The thought of registering a company may seem daunting. Throw in all the legal and tax speak and one’s head can get into a legitimate spin. Firstly, I am not a tax practitioner. I do run two businesses, one I have CIPC registered and the other not. The decisions were made strategically on the nature of each business. Here is a quick guide on how to make that decision for your own business.
If you own property or high value assets related to the business
Once you are CIPC registered – which you can do online, through a bank or a registration agency – you can then register for VAT (Value Added Taxes). You cannot register your business for VAT unless you have CIPC registration. The main reason a company would CIPC register is to claim VAT back on their high value assets and property. Even when I tried renting commercial space for my business, they required my company registration. This can benefit you when e-filing because all business related expenditure such as the property, high value assets and operational costs (cellphone, office equipment, etc) that come from a VAT registered vendor can then be claimed back on your tax return. Make sure you keep all your receipts and have a tax practitioner talk you through the tax return if you are not sure how to complete the e-filing.
Then there is the perception of “credibility” from customers. For example, if you have a children’s day care centre and you own the property, I would highly recommend you CIPC register. Firstly, to gain the benefit of claiming VAT back on the property payments. But also for your customers (the parents), if they see Pty (Ltd) on your invoicing, it makes them feel like the company is more legit or established and gives them peace of mind as customer. Ask any of them what Pty (Ltd) means, most wont know, but it is a trademark that lends credibility to your business.
2. You will be doing major business in other countries
Ok so why then would anyone opt not to CIPC register? The biggest example is a company we are all familiar with and probably regular users of, it reported 60 billion US dollars in revenue earlier this year and operates world wide. That company is Uber. They do not own any tangible assets. They operate across several different countries and in all US states where each have their own tax regulations. For Uber it makes sense not to company register their business. My second business isn’t Uber by the way 🙂 but I do plan on growing the service remotely to other African countries and for the scale up model, it would not make sense to register this business.
3. You need finance for the business
To open a business bank account, you will need a company registration number. If you plan to grow a lucrative business, I would highly recommend you open an account for it. Shop around with the banks to see which plan works best for you. Some banks want to be in total financial control once you open an account, other banks provide great tools to help for payment tracking and invoicing. Personally, I like the options at FNB.
If you want to ask a bank to finance your business, you will need an existing business account with that bank and you will have to present a business plan.
If you have a specific query or require more detailed support for your business, visit nubianetwork.com