You do not need a registered company to start trading. Plenty of good businesses run for a year as one person invoicing under their own name, and registering before there is anything to register is a common way to acquire obligations without acquiring customers.
But there is a point at which not registering starts costing you — and it usually arrives sooner than people expect.
Sole proprietor or company?
Trading in your own name is the default. It costs nothing, requires no registration, and your business income is simply part of your personal income for tax. It also means there is no separation between you and the business: its debts are your debts, and its obligations reach your personal assets.
Registering a private company creates a separate legal person. That separation is the main thing you are buying, and three practical consequences follow from it.
- Limited liability. Ordinarily the company's debts are the company's. Not absolutely — directors have duties, and personal surety on a lease or a loan puts you back on the hook, which lenders know and will ask for.
- Credibility and access. Many larger customers will not buy from an unregistered supplier at all, and most procurement processes require a registration number before they will consider you.
- It can be sold, shared, or inherited. A sole proprietorship cannot really be sold — you can sell the assets and the customers, but not the business itself.
What you take on in exchange is administration that does not stop: annual returns, separate company tax, and financial records kept properly. That is the real trade, and it is worth being honest about before you make it.
The registration itself
Registration is done through the CIPC, and you can do it yourself. You will need identity documents for the directors, a name, and the details of who owns what.
Two things about the name. You can register a company without reserving a name first, in which case the registration number becomes the name until you change it, which is fine and quite common. And a company name is not a trade mark — registering the company does not stop somebody else using a similar name, and if the name matters commercially that is a separate exercise.
You will be asked for a financial year end. Pick one and remember it, because everything after this — annual returns, tax, financial statements — hangs off that date.
What has to happen immediately afterwards
Registration is the beginning of the obligations, not the end of the task.
- Open a bank account in the company's name. Running company income through a personal account undermines the separation you just paid for, and makes the accounting significantly more expensive at year end.
- Sort out tax. The company is a taxpayer in its own right. Understand what it must file and when, and whether and when you will have to register for VAT — that obligation arrives at a turnover threshold, and it arrives whether or not you noticed.
- Register as an employer if you have staff, or when you take on your first.
- Keep the records separate from day one. Retrofitting a year of mixed personal and company transactions is the most expensive thing you can ask an accountant to do.
The mistake that costs the most
Registering, and then not filing.
A company must submit an annual return every year, on the anniversary of its registration, whether or not it traded and whether or not it made money. Miss enough of them and the CIPC begins deregistration, and the company can end up deregistered without the owner realising.
The consequences arrive at the worst moment. A deregistered company cannot contract, its bank account can be frozen, and a customer running a compliance check on you will see it immediately. Restoring it is possible and it is slower and more expensive than simply having filed.
Put the date in a calendar the year you register. It is a small annual cost and a short form, and it is the single most common avoidable failure in South African small business administration.
Shelf companies
You can buy a company that already exists and is already registered. It is faster and it is occasionally useful when somebody insists on a registration number this week.
Check what you are buying. A dormant shelf company from a reputable provider is fine. A company with a history is a company with a history — unfiled returns, a tax number in a bad state, or debts attached to it. Ask for the CIPC records and the tax status before you pay, not after.
When to do it
Register when a customer requires it, when you are taking on liability you would not want to carry personally, when you are bringing in a partner, or when the income is substantial enough that the tax treatment matters.
Not because it feels like the thing a real business does. The registration does not make it real. The customers do.
General guidance on registering a business in South Africa, not legal, tax or financial advice. Requirements, thresholds and fees change; confirm the current position with the CIPC and SARS, and take advice on the structure that suits your circumstances.