My side hustle

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Salmank

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Hi,

So I do some programming on the side (not as a primary job)

From 13th January 2023 to 13th December, we made close to R270 000.

I have one person who is 'employed' and pay her R6000 every month.

Another R30 000 is used for other things.

I hope to make in the range of R300 000 over the next year, and net around R200 000.

Should I register as a company/business? What will be the best way to continue with this, and how should I pay the taxes?
 
Salmank said:
Hi,

So I do some programming on the side (not as a primary job)

From 13th January 2023 to 13th December, we made close to R270 000.

I have one person who is 'employed' and pay her R6000 every month.

Another R30 000 is used for other things.

I hope to make in the range of R300 000 over the next year, and net around R200 000.

Should I register as a company/business? What will be the best way to continue with this, and how should I pay the taxes?
Click to expand...
Congrats. That's really well done. There are benefits to continuing as a sole proprietor, just as there are benefits to registering a company. I'd suggest you make an appointment with a tax practitioner.

Oh, and take whatever may come from this thread with a healthy dose of salt.
 
Registering as a company comes with its own headaches and will probably need to be managed by an accountant. But seeing that you have someone employed, you might want to look into labour laws sooner or later as that can be the biggest headache.
 
Salmank said:
Should I register as a company/business? What will be the best way to continue with this, and how should I pay the taxes?
Click to expand...

You're automatically already a provisional taxpayer because you have a source of income other than salary, so you best get filing those (IRP6) - the next one is due at the end of Feb 2024 and covers the 12 months to Feb 2024, including estimated income for February itself.

Hold off registering a company. Given the nature of your business you almost certainly cannot get a tax benefit from incorporating until your operations are larger (>= 3 full time employees).

As a sole proprietor you can deduct all your business expenses including subcontractors, home office etc. and you can even register for VAT if/when that becomes necessary.
 
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Pho3nix said:
Get an accountant and register a business. Especially if you’re employing someone
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Accountants will often recommend incorporating simply because it more than doubles their income. They get to file returns for both you and your company, do CIPC admin, payroll, EMP201s etc.

This all makes no sense for the OP. Besides the accounting costs, he will probably end up paying a higher overall rate of tax than if he just stayed a sole prop.

If the "employee" is sub-contractor same as OP or works < 24 hours a month there's no need for all that nonsense.
 
Tomtomtom said:
Accountants will often recommend incorporating simply because it more than doubles their income. They get to file returns for both you and your company, do CIPC admin, payroll, EMP201s etc.

This all makes no sense for the OP. Besides the accounting costs, he will probably end up paying a higher overall rate of tax than if he just stayed a sole prop.

If the "employee" is sub-contractor same as OP or works &lt; 24 hours a month there's no need for all that nonsense.
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I’m not an accountant so won’t get into a back and forth. Went through this earlier this year if not last year.

Speak to an accountant, register the business yourself. Cheap business account with Nedbank/Capitec. Pay for a payroll & accounting software himself. Speak to Accountant or Bookkeeper twice a year to go through his books for SARS submission.

None of these need the accountant to manage, he just needs to understand his options. If after a 1 hr chat he thinks sole-prop works better for him then he should go ahead
 
If this is your first business (I.E. not registering as an additional company) then yes, you can get a tax exemption for SMB tax, as well as pay less overall tax than it being declared as personal income. Registering as a business will also give you some distance from personal liability should there be legal issues. Paying a decent accountant is worth it.
 
You can trade as a sole trader. You must pay sars for Jan & Feb 2023, as that is a seperate tax year. And you might be subjected to penalties. Unless you billed the clients in March 2023.

For the March 2023 to Feb 2024, there is stilp time to pay SARS.


THe general deduction formula is your friend.
If in the production of income, you can deduct expenses incurred, provided it is not of a capital nature, or specifically excluded as a allowed deduction.

Wear & Tear on assets are also allowed.

So, get to an accountant asap. They will advise you best. A good accountant will do the calculations which will show whether you save more tax as a sole trader or as a pvt company.

Note there is a lot of headaches with being a company director.


Since you are an employer, the BCEA and LRA and other employment acts/regulations apply as well. I am not sure which will apply, but you better sign ASAP an emplyment contract and have a payslip issued to the employee, as currently you breaking the law. Make sure contract include POPIA clause as well.

VAT may also be applicable if you over the threshold. SARS Website is easy to search.
 
Oh, if your employee is your wife or child, SARS, may disregard that as expense. So you might still be liable for tax on that.
 
I hope you have been paying UIF for her? Otherwise SARS is gonna nail you harder than @ShaunSA nailed me the first time we met in Jozi
 
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The Darkness said:
If this is your first business (I.E. not registering as an additional company) then yes, you can get a tax exemption for SMB tax
Click to expand...

If you mean the SBC tax regime then no, this doesn't apply to programmers selling their services. Hence OP needing >=3 employees etc.

Look at the worked example on page 19 here.
 
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