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South Africa Company Formation

Forming a company in South Africa is a 6-step process, which is as follows:

1. Reservation of the company name and payment of fees with the Registrar of Companies. This will take 3 days if this is done electronically. The cost is approx 50 ZAR.
2. A certificate to commence business is submitted with the formation documentation. This is required by law before a company can trade or raise finance. This takes between 5 to 7 days, and costs approx 350 ZAR for an administration fee, plus 0.5% of capital, along with 60 ZAR for the certificate to commence business.
3. The company needs to open a bank account, which takes 1 day.
4. Register for income tax, VAT and employee withholding tax with the office of the local receiver of revenue. This will take 12 days.
5. Register for unemployment insurance with the Department of Labour. This will take 4 days, and runs simultaneously with procedure 4.
6. Register with the commissioner for Compensation for Occupational Injuries and Diseases Act. This will take around 10 days, and can run alongside procedure 4.

There are several types of company you can formulate, as follows:

Sole Proprietorship

This is a business owned and operated by one person. All income from the business should be included in your individual tax return. There is unlimited liability.

Partnership

A business run and owned by two or more people. This is not a separate legal entity, so each partner is taxed on their share of the profits. You can't have more than twenty partners, and there is unlimited liability.

It is said that partnerships are fundamental to both government departments and non-government organisations. But there are exceptions to the rule. For instance, those companies entering the South African market with a innovative product or service tend to go it alone, allowing their business to speak on the merits of its operations alone.
But not everyone is going to revolutionise the market. Therefore, as a general rule-of-thumb, partnerships are often sought out: the tighter the relationship, the better the success.

Another key feature of entering the South African market as a partner is proximity. Many use the country as a gateway to other markets on the continent. Again, the knowledge of adjacent nations and their cultures is something which can be advised upon by a South African partner. Likewise, their knowledge of boarder-crossing and protocol can also give you an otherwise missing advantage.


Close Corporation

This is a separate legal entity, and it must register as a taxpayer. Members don't have shares, but a percentage interest. The maximum number of members is 10. There is no share capital so there are no shareholders. The members are usually family , etc.

Private Company

This is a separate legal entity, therefore it must register as a taxpayer. The owners are shareholders, and the maximum number of shareholders is fifty. There is limited liability for shareholders.

Joint venture

This represents a significant section of international operations in South Africa, particularly amongst the larger companies. The economic sectors in which joint ventures are most commonly found are research and development, national resource exploration, engineering and construction, production and manufacturing, buying and selling, and services.

Incorporation of a company requires the following steps:

• Reserve a company name
• File the Memorandum and Articles of Association
• File the written consent of auditors to act for the company
• A company name must be reserved with and approved by Companies and Intellectual Property Registration Office (CIPRO). It is recommended that you alternative names in the instance your first choice is deemed unsuitable by CIPRO. The memorandum and articles of association must also be filed with them.
• The memorandum of association must show the name of the company and the company's objectives.

Offshore Companies

By choosing to incorporate an offshore company, business owners and investors can set-up a business outside the jurisdiction of its operations. Offshore companies are traditionally, but not exclusively, incorporated for lower fees and taxes. Business owners must abide the regulations of the offshore jurisdiction, and must not trade within the jurisdiction.

The benefits are vast. As aforesaid, reduced tax and fees are often big factors when considering offshore incorporation. A company may also choose and offshore location to:

• Simplify set-up and maintenance - entrepreneurs may find bureaucracy and red tape less of an obstacle in offshore jurisdictions
  
• Assume anonymity - the names of owners and directors are not for public record, and references to the company may only be made in its registered agent
  
• Ensure legal protection - for instance, some jurisdictions favour corporate governance, meaning a company is only liable to offshore laws as opposed to those in its areas of operation
  
• Protect assets - business owners may opt to arrange their assets and transactions in such a way that protects them from liability
  

Characteristics of an offshore company:

• Memorandum and Articles of Association
  
• Certificate of Incorporation
  
• Registered Office/Agent
  
• Shareholders / Members
  
• Directors / Managers
  
• Company secretary
  
• Statutory Register
  
• Bookkeeping
  

Traditional locations for offshore incorporation are tax havens, such as the British Virgin Islands, Panama and Monaco. Other favoured areas include India, the Bahamas, Dubai, the Cayman Islands, Cyprus, Seychelles, Marshall islands, Delaware, Turks & Caicos Islands, Hong Kong, Jersey, Guernsey and the Isle of Man.

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