South Africa was ranked among the top 40 countries easy for you to do business in. This survey compared 183 countries and ranked them according to how easy it was for expatriates to ‘set-up shop in’. With this in mind, here are important factors to consider when starting a business in South Africa.
Decide the company structure
Prospective entrepreneurs can opt to open a sole proprietorship business, a closed corporation, Pty Ltd or a branch (assuming that your company has an existence outside SA). Seek advice from a local expert regarding the appropriate company structure.
Name the company
For sole proprietorship and partnerships, there is legislation underway regarding promotion of the business under the ‘trading as’ category. For corporations and Pty Ltd’s, you’ll have to make an application to the Companies and Intellectual Property Registration Office of South Africa (CIPRO) for name reservation and consequently registration. If the name has already been used, you will be provided with alternatives of the same.
Registration
The process of registering a business in South Africa takes 5 to 30 days and varies depending on whether the company is a closed corporation or Pty Ltd.
Closed corporation – application includes the provision of a founding statement, a CK1 (name reservation) application, letter of consent and approved name application form.
Pty Ltd – applicants must provide an approved name application form, a memorandum, and article of association, a certificate of incorporation, and certificate to commence business (CM46).
Tax considerations
Dividends are taxed by the means of a secondary tax on businesses at a rate of 10%. Tax rates range between 0% to 40% depending on the type of business. Here is a breakdown:
* Sole proprietors – 18% – 40%
* Closed corporations & Pty Ltd’s – 28% on gross profit
* Small businesses – based on a sliding scale going up to 28%
* Personal service providers and branches – 33%
