There are 2 main company types in South Africa:
- PTY (LTD)
- Non-Profit Company (NPC)
FOR PROFIT COMPANIES
Private Companies must have at least 1 director. At least one of the appointed directors must also be appointed as an incorporator. You cannot appoint an alternate director if a full director is not appointed.
Most common structures:
- Public (name ends in “Ltd”) or private (“Pty Ltd”) company
- Personal Liability Company (“Inc”)
- Business trust
- Sole proprietorship
- External company (branch of a foreign company)
These types of business offer directors protection from individual liability. A company can make shares available to staff as a Private company (Pty) or to the public as a Limited company (Ltd), and these are easily transferred from one owner to another.
(Pty) Ltd companies are subject to an annual audit. This is the best legal structure for people who ultimately want to sell their business to a large competitor, or to be listed on the stock exchange.
NOT FOR PROFIT COMPANIES
Non-Profit Companies must have at least 3 directors. All directors will also be appointed as incorporators. You cannot appoint an alternate director if a full director is not appointed. Only South Africans can be appointed as directors/incorporators using this channel, foreign directors must make use of the manual process.
The CIPC (Companies and Intellectual Property Commission) registers Companies and Co-operatives.
It is not necessary for all businesses to formalise by registering with the CIPC. For some businesses, such as informal businesses and sole proprietors, there may not be sufficient benefits. Businesses that wish to transact with government and the formal sector, or that wish to access certain types of government support, are generally required to be registered with the CIPC. For these businesses, there may also be tax benefits to registration, as registered businesses have a lower tax rate than individuals. Even though you may not be registered with the CIPC, you will still have to be registered with the South African Revenue Services and will still be liable for tax if your turnover exceeds the prescribed threshold.
Registering a business is simple and inexpensive if you follow the steps outlined on the CIPC website, the first step being registered as a CIPC customer. However, it brings with it certain responsibilities, irrespective of whether the business is trading. For example, you will need to file an annual return and pay an annual fee.
In terms of the Companies Act, 2008, a company may be registered with or without a company name. When a company is registered without a reserved name, its registration number automatically becomes the company name. This is the quickest way to register a company.
Such a company may transact with a trading (business) name, or may apply to add a reserved name at a later stage. In this case, the company will need to first reserve a name and then apply for a name change, which constitutes a change to its Memorandum of Incorporation (MOI) (refer to Maintain a Business).
If your initial name reservation application is not approved, you will need to apply for new names. You may apply for between 1 and 4 names during each application process. Each name reservation application costs R50. A company registration may vary between R125 and R475 (R125 for a private company, R475 for a non-profit company registered without members).