What registrations you need to have in place when you start a business and the advantages of doing it right.
CIPC Registration
Most companies are registered with CIPC, and it is the best if you plan on growing your business. You can also run as a sole proprietorship without registering a company. In the end, if you do all your taxes right, with this option you will pay the least.
You need to send your annual returns (financial statements) to CIPC once a year, and a pay a fee in order to remain compliant. Otherwise they add penalties and deregister your company.
Click here if you are unsure which type of company/ legal entity is best for you.
SARS Income Tax Registration
This is a requirement by law, that all companies must pay tax on the profits they make. You must submit provisional taxes (IRP6) twice a year based on what you forecast your profits will be. Once a year, you need to do a final tax return (IT14) based on the actual profits made.
Profits are only the surplus funds left after having paid all expenses, including your own salary. You will probably also qualify as a “Small Business Corporation”, which means that you don’t need to pay tax on your first R80,000 of profits.
Pay-as-you-earn (PAYE) Registration
This is an additional registration you need with SARS if you employ people. On this number you will submit and pay the personal income taxes for yourself or your employees. The company must by law subtract and pay these taxes. An EMP201 report must be submitted to SARS monthly and an EMP501 report twice annually.
All your employees, including yourself, if earning less than R6,925 per month does not need to pay this tax (Although you still need to do the tax submissions). Others needs to pay tax on the amount over and above the R6,925 they earned. If your spouse is also helping in the company, she can earn a separate salary and also only need to pay tax for income earned above R6,925.
Unemployment Insurance Fund (UIF) Registration
This is also a registration that applies where you have people employed (Including yourself). The company must subtract 1% of the employees’ wages and contribute another 1% from the company. This combined 2% of all wages or salaries is paid over to the Department of Labour on a monthly basis. A UIF submission report must be submitted monthly to the department.
The percentage limit is a maximum of R148,72 per employee, but you will only reach that for employees that earns more than R14,872 per month.
Skills Development Levy (SDL)
If your total wages or salaries paid in a year exceed R500,000, you need to also pay SDL. The levy of 1% of all wages is also paid to SARS. It is only a 1% company contribution and cannot be subtracted from employees’ wages. It is included in the EMP201 and EMP501 reports as mentioned under the PAYE point.
Value Added Tax (VAT)
If your turn-over (total income in a year) will exceed R1,000,000, then you need to register for VAT. With VAT, you need to pay 15% of your income as tax to SARS, but you may deduct certain expenses that also have VAT on it. You will also add the 15% tax on your invoices for your customers to pay. Where they are VAT registered it will have no impact on them, otherwise your service will be 15% more expensive than before. There are a lot of rules on VAT, what to include or exclude, as well as industry specific rules.
If you are VAT registered, then you must submit monthly a VAT201 report to SARS. SARS may from time to time want to do a VAT verification audit.
Workman’s Compensation and Letter of Goodstanding
The Compensation Commissioner will pay for all work-related injuries and diseases if:
- If you are registered with the commission and have paid your workman’s compensation. This varies per industry, but construction is for example is R2.16 for every R100 paid in wages or salaries (2.16%). You need to do this once yearly and pay in advance for the coming year. Once done, you will receive an updated Letter of Goodstanding.
- If you have solid proof that you have done everything possible to prevent the injury, death or disease, as per the Occupational Health and Safety Act (OHS). Normally companies, depending on their industry and risk levels, compile a Health and Safety File or Health and Safety System which they use to ensure they comply to the OHS Act.
Is your business non-compliant? Get in touch so we can help you! Also see our basic accounting, HR, compliance and other packages available here.
Advantages of having your stuff in place
Although the above mentioned registrations and compliance required is law, many people don’t do it. There are however a many advantages of doing things correctly, for example:
- You get easier access financing and business support from financial institutions.
- You get easier get tenders or contracts from government institutions or large private or public companies as they require the correct compliance paperwork or certificates prior to granting you an opportunity to tender.
- Companies must ensure they appoint contractors and suppliers with the correct good-standings. They will get in trouble for appointing you where this was not in order.
- If you, or one of your employees, got in a serious accident while at work, you don’t need to pay. The workman’s compensation pays for all hospitalization and other fees.
- If one of your employees gets injured and you didn’t have your Letter of Goodstanding and Health & Safety system in place, you are liable for all the costs to the employee, a fine and imprisonment.
- If you must dismiss or retrench your employees due to not having enough work, they can claim unemployment benefits from the Department of Labour, who usually would pay out a percentage of their salary or wage.
- The costs of being compliant is much less than you think, also when considering the new possibilities that it opens. It is however important to start right, as banks and financiers will often look at a longer history, or larger companies you do business with will only start once your things are in place.
Are you struggling to get financing or contracts because your stuff are not in place? Get in touch so we can help you! Also see our basic accounting, HR, compliance and other packages available here.
Why you need Knowble when you start a business?
Knowble gives small and medium businesses an all-inclusive business support package that helps you get and keep these things in place.
- We can help you to be complaint on all aspects, where most other consultants or companies only help with one or two of the aspects.
- We do more. We’ll advise to ensure you don’t pay any more tax than you must. We’ll advice on any aspects that can help your business grow.
- Knowble will do it’s best to make sure everything is done 100% legally, while also trying to find ways to make it possible and affordable for you.
Get in touch so we can help you start your business! Also see our basic accounting, HR, compliance and other packages available here.
