Registering Business Two Quick Questions

[Chevron]

So busy filling out the forms for my small business and two questions.

1) Financial year end date.
Now I know a lot of companies use the 1Apr-31Mar like the governmant, but what are the actual pros and cones of using/not using this date?

2) Authorized Share Capital
Since I will be the only employee and owner do I actually need to authorize any? If so how many? I take this depends on the type of company?

 

[halfmoonforever]

Can't comment on #2, but as far as I know, most companies year-end is 30 June.

 

[deweyzeph]

Actually most businesses use the tax year for their financial year which runs from 1 March to 28 February (29 Feb in a leap year).

 

[Chevron]

Actually most businesses use the tax year for their financial year which runs from 1 March to 28 February (29 Feb in a leap year).

Yeah that's the one.

 

[Chevron]

So in case someone comes up with this question in the future this is the advice I went with(in a nutshell):

1) Stick with End of February unless your business has a certain seasonality where it would make sense to use another period.

2) Authorize 1000 shares and issue 100 shares to yourself that way you have a reserve of shares in the event you want to take on more shareholders in future. The 1000 authorised can also be increased or decreased at any stage but this does require a separate application to CIPC.

 

[IzZzy]

2) Authorize 1000 shares and issue 100 shares to yourself that way you have a reserve of shares in the event you want to take on more shareholders in future. The 1000 authorised can also be increased or decreased at any stage but this does require a separate application to CIPC.

Good advice - I would even make it 1 000 000 or something. To change it, you would need to amend your MOI by way of special resolution.

 

[The_Ogre]

So in case someone comes up with this question in the future this is the advice I went with(in a nutshell):

1) Stick with End of February unless your business has a certain seasonality where it would make sense to use another period.

2) Authorize 1000 shares and issue 100 shares to yourself that way you have a reserve of shares in the event you want to take on more shareholders in future. The 1000 authorised can also be increased or decreased at any stage but this does require a separate application to CIPC.

1000? I always make it 1 000 000 000! You never know

 

[bchip]

Smaller companies keep it to the tax year Mar - Feb
because the tax calculations can get hectic when there are tax changes across the 2 different years.

Larger companies can change it to a more seasonal look, but they also have the resources
to hire a tax team to do the calculations.

 

[deweyzeph]

1000? I always make it 1 000 000 000! You never know

The main reason you might want to make the number of shares larger is if you want to increase the granularity of the shares. For example, if you've issued 1000 shares, the smallest shareholding you can grant someone is 1 share out of a 1000 which is 0.1%. If you increase the shareholding to 10000 shares, then you can offer a shareholder 0.01% of the shareholding, etc. 1000 shares should be sufficient for most small to medium sized businesses, unless you're planning on listing on the stock exchange anytime soon.

 

[The_Ogre]

The main reason you might want to make the number of shares larger is if you want to increase the granularity of the shares. For example, if you've issued 1000 shares, the smallest shareholding you can grant someone is 1 share out of a 1000 which is 0.1%. If you increase the shareholding to 10000 shares, then you can offer a shareholder 0.01% of the shareholding, etc. 1000 shares should be sufficient for most small to medium sized businesses, unless you're planning on listing on the stock exchange anytime soon.

I don't agree.

If you need to expand what would sway a potential investor more easily: 100 shares, or 1 000 000? Its much easier to manage a large number of shares as you can then split it to a much lower level of granularity - ie the investor will have more flexibility.

Also with a large number of shares you can split them into different share classes to use for different purposes; and also not issue all for circulation for fundraising purposes.