A business is an activity that includes producing or buying and selling products and making money through the process. The products can be goods and services, from which one can make a profit from. A business transaction doesn’t have to form a registered entity such as a corporation, partnership, or any registered company.
A business, according to CIPC (Companies and Intellectual Properties Commission) doesn’t have to be registered to qualify as a business and again, not every business needs to be registered, however, each business, registered or not, qualifies to pay tax when it has received a certain threshold.
Business Entities/Business Types
Close Corporations (CCs), which was a type of business entity can no longer be created, but exist CCs will continue to operate. If you are a foreigner and willing to invest in SA companies, you will need to apply for a business permit.
Under the Companies Acts, there are two types of companies namely:
Also known as a sole trader, this type of company is owned by one person. The owner operates the person alone, if the company grows – She/he can hire employees. This type of company has unlimited liability for all obligations.
Every single piece of infrastructure is owned by the sole proprietor.
Public (“Ltd”) or private (“Pty Ltd”) company
Public Companies have no limit to the number of shareholders, whereas the private company needs to have at least one director and shareholder and membership are restricted to 50.
Personal Liability Company (“Inc”)
This is a type of a company that ends with the word “Incorporated”, and meets the criteria of a private company.
A partnership is a business company entity owned by two or more people. Each Partner has unlimited liability for the debt incurred by the business.
This type of company operates non-profit activities in South Africa
Registering a Business with CIPC
- I did mention it before that it is not necessary for all businesses to register with CIPC, there are a lot of informal businesses in South Africa as well as sole proprietors, this type of business when not need to register as there may not be benefits.
- You can register your business with CIPC if your business wishes to make transactions with the government and a formal Sector. For such businesses, there will be tax benefits because of a registered business as a lower tax rate.
- NB: You will still be required to be registered with the South African Revenue Services whether your business is registered or not and you’ll still be liable for tax should your turnover exceed the prescribed threshold.
- CIPC offers the lowest registration prices and it’s only a few steps. Registration of a company brings with it some responsibilities like filing an annual return and paying an annual fee.