How to start a private company

E

Elbad

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Firstly, let me start this off by saying, yes I've searched. Yes I've read. Then I've read some more. No I'm not ready (Who is?). Yes, I'm going to do it anyway.

Secondly, the intent of this thread. Some of you will tell me how difficult it is (See, I have searched :D ) and that it's so hard to earn a living etc. I appreciate the opinion, but I still want to go ahead. Some of us just need to hit our heads a few times. I'd like for this post to be a type of guide, through all the in's and outs of a business. If you can point me to a site I've missed, that explains everything in normal English, please do, and we can wrap this up.

Thirdly, some background on why I'm asking. I'm looking to start my business. I've got 13 years experience in IT, currently a software architect (my point is I'm not a straight out of school guy who's trying to make a quick buck). My plan is to start a company. CC is out of the question, so it looks like Private is the only option. I've got an idea for a website (who doesn't, right?), and I've got a web designer onboard and myself for development. This site will take a while to get built, and I'm not expecting any return on it till the end of 2015. Then I've got another friend, who wants to go into business importing electrical items and selling them on a site also, while doing some marketing to retail. My thinking is, one official company, running multiple smaller products ("companies"). So this is why I want to register a company now.

Also important, I'm looking at bare minimum. This company will start off as a side-line thing, and hopefully become something more. My goal is to keep costs down to a minimum, so some of my questions are going be around that - e.g. minimum auditing that needs to take place.

Lastly, my questions. I'll be adding to these as we go along, step by step, piece by piece. Humbly. If it's OK with everyone :confused:

The first question that's got me confused in the Private Company Registration forms, is the number of Shares. What's the recommendation here. For now, it will be my own company. But going forward, I might want to offer shares to employees as remuneration. Not just in the beginning, but maybe a few years doing the line. And if I only have 1000 shares, will that be fine. Can I change this later? i.e. make each share into 10? Is this trivial, or does it play an important factor one day?
 
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Also you can increase the amount of shares at any time through a company resolution.

CC's cannot be registered anymore, but you can bug an existing one that is still active (not recommended)
 
Thanks. I'm aware of the CPIC website. I've read all the documentation on their site, but nowhere does it actually go into detail about what the fields do, or any advise on filling the forms out. I was actually planning on doing it through FNB - unless someone has any reason not to. They will register my company for me while I open a Business Account (And I'm very happy with their service on my personal accounts). Think they charged R125, but they dont register the name, so I'll start trading under a number and register the name whenever.

I just don't know what to fill in. Sure, I can thumbsuck, but I want to be aware of as much as possible. I see SwiftReg start you off on 1200 shares. I'm just curous, from experience, what do people find the best way to go about doing things.

The biggest thing for me, is the annual costs. I've read on a a post here somewhere that private companies no longer need to be audited? If not, what is the requirement? Would I be able to do my books myself? Or do I need a CA? or must an auditing firm signoff? I can't find any info about this, but I can't believe a company with a R50k turnover would require audits etc.

Can I register my company, open a bank account, start trading and if I only sell 10 items the whole year and make no profit, I'm fine. Or will I get whacked with an auditing fee or something, just to be legal?
 
The requirements are not as onerous as before with private companies due to them absorbing the cc structures.
It is now differentiated by turnover. CIPC has all the info, but I preferred going through Swiftreg.. That is the recommended avenue for Standard Bank clients. You should also look at the Standard Bank website for info. The banks seem to have the most topical and relevant info. Even just for gathering info.
 
Elbad said:
Firstly, let me start this off by saying, yes I've searched. Yes I've read. Then I've read some more. No I'm not ready (Who is?). Yes, I'm going to do it anyway.

Secondly, the intent of this thread. Some of you will tell me how difficult it is (See, I have searched :D ) and that it's so hard to earn a living etc. I appreciate the opinion, but I still want to go ahead. Some of us just need to hit our heads a few times. I'd like for this post to be a type of guide, through all the in's and outs of a business. If you can point me to a site I've missed, that explains everything in normal English, please do, and we can wrap this up.

Thirdly, some background on why I'm asking. I'm looking to start my business. I've got 13 years experience in IT, currently a software architect (my point is I'm not a straight out of school guy who's trying to make a quick buck). My plan is to start a company. CC is out of the question, so it looks like Private is the only option. I've got an idea for a website (who doesn't, right?), and I've got a web designer onboard and myself for development. This site will take a while to get built, and I'm not expecting any return on it till the end of 2015. Then I've got another friend, who wants to go into business importing electrical items and selling them on a site also, while doing some marketing to retail. My thinking is, one official company, running multiple smaller products ("companies"). So this is why I want to register a company now.

Also important, I'm looking at bare minimum. This company will start off as a side-line thing, and hopefully become something more. My goal is to keep costs down to a minimum, so some of my questions are going be around that - e.g. minimum auditing that needs to take place.

Lastly, my questions. I'll be adding to these as we go along, step by step, piece by piece. Humbly. If it's OK with everyone :confused:

The first question that's got me confused in the Private Company Registration forms, is the number of Shares. What's the recommendation here. For now, it will be my own company. But going forward, I might want to offer shares to employees as remuneration. Not just in the beginning, but maybe a few years doing the line. And if I only have 1000 shares, will that be fine. Can I change this later? i.e. make each share into 10? Is this trivial, or does it play an important factor one day?
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No brainer swiftreg is the best option.
Just keep in mind I would advise against offering shares in return for loans etc. If you however need help with any employee registrations etc feel free to pm me.
 
OK thanks. So it seems the general recommendation is to use Swiftreg rather. Still no info on the optimal amount of shares? Or can this be changed later on.
Also, my friend on the electrical side, will hold 50% of the electrical import business (He's an electrical engineer, knows about the stuff more than me, and apparently there's no import tax on electrical goods?!) What's the best way to do this? I don't want to give him 50% of the business, as the business will operate several of these smaller type businesses, and he will only be entitled to the 1. So overall share's doesn't seem applicable. Would I just create a contract indicating our respective rights and responsibilities? And that would be sufficient?

In terms of auditing / bookkeeping. Would something like Pastel Online be sufficient for me to manage my books myself? Realistically, I don't see us having 1000's of sales a month initially, so I don't think hiring an accountant or bookkeeper is necessary. Obviously, if / when we start making money, we would look at one of those, but for now, would something like Pastel Online give me everything I would need when it comes to submitting my provisional taxes and audit reports to CIPC?
 
Fransh said:
No brainer swiftreg is the best option.
Just keep in mind I would advise against offering shares in return for loans etc. If you however need help with any employee registrations etc feel free to pm me.
Click to expand...

We will be financing this ourselves, so shares won't be used for loans / capital. It's more of a reward based thing. Certain key employees that I have in mind to hire once the business starts making money, that I could entice with shares in the company.
 
Elbad said:
Still no info on the optimal amount of shares? Or can this be changed later on.
Also, my friend on the electrical side, will hold 50% of the electrical import business (He's an electrical engineer, knows about the stuff more than me, and apparently there's no import tax on electrical goods?!) What's the best way to do this? I don't want to give him 50% of the business
Click to expand...

You can amend the issued shares at a later date, no problem there.

With your proposed operational structure, I would recommend having a holding company and individual legal entities for the various functional entities. That would make the shareholding simpler and ring-fence the risks and structures. The alternative is to draw up a M.O.A. that will detail the terms of profit & risk exposure for the trading functionalities.

The complexity and/or simplicity of structure would depend entirely on where you hope to take the Company one day. For shareholding to be used effectively and to be easily quantified, different legal entities are recommended. That way you can always sell off part of your business and protect the whole when needed.

Horses for courses.
 
Aquadyne said:
You can amend the issued shares at a later date, no problem there.

With your proposed operational structure, I would recommend having a holding company and individual legal entities for the various functional entities. That would make the shareholding simpler and ring-fence the risks and structures. The alternative is to draw up a M.O.A. that will detail the terms of profit & risk exposure for the trading functionalities.
Click to expand...

That sounds perfect. Starting up 1 company is daunting enough at the moment. As the various "products" grow into their own companies, I can maybe look at putting them in the own companies then. But for now a MoA sounds perfect.

I read on one of the other posts here someone mentioned there are tax implications with financing your business yourself? Something about providing your business with a loan. Does this affect my personal income tax (can I get something out from SARS :D ), or does this affect the business's tax?
 
Elbad said:
He's an electrical engineer, knows about the stuff more than me, and apparently there's no import tax on electrical goods?!
Click to expand...

Might be no ad valorem or import duty tax on some electrical goods, but you will be paying at least 14% VAT on everything. That is 14% VAT on 110% of the value of the goods.
 
Elbad said:
That sounds perfect. Starting up 1 company is daunting enough at the moment. As the various "products" grow into their own companies, I can maybe look at putting them in the own companies then. But for now a MoA sounds perfect.

I read on one of the other posts here someone mentioned there are tax implications with financing your business yourself? Something about providing your business with a loan. Does this affect my personal income tax (can I get something out from SARS :D ), or does this affect the business's tax?
Click to expand...

I suggest you get an accountant. Providing you get one that knows his/her stuff you will be thankful later. And make sure you have access to a reputable registered tax consultant too. Providing a loan does not affect your personal income tax, but the company itself will benefit from the loan (savings etc depends on a couple of factors). Are you going to pay the loan back to yourself? Depending on the type of loan and how it structured you may have to pay SARS money when you pay yourself back.

If you earn below a certain threshold (not sure what it is) you dont have to do full audits, but even a partial audit can cost you a couple of thousand.

If you are vat registered you can claim back your vat on your input costs but you have to add it in when you sell your product. There is a threshold for vat registration too.

SARS is very picky about monies owed to them, they expect any taxes that accrue to them during the month to be paid the following month otherwise they start raising penalty fees. Companies have to send SARS salary information on a monthly basis and pay the relevant taxes. And be careful, they like to add extra charges. As a director you dont have to pay a skils development levy but they do like adding it in.

Make sure you have multiple copies of your tax clearance certificate. Some tenders/jobs/ require that certificate before they do business with you. Though I found in some industries that requirement is huge and others not so much.
 
I have an accountant I can use, but he's pricy. Obviously, if I start making money, I'll use the accountant, but because this is a sideline thing, I'm not expecting more than a few grand turnover initially. The first few months are really going to be more about marketing and making a name. As such, an accountant will probably cost more than what the company will make.
As a director of the company, do I need to register anything with SARS for myself? Technically I'll be an employee of the company? I don't plan on taking a salary initially, as any income would get put back in the company. And the friend in going into the business with, will also not be taking a salary or anything, but would I need to register him as an employee?
 
Elbad said:
Thanks. I'm aware of the CPIC website. I've read all the documentation on their site, but nowhere does it actually go into detail about what the fields do, or any advise on filling the forms out. I was actually planning on doing it through FNB - unless someone has any reason not to. They will register my company for me while I open a Business Account (And I'm very happy with their service on my personal accounts). Think they charged R125, but they dont register the name, so I'll start trading under a number and register the name whenever.

I just don't know what to fill in. Sure, I can thumbsuck, but I want to be aware of as much as possible. I see SwiftReg start you off on 1200 shares. I'm just curous, from experience, what do people find the best way to go about doing things.

The biggest thing for me, is the annual costs. I've read on a a post here somewhere that private companies no longer need to be audited? If not, what is the requirement? Would I be able to do my books myself? Or do I need a CA? or must an auditing firm signoff? I can't find any info about this, but I can't believe a company with a R50k turnover would require audits etc.

Can I register my company, open a bank account, start trading and if I only sell 10 items the whole year and make no profit, I'm fine. Or will I get whacked with an auditing fee or something, just to be legal?
Click to expand...

In auditing theres this thing we call Public interest Score. Its this scorecard that determines whether your company needs to be audited by yourself or External auditor.
 
Declare independent contractor fee to the directors where you can declare the salary sacrifices against.

Elbad said:
I have an accountant I can use, but he's pricy. Obviously, if I start making money, I'll use the accountant, but because this is a sideline thing, I'm not expecting more than a few grand turnover initially. The first few months are really going to be more about marketing and making a name. As such, an accountant will probably cost more than what the company will make.
As a director of the company, do I need to register anything with SARS for myself? Technically I'll be an employee of the company? I don't plan on taking a salary initially, as any income would get put back in the company. And the friend in going into the business with, will also not be taking a salary or anything, but would I need to register him as an employee?
Click to expand...
 
Reviving an old post here, but it's my post and it's on the same topic :whistle:

Its taken time - actually still taking time, but things are moving. I went the SwiftReg route, and I'm just waiting for my documents now. Every time I check the site, it shows a higher timeframe...backlog at the CIPC apparently?!

In the meanwhile, I'm sortof holding off on everything. I'd like to start clean - i.e. wait for my company so I can open a bank account and start building the site and stuff with that bank account.

What I'd like to know, is how do I go about with company expenses, working from home. What can I claim and how?
CellPhone - do I claim a % of this? Do I actually need to keep a record of which calls were related to my new business and which were personal / dayjob? My ADSL at home? Rent for the study room?

I know technically everything that would be used in a normal office can be claimed, but how do I go about this? Most of these things come out my personal accounts (bond payment, cellphone bill, ADSL etc), so would my company "pay" me for it's portion of these things. Do I need to create some kind of agreement between myself and...um...myself as director?

So technically, between rent, ADSL, phones etc, my company portion worked out to R2,000pm. Would that mean my company could pay me R2,000 for "services rendered", and that amount is tax free, as I;ve already paid the tax on those items before "providing" them to my company. Or am I completely off the ball?
 
Elbad said:
Reviving an old post here, but it's my post and it's on the same topic :whistle:

Its taken time - actually still taking time, but things are moving. I went the SwiftReg route, and I'm just waiting for my documents now. Every time I check the site, it shows a higher timeframe...backlog at the CIPC apparently?!

In the meanwhile, I'm sortof holding off on everything. I'd like to start clean - i.e. wait for my company so I can open a bank account and start building the site and stuff with that bank account.

What I'd like to know, is how do I go about with company expenses, working from home. What can I claim and how?
CellPhone - do I claim a % of this? Do I actually need to keep a record of which calls were related to my new business and which were personal / dayjob? My ADSL at home? Rent for the study room?

I know technically everything that would be used in a normal office can be claimed, but how do I go about this? Most of these things come out my personal accounts (bond payment, cellphone bill, ADSL etc), so would my company "pay" me for it's portion of these things. Do I need to create some kind of agreement between myself and...um...myself as director?

So technically, between rent, ADSL, phones etc, my company portion worked out to R2,000pm. Would that mean my company could pay me R2,000 for "services rendered", and that amount is tax free, as I;ve already paid the tax on those items before "providing" them to my company. Or am I completely off the ball?
Click to expand...


I have two words for you that would answer all your questions register for "TurnOver Tax" after you have successfully registered your business.

If you need any Help PM me.
 
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