We are able to issue share certificates and maintain your share register on your behalf.

2. Opening a bank account

Once you have received the company registration documents, you need to open a bank account in the company’s name. The company cannot use an associated entity or individual’s bank account. SARS will not refund you if the company does not have a bank account in the company’s name.

To open a bank account, you normally need to take the company registration documents, proof of address of both the company and the directors and directors’ identity documents.

3. Income tax

Every company needs to be registered for income tax to comply with the Income Tax Act and Tax Administration Act.

CIPC will automatically register a new company with SARS on registration of the new company. You will receive a tax registration confirmation letter from SARS confirming the income tax registration.

The company is required to submit an annual tax return within 12 months of year end, as well as provisional tax returns twice a year. We can help you will all your tax return submissions.

4. VAT

For some companies, VAT registration is compulsory and for other companies, VAT registration is voluntary. The requirements for each option are set out below. We recommend that you come and talk to us about how your business can deal with VAT in the most cost-effective manner while still complying with all laws.

Compulsory VAT registration

  • It is mandatory for any business to register for VAT if the income earned in any consecutive twelve-month period exceeded or is likely to exceed R1 million.

Voluntary VAT registration will be granted by SARS when the following criteria is met:

  • Taxable supplies exceeded R50 000 in the preceding 12 months
  • Taxable supplies did not exceed R50 000 in preceding 12 months but are expected to exceed R50 000 in the following 12 months

VAT Returns are submitted to SARS every two months. VAT payments must reach SARS before the last working day of the month following the period. Failure to make payment in time will lead to penalties and interest raised by SARS.

5. Employees

If you have employees in your service, you need to comply with the following bodies:

  • SARS (for payment of PAYE, UIF and SDL)
  • Department of Labour
  • Workmen’s Compensation
  • All employees need to register as taxpayers (have an income tax number)
  • Industry related bodies, if applicable

Please see our article titled “Compliance Requirements If You Have Employees

6. Accounting records

Companies are required to prepare Annual Financial Statements in terms of the Companies Act 71 of 2008.

Proper accounting records are needed to prepare the Annual Financial Statements at the end of the financial year end. Accounting records are also needed to monitor your company’s financial position at all times. Monthly bookkeeping includes the processing of invoices (debtors and creditors), bank statements, income and expenses, asset register and the preparation of management accounts when needed.

Once registered for VAT, it is essential to keep your bookkeeping up to date because the information is needed for submission of VAT returns.

Make you life simpler by contacting us for all your accounting and compliance needs.

7. To audit or not to audit?

The Companies Act provides for the audit of the Annual Financial Statements of the following companies:

  • Public companies (listed and unlisted);
  • State-owned companies;
  • Any profit or non-profit company if, in the ordinary course of its primary activities, it holds assets in a fiduciary capacity for persons who are not related to the company, and the aggregate value of such assets held at any time during the financial year exceeds R5 million;
  • Any company whose public interest score is above 350 or more, or is at least 100 if its Annual Financial Statements for that year were internally compiled.

8. When is an independent review required?

The law on independent review has changed in recent years with the inclusion of sub-section 2A in section 30 of the Companies Act. Sub-section 2A has had the effect of broadening the net of those companies that must be independently reviewed.

Section 30(2A) must be read together with regulations 28 and 29.

The general rule is that a company is exempt from independent review where every person who is a holder of, or has a beneficial interest in, any securities issued by that company is also a director of that company. In other words, if one of the shareholders of a company is a trust or another company, that company must be independently reviewed because a juristic person cannot be a director.

There are, however, two exceptions to this general rule set you in section 30(2A) that must be considered.

9. CIPC annual returns

All companies must submit Annual Returns once a year on the anniversary month of the company registration. These fees are paid to CIPC.

The Company’s Financial Statements, if the company is audited, or a Financial Accountability Supplement (FAS) for non-audited companies must also be submitted to CIPC. CIPC will then issue a CoR30.1.

The Annual Return must be filed within 30 business days of the company’s anniversary date. Failure to submit your yearly Annual Return will lead to deregistration of the company with CIPC. Late or non-submission of Annual Returns
will lead to penalties raised by CIPC.

10. Company register and minute book

According to the Companies Act, all companies must have a Company Register and Minute Book. The Company Register keeps record of all changes and amendments within the company (directors, addresses, shares, etc.) and all minutes of meetings and resolutions are kept in the Minute Book. All decisions, changes, purchases of new assets, loan agreements must be recorded through a resolution or minutes of meetings.

11. Company changes

All company changes (change of directors, business address, shareholder changes, auditor changes, etc.) need to be submitted to CIPC within 30 days of this change. CIPC documents are used by SARS, banks, Deeds Offices, Master Offices, lawyers, estate agents and the like to verify and check company information when you enter into contracts with them. If the information with CIPC is incorrect or outdated, it can delay your intended transaction.

12. Deregistration

Once your company has ceased to carry on business, has no assets and liabilities and there is no reasonable probability of the company being liquidated or will commence trading in the near future again, it is recommended that you deregister your company with CIPC.

Once you receive the final deregistration confirmation letter from CIPC, all tax types with SARS, UIF and Workmen’s Compensation need to also be deregistered. Failure to submit deregistration may lead to penalties and interest raised or administration penalties for non-submission.

We trust that this has been a helpful article on the simple steps to set up a company and compliance required. We look forward to helping you with all of your company needs.