Registering a company for freelancing/consulting work

[InTheWild]

Hi everyone,

I've started doing more freelancing/consulting work lately. I'm invoicing in my personal capacity and have been told by a few people that registering a company would be a better way to go.

Anyone know what the pros/cons are, and if it makes sense at all. I just see admin nightmares, with SARS etc. But maybe worthwhile tax-wise in the end?

Any pointers would be much appreciated!

 

[richjdavies]

(following but no advice to give currently)

 

[Tomtomtom]

I don't see any advantage for a one man freelance/consulting show due to the Personal Service Provider rules.

 

[InTheWild]

I don't see any advantage for a one man freelance/consulting show due to the Personal Service Provider rules.

I think that's more to do with employees resigning and invoicing their previous employers? Or at least to curtail that

 

[InTheWild]

Surely, a business can start with one employee/director.

 

[Tomtomtom]

I think that's more to do with employees resigning and invoicing their previous employers? Or at least to curtail that

Read a bit further in the link.

The taxation of PSP has been extended beyond the scenario described above and includes any PSP whether or notthe services are rendered to former employers.

 

[InTheWild]

I don't see any advantage for a one man freelance/consulting show due to the Personal Service Provider rules.

but thanks for this - I will read in detail!

 

[InTheWild]

Read a bit further in the link.

but then how do you start a business then? I understand why that was put in place, but I'm sure I'd be more successful going forward quoting and invoicing from a company entity than just a one man show?

 

[InTheWild]

Can you imagine having a professional website with a business type name etc, and then invoice Piet Pompies?

 

[The_MAC]

Google "Sole Proprietor", don't know the details but know of an old friend who went this route

 

[Speedster]

Can you imagine having a professional website with a business type name etc, and then invoice Piet Pompies?

There's nothing stopping you running your sole proprietor business under any name that isn't trademarked.

I.e. not registered as a business

 

[PsyWulf]

Mostly,vs a soleprop,it's legal protection. Company assets and your assets are distinct
As a soleprop someone can sue your business and take your house/car (in a absolute worst case ofc)

Tax only really becomes an issue when you need to do VAT,or if it's your only income then submission time changes etc

 

[Tomtomtom]

Surely, a business can start with one employee/director.

Yes, it can. But by default it will pay tax on profit at 28%, and then another 20% on dividends. So it's not a great option for a one-man show from a pure tax perspective. There are many other reasons to start a company to do with capital raising, limited liability etc. that are probably out of scope for this kind of business.

but then how do you start a business then? I understand why that was put in place, but I'm sure I'd be more successful going forward quoting and invoicing from a company entity than just a one man show?

Not necessarily. By the time you're invoicing, you already have the client, and the job, so no problem there. As mentioned above you can trade as any name you like.

 

[PsyWulf]

FNB has a new Soleprop account that came out this week,as a client you get an extra business banking account for free,linked to your FNB app,and a discount for Tax submissions with TaxTim

 

[InTheWild]

Yes, it can. But by default it will pay tax on profit at 28%, and then another 20% on dividends. So it's not a great option for a one-man show from a pure tax perspective. There are many other reasons to start a company to do with capital raising, limited liability etc. that are probably out of scope for this kind of business.




Not necessarily. By the time you're invoicing, you already have the client, and the job, so no problem there. As mentioned above you can trade as any name you like.

thanks triple T - it's starting to make some sense

 

[InTheWild]

Mostly,vs a soleprop,it's legal protection. Company assets and your assets are distinct
As a soleprop someone can sue your business and take your house/car (in a absolute worst case ofc)

Tax only really becomes an issue when you need to do VAT,or if it's your only income then submission time changes etc

thanks - makes sense

 

[InTheWild]

Google "Sole Proprietor", don't know the details but know of an old friend who went this route

Yeah an option, but that kind of gives me the vibes of Aunty Sally's Rusks at the local farmers market..

 

[PsyWulf]

Yeah an option, but that kind of gives me the vibes of Aunty Sally's Rusks at the local farmers market..

Sole Prop can be functionally a business,letter from the Bank and Everything

 

[InTheWild]

Ok, but what happens if you have clients that would rather do business with a registered business? These cases I have come across.

 

[dontcryforme]

If it is not just one client and if you do not render services on the client's premises, you are not a PSP.

Read up on Micro Businesses Turnover Tax, first R200k divideds are tax exempt: https://www.taxtim.com/za/guides/turnover-tax-explained