Topic: FAQs on Starting a Business, the Company Registration Process, Tender Compliance Documents, VAT Registration, Tax Clearance and a Letter of Good Standing
If you’re a South African entrepreneur, we KNOW you have questions on a Company Registration to the finer documentation details. A lot of them. We work with South African entrepreneurs like you on the DAILY.
Company admin can be incredibly overwhelming. And the info or how-to’s the internet provides is usually irrelevant to South Africa.
So we’ve decided to put together all the questions we get every day from entrepreneurs and small to medium business owners and answer them in a South African context for you.
Our experts know what they’re talking about; they’ve helped thousands of entrepreneurs and small to medium businesses with the same questions since 2006.
Some who are just kick-starting their own businesses for the first time and others who have been in business for years.
You get one FREE consultation with one of our Consultants
If you’re as busy as we think you are (we know you have to EVERYTHING in your business) you can always book a FREE consultation with one of our experts.
Here are 10 Frequently Asked Questions by South African entrepreneurs we’ll be covering in this post (click on the question you’d like answered to see our expert answer):
How to start your own Business if you have no money
The simplest way to get away with little to no money is by starting small and getting creative. It’s vital that whatever idea you have, you test before investing a lot of money in it.
If you can create your first set of products or offer your initial service without spending much, you can make money to invest in a better product or service, the second time around. Here are a few ideas to get you started:
1. Get a product or service that requires no cost (there are more options than you think)
- Sell a product that you already have for e.g. lemons from your garden
- Sell a product that you can create from the things you have, for e.g. bake fudge or pancakes (both only requires a few basic ingredients) or redo old furniture you have
- Sell a service that you’re skilled at for e.g. Photography
- Sell of service that anyone can do, that isn’t being done in your local area need, for e.g. Dog Walking
If you earn enough with these ideas within this first few months, you can use the capital to buy new stock or better your services or products.
2. Get funding
- Make a small loan to get the start-up money you need
- Ask family or friends for enough money to buy your first few stock/tool items
- Get an investor if you have a big idea that requires a lot of money like for e.g. a Tender (we have a Funding Tool)
If you earn enough with these ideas within this first few months, you can use the capital to buy new stock or better your services or products.
How to start your own Business
How to start your business, largely depends on where you’re at.
Which phase is your South African Company in?
1. You don’t have an idea yet, but you’re sure you want to work for yourself
Okay, time to brainstorm.
The basis of a business is offering a service or a product to people who have a need for (that they are willing to pay for).
You either need to be the first to offer the service/product in your area, or the best or the most affordable – there needs to be a reason why people will choose your product or service (whatever you choose to offer later).
So think of something:
- That people in your area need?
- That people in your area want?
- A service/product that you might be able to offer for cheaper?
- A service/product that you might be able to do better (at a higher quality or service delivery standard)?
It doesn’t need to be fancy, it just needs to be something that will cost you less than you’ll get for it. Also, consider that a really small profit margin means you’ll have to sell a lot of it. A high-profit margin means there’s less pressure to sell as much to make the business viable.
2. You only have a vague business idea, but you’d like to develop it into something amazing
The best way to test whether your business will work is to actually test it.
Create a few samples of your product and sell it to whoever will listen to you or sign up one or two people to your service – it doesn’t need to be perfect or formal. JUST TEST IT!
Give out free trials or samples and ask people what they think, what they would pay for it and who they think competes with your product/service.
A very good place to start is a business plan – as it forces you to consider all the aspects of a business.
We have experts that specialize in this. However you’ll need some startup cash for this, so if you’re not financially there yet, get creating and testing first!
3. You have an informal business that I’d like to take to the next level
This probably means two things: 1. you want to formally register and/or protect your trademark or brand name and 2. you want some branding – a good logo, a website, even perhaps an e-commerce website or some flyers and business cards.
For 1. you’ll need to register your business at the CIPC.
It’s quite a bit of admin, so you can call our consultants and they’ll do it for you for only R990
If you want to do it yourself, here’s where you can see how to in THIS POST.
If you have a very specific business, for e.g a construction or security company, that requires some industry association registrations, you can take a look at our Industry Packages Section.
4. You’re ready to establish your business by aiming for Tenders and large contracts
This is SUCH an important and significant step in your business. It can change the game for your business entirely.
We’ve dedicated THIS ENTIRE POST to Winning Tenders in SA. So have a look, but here are the essentials:
How to win Tenders in SA
The first step to winning a Tender is finding a Tender that’s a perfect fit for your company – a job that you can complete and that you can offer competitive value to. There are various sites dedicated to Tenders, however, it’s pretty daunting working through them all 24 / 7.
We offer a Tender Leads and Notification Service with our Tender Maintenance Service. It’s only R490 per month and includes Tender Leads relevant to your business, assistance with your first Tender Application, Tender Finance Assistance and Expert Consultation.
But if that’s too much of a commitment for you right now, you can use our Tender app and get 5 Tender Leads for FREE. You can read about that right in our quarterly magazine.
Download your free copy of our first Company Registration magazine issue ever right HERE (learn how to get 5 Tender Leads for FREE).
The second step is ensuring you comply if all the Tender Requirements. This usually includes a list of documents. These are the most common documents needed:
- Company Registration
- Tax Registration and Clearance
- VAT Registration
- BEE Affidavit / Certificate
- Shareholders’ certificates
- Letter of Good Standing at the Compensation Fund
- Central Supplier Database (CSD) Registration
- Other Industry-specific Requirements like PSIRA Registration (for Security Companies)
The third step is actually applying for the Tender. You can Google away on this one, or consult our experts. Check out our infographic…
Click HERE to view a Simple Infographic on our Tender Program to help you find, apply for and win Tenders
How to win Government Tenders in SA
The only extreme difference between applying for a private and a Government Tender is the Central Supplier Database (CSD) registration. The CSD is a database of preapproved Government supplier. You’ll need to be registered here before you can apply for Government Tenders.
But don’t worry, it’s simpler than it sounds.
How to register a Company
The Company Registration process in South Africa is two-fold: first Company Name Reservation and then Company Registration.
If you need help picking your Company Structure (for e.g. whether you want a Pty – the most common structure – or one of the other company structures), click HERE. It’s an Extensive Guide to Company Registration: from picking the right structure to company registration.
Here are the basics of a Pty Company Registration
Company Name Reservation
- Go to the CIPC’s Website HERE
- Search whether your preferred company name is available or take (if you need help with this process, check out our Extensive Guide to Company Registration)
- Create an account on the CIPC’s eService Website
- Follow the Reserve a Company Name instruction (if you need assistance with this, you can opt for our super quick and easy Company Registration Service right HERE)
- Once your Company Name is available and reserved you can follow the CIPC’s eService Website‘s instructions on Company Registration (if you need assistance with this, you can opt for our super quick and easy Company Registration Service right HERE)
Where to register a Company
All South African Companies are registered at the CIPC.
You can either register your company via the CIPC’s eService system or you can ask your accountants assistance or make use of Company Documents Experts like us to register your company for you at the CIPC.
If you want to do it yourself, you must create an account on the site and then follow the CIPC’s instructions. Click HERE if you’d like our expert assistance.
If you have a specialized company, like for e.g. a security company there will be additional registration needed – however company registration on the CIPC’s database is the first step.
How long does it take to register a Company
To register a New South African Company (Pty) with your own company name usually takes about 7-21 days.
- If you buy a Shelf Name (that’s simply a reserved and generic-sounding company name) it’ll take less time.
- It’s even faster if you buy a Shelf Company (that’s a preregistered company with a generic name).
- The fastest option might be to use fast-tracked company registration via the CIPC offered by company documentation specialists like ourselves. We offer:
- New Company (Pty) Registration from 5 days
- PTY & Shelf Name Registration from 48 hours
- Shelf Company Registration from 24 hours.
- Read more HERE.
Why is our service so fast? Our experts know exactly what documents are needed, we have a streamlined online system that processes the CIPC’s requirements, and we have special relations with the CIPC.
How to register for VAT
You can register for VAT at SARS by completing a VAT 101 – Application for Registration form and submitting it to the local SARS branch.
- You CANNOT register for VAT if you don’t have a turnover of R50 000 a year or more.
- You MAY register voluntarily if your turnover is R50 000 a year or more or if you have invoices that exceed R4300 per month (for two consecutive months).
- You MUST register if company’s income exceeds R1 million over 12 months. It’s a mandatory legal requirement. You should register within 21 days from the date of exceeding R1 million.
Why register for VAT voluntarily?
There are two reasons you would want to register for voluntary VAT – if you qualify.
The first being, you’d be able to claim back the VAT you pay when making purchases from other VAT registered companies.
The second being, VAT-registered suppliers often prefer doing business with other VAT-registered companies.
This is how it works:
You’ve paid 14% VAT on all the purchases from VAT-registered companies, before the 1st of April 2018. Any purchases after the 1st of April from VAT-registered companies will be 15% VAT.
Any VAT-registered company needs to add the legally required VAT percentage to their prices to pay to SARS. Currently, that’s 15%.
Once, you’ve registered your own company for VAT, you’ll have to add that 15% VAT to all your prices as well.
Luckily, being VAT-registered you can claim back that 15% you pay your supplier directly from SARS. If you can’t or don’t want to register, you can’t claim back that VAT.
Another perk is being able to claim back the VAT paid on any capital goods you buy for your business (for e.g. equipment or vehicles).
If you want to, or have to, register for VAT, here’s a handy VAT Package that might come in handy!
How to get a Tax Clearance Certificate
You can get a Tax Clearance Certificate directly from SARS’s eFiling website.
Your accountant can also assist you or you can make use of a Company Document specialist like us. Fast-tracked Tax Clearance services like ours, offers you an easier and quicker way to get your Company Documentation in order.
Here’s how it works: Once you’ve signed up for our Tax Clearance Service, you’ll get a designated SARS expert that’ll assist you with the SARS process and all SARS’s requirements so you get your Tax Clearance ASAP.
You qualify for a FREE Company Documentation consultation
Skip all the admin and get your own designated Company Documentation Expert who will walk you through the easiest and fastest way to get the documentation you need. Book your first consultation for free. No commitment required.
What is a Tax Clearance Certificate
A Tax Clearance Certificate is a certificate issued by SARS that essentially proves that you don’t owe SARS any outstanding Tax.
Tenders often require this document form its applicants, also often called a TCC, to ensure that they’re not doing business with companies that don’t comply with SARS.
How to get a Letter of Good Standing
There are three steps to getting a Letter of Good Standing: COID Registration, Return of Earning and Notice of Assessment (NOA).
If you skip any of these steps, you won’t qualify for a Letter of Good Standing. Why? The Letter of Good Standing is a document that the Labour Department’s Workman’s Compensation Fund gives you to prove that all your payments and registration processes are complete and in order.
STEP 1: You have to register your company with COID (The Workman’s Compensation Fund)
To register your company with COID, you’ll register and pay a registration fee.
You can register your company directly at the Labour Department or opt for our COID service. If you opt for our service, a designated COID expert will assist you with all your required documents, its submission and all three steps of the process toward getting a Letter of Good Standing. We’ll send you clear forms and updates to your email – so you’ll avoid any ques or online administration drama.
Our COID service is also usually faster.
Our COID process only takes 25 days, with the Department, it can often take months longer.
If you do want to do it yourself online, you can go to the Department of Labour’s online page right HERE.
Here’s a list of required Documents for the initial COID Registration:
- A Valid South African ID
- Company Registration Document
- COID Registration Form
- Power of Attorney (if you’re doing it yourself, and not using our service, this document isn’t needed)
- Registration Fee Proof of Payment
STEP 2: Submit your employee expenses
The next step is submitting your annual Return of Earnings, a summary of the salaries you’ve pad for the financial year, to the Department of Labour. The Department needs this to calculate how much you, as the employer, need to pay the Workman’s Compensation Fund.
You’ll pay a certain percentage of your total employee expenses in order to cover all your employees in the case of work-related injury or harm.
You’ll have to repeat step 2 – submitting your annual salary and wage expenses (your Return of Earnings) – every financial year on the 31st of April. Step 1 is only required once.
If the process is too complicated for you, our COID experts can assist you and walk you through the entire process – from beginning to end. Learn more HERE.
Step 3: Pay your yearly / monthly fee to COID
After you’ve completed step 2, within about 3 weekdays, the Department of Labour will notify you what amount’ payable to cover all your employees. They will send you a Notice of Assessment (NOA). This document states how much you must pay COID.
There’s a monthly and a yearly payment plan. However, the monthly option requires a 30% deposit.
Once the amount stated on your Notice of Assessment (NOA) document is paid in one go to the Department of Labour, you’ll get a Letter of Good Standing. This letter now proves your employees are covered for a year.
If you opt for the monthly payment option your Letter of Good Standing will only be valid on a month-to-month basis, provided you pay every month on time.
If you ever neglect payment, you won’t have a Letter of Good Standing and your employees won’t be covered for that time.
I know it all might seem daunting, so as a reminder, we do have experts who can assist you step-by-step.
We offer an all-inclusive Workman’s Compensation Package as well. You read about that HERE.
Here’s a list of required for step 3:
- Notice of Assessment (sent to you by the Department of Labour)
- Proof of Payment for your yearly fees
What is a Letter of Good Standing
A Letter of Good Standing is a document proving you’re up-to-date with all your Workman’s Compensation Fund (COID) payment, a form of government-provided employee cover.
Almost all South African Employers are required to register with and pay the Workman’s Compensation Fund (COID). COID will assist its registered members in paying for any work-related injuries or cover in the case of harm to their employees.
If you’re not up to date with your payments, COID won’t cover your employees. That’s why Tenders often require this document from their applicants – they don’t want to be held liable for your employees in any way.
Any more burning questions?
We know Company Documentation can be extremely confusing, that’s we’re offering you a FREE consultation on ANY QUESTION you have.