A registered business could open new doors for your business. This includes doing business with corporate companies and government departments. However, before registering a business you should have tested your business idea, secured clients, chosen a name for your business and be fully ready to operate. So what type of business should you register???
Here are 3 types of common business entities and related information:
1) Sole-Proprietor Or Sole Trader
This is the easiest type of business to start, typically used for starting your business without the need to register. Use a sole trader until your business is ready to start formally trading.
- No formal registration required
- Simply go into the bank with Identity document and proof of address to open your account
- Owner makes decisions and is personally liable for any debt
- Administration is minimized as no financial reporting is required in terms of financial statements and management accounts
- Taxation can increase as your income bracket changes due to combined personal and business income
2) Private Company (Pty Limited)
This is the most common type of business registered and is a relatively simple process. Pty Limited is a formally registered business and legal entity which includes compliance of annual returns and taxation compliance. Financial statements must be prepared annually for tax purposes. Private company allows you to do business and is generally preferred for business with corporate companies and government.
- Potential clients generally prefer doing business with a registered business
- Minimum of 1 director, Maximum of 50
- Formal business registration required to register a Pty Limited
- Registration process generally takes 10 days
- Pty Ltd can apply for business finance at financial institutions
- Cost is R175 if done online
- Register online cipc.co.za some banks in South Africa also provide business registration services on their websites
- You will need the following when registering your business:
- Four business names in order of preference (do a name reservation to check if the name you chose is available)
- Certified Identity documents of all shareholders and directors
- Proof of address
- Documents required for signing when registered will be available online
Non – Profit Company (NPC)
This type of company should be considered if your business is dependent on sponsorships and donations. The objectives of NPC is not linked to profit generation however, sound financial and cash flow management is highly important. Legally this entity will qualify for sponsors and donations. This type of business is generally suited to Social Entrepreneurship.
- Registration is done manually by completing forms which can be downloaded from cipc.co.za
- Financial statements must be prepared and available to sponsors and donors
- Credibility and sound financial management will attract sponsorship
Examples of NPCs’: Charity Organizations, Churches, Soccer Clubs