In our very first Blog we looked at the different business types you as an entrepreneur would probably need to consider when starting out, in this series of blogs we will look at these business types in a little more detail.
The most common business “type” would be a Private Company. This type of business requires formal registration with the CIPC , which should take between 5 and 10 working days.
One of the most important things to remember when registering a private company is that it is a separate legal entity from you the Shareholder (Owner). As such, it must have its own bank account and all formal documents (letterhead, invoice, legal agreements, etc.) need to have the following information displayed on them – Registered Name, Registration Number, Directors, Registered Physical Address.
The next big thing to remember when running a private company is that you could qualify as a Small Business Corporation (SBC) and be taxed on your business profits at a much lower rate than the standard 28%. Besides the savings in income tax, there are also massive savings through accelerated depreciation and dividend taxes.
When your business reaches a point where you need to hire staff or begin invoicing more than R1million per year, the standard procedures as any other business will apply and you will need to register the business for UIF, Workman’s Comp, PAYE and VAT.
Lastly we need to look at the risks associated with owning and managing a private company. One of the perks of the private company being a separate legal entity is it is responsible for its own mistakes and the shareholders can only lose what it is that they have invested and no more. The downside risk here though is, if you the shareholder are also a Director, then you could be liable for any losses if it can be proven that you were not acting in the best interest of the company.
We recommend attending a Directors responsibility course as the new Companies Act, comes down pretty hard on delinquent directors.
In this series I will be diving a little deeper into many of the topics I raised in our “Year in the Life” of a business series started last year, so feel free to visit our website to see what we’ve already covered.
At Phezulu VBO we do more than just assist clients with their company registrations, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.
For more information, please visit our website www.phezulu.net or give me a call on 010 003 8558