Put a spring in your company’s step

Spring is in the air and it brings with promises of new beginnings and growth. It is therefore not surprising that I am seeing more requests from clients about setting up private companies.

Are you wondering whether you should keep on trading in your own name or registering a company? Or do you have a registered company and need to know what the legal requirements are?

There would be tax advantages to register a company, as a company only pays 28% income tax whereas an individual can pay up to 45% income tax. However it is important to note that a company has more legal requirements to comply with.

To help you decide and demystify the process I have put together this little guide:

Here is a list of requirements at the different institutions:

CIPC    (Companies and Intellectual Property Commission)

An annual return needs to be completed to confirm that the company is still trading.

This needs to be sent in the month of the company’s registration anniversary.

SARS   (South African Revenue Service)

INCOME TAX – a return needs to be completed once a year (IT14) to show profit or loss.  If a profit was made income tax of 28% needs to be paid on the profit.

A set of annual financial statements needs to be drawn up and reviewed by an accountant or auditor to accompany the income tax return.

PROVISIONAL TAX – returns need to be submitted twice a year and if the company is making a profit provisional tax needs to be paid on the estimated profit.

The provisional tax returns need to be submitted before end of August and end of February.  If you need more info regarding provisional tax, please see my blog on provisional tax.

VAT – the company needs to register for VAT if the turnover of the company exceeds  R1 000 000 per year (R83 000 per month).  If the company is registered for VAT the VAT return needs to be submitted on SARS e-filing every second month before the last day of the month or if the last day of the month falls on a weekend it needs to be submitted and paid the Friday before.

PAYE & UIF – Return needs to be submitted on SARS e-filing on the 7th of every month or if the 7th falls on a weekend it needs to be submitted the Friday before.

Workmens Compensation

It is compulsory for a company to register for Workmens Compensation.  This is to provide compensation when you or one of the employees gets hurt while working at a client or any other injury received while on duty.

You pay once a year before the end of March.  The Compensation Fund gives you a percentage according to the type of work that you do.  The more dangerous it is, the higher the percentage.  You will then pay this percentage on the salaries (including the directors’ salaries) you paid for the year.

These are the main legal requirements around tax and accounting that every private company has to comply with. Weighing up the benefits of registering a private company and complying with these regulations can be a tough decision. That is why we are always willing to talk to you about your concerns and give you advice based on the experience we have gained helping other small businesses just like yours.

If you decide to go ahead and registering a company, or your company needs help with any of the other requirements listed above, we are willing and able to assist you on your journey and help you grow.

Until next month then.  Have a wonderful spring!