Guide to registering a business in South Africa

With one of the largest economies on the continent, South Africa is a popular destination for would-be entrepreneurs. Registering a company is a manageable process and the South African government offers several legal business structures to choose from.

However, it’s essential to first familiarize yourself with the country’s visa conditions, tax regulations, accounting standards, and local workplace culture environment before registering your business in South Africa.

Keep reading for more about these topics:

Who can register a business in South Africa?

Technically, any legal resident of South Africa may start a business in the country. The legal and regulatory requirements for registering a South African business depend on the individual’s nationality and immigration status.

South African citizens and permanent residents have the easiest path to starting a business – they simply have to register it with the Companies and Intellectual Property Commission (CIPC).

Other foreign nationals need to invest a minimum amount of capital (currently R5 million in either cash or resources). They also have to employ at least 60% South African citizens and provide a comprehensive business plan.

Temporary residents can start a business if they first obtain a financially independent person visa. These are given to individuals with a minimum net worth who can support themselves in South Africa. The current amount needed is R12 million in savings.

Legal structures for South African businesses

The Companies Act No. 71 of 2008 governs the legal formation of businesses in South Africa. It details several different legal company types, including the following.

Sole proprietorship

Sole proprietorship is the simplest legal business form in South Africa. It involves a sole trader doing business, either under their own name or a business name. There is no separation of or distinction between business and personal income and assets, and the sole proprietor is liable for all business debts.

Unincorporated partnership

In an unincorporated partnership, the shared responsibility is a key feature. This is where a business owned by at least two individuals is not registered as a separate legal entity. It operates largely the same as a sole proprietorship, with all business profits shared between partners and each partner being jointly liable for any business debts.

These types of partnerships are often known as Personal Liability Companies and are frequently used for professional firms, for example, doctors, lawyers, or accountants.

Private company (Pty Ltd)

This is a form of a privately owned company incorporated and registered as a legal entity in its own right. In other words, it is treated as separate from any owners and is liable for corporate tax. All owners are shareholders and if they work for the company then they are legally employees, for example directors. Importantly, these owners are not personally liable for any business debts, providing a secure investment environment.

In South Africa, private companies must have a minimum of one shareholder. Until recently, there was a maximum of 50 shareholders limit, but this has now been lifted.

Public company (Ltd)

Public companies, a distinct form of an incorporated company, offer flexibility in their structure. Their shares are open to the public, and the management is entrusted to a Board of Directors. These companies should have a minimum of seven shareholders, but there is no maximum limit.

Public companies can either be listed companies, meaning they are listed on the national stock exchange, or unlisted, where they don’t appear on the stock exchange but still have publicly available shares.

How to register a business in South Africa as an expat

The first step to starting a business in South Africa as an expat is ensuring you meet the immigration-related requirements for business owners, like having the correct visa or residence permit. Then, you can start your South African business, but remember that you must follow specific legal, administrative, and financial procedures.

Legally registering your business in South Africa

If your business is incorporated, in other words, if it exists as its own legal entity, such as a private company, you need to register it with the CIPC. Sole traders and unincorporated partnerships don’t need to register. However, they can choose to do so.

You can officially register a business with the South African government in one of three ways:

• Through the CIPC website
• Using the BizPortal platform which was set up by the CIPC
• Via a South African bank or admin service provider that offers business registration services

To register, you will need to provide:

• Copies of the IDs of all company directors
• Certificate confirming the business name, available on the CIPC website (optional)
• Articles of Association, if you have them

You should register your business either before or soon after you start trading. The process typically takes between 3 and 21 working days and the fee is usually R125–500, depending on the process.

All businesses in South Africa also need to register with the South African Revenue Service (SARS) for tax purposes. You can do this by completing an IT77 fvorm from your local tax office or the SARS website. Businesses need to register within 60 days of beginning trading. If your company makes an annual turnover of over R1 million, you’ll also need to register for VAT.

Licenses and permits

Businesses trading in certain industries in South Africa need a trade license. These include:

• Restaurants, cafes, and any businesses serving food
• Pubs, bars, and nightclubs serving alcohol
• Health services such as clinics, spas, gyms, and public baths
• Entertainment providers such as cinemas, live music venues, or casinos

You will need to apply for any licenses needed through the licensing department of your local municipality before you begin trading. There is a one-off application fee, usually no more than R500.

Certain professions in South Africa, for example, lawyers and doctors, are regulated, and those who practice them need to be members of a professional body. If you start a business in South Africa in a regulated industry, you must have the necessary licenses in place.

Registering an online business in South Africa

If you have a business idea but don’t want to go through the hassle of sorting out an office or store, you can set yourself up as an online-only enterprise in South Africa. The South African e-commerce market is valued at around R200 billion per year.

The process is essentially the same as for setting up a regular business. For example, the same registration and licensing requirements apply, and you must register with SARS for tax purposes.

Bear in mind that you will have additional considerations, such as purchasing a domain name for your website. If you want to open an online store, you can use platforms such as Shopify or Portmoni.

Foreign companies opening up a South African branch or subsidiary

To open a branch of your business in South Africa, you can choose between setting up a subsidiary and registering as a foreign company.

Setting up a subsidiary is the more complicated of the two, but it means that you will be more embedded in the South African economy. It essentially means setting up a separate legal company in South Africa. The parent company’s control is exercised through being a major shareholder, and they will typically have representation on the company board.

Setting up a subsidiary means starting up an entirely new business and being subject to the same accounting requirements as South African businesses.

Registering as a foreign company is more straightforward and usually means simply opening a branch in South Africa. The business is domiciled in its home country but will taxed in South Africa on income earned in the country, and the branch will also have to follow South African business regulations. This includes submitting annual account statements to SARS.

Although opening a full branch is the main method of becoming an external company in South Africa, you may also need to register if you:

• Hold board or shareholders meetings in South Africa
• Open up a South African business bank account
• Acquire property, mortgages, or debts in South Africa
• Acquire any intellectual property
• Recruit any employees in South Africa

Neither branches nor subsidiaries have to have any South African residents as owners or board members. However, they will need a local resident to act as a public officer or representative overseeing operations. They also need to maintain a local auditor.

External companies with a presence in South Africa can convert to a subsidiary as long as they meet certain requirements.

Registering a nonprofit or charity in South Africa

Non-profit organizations exist to serve a defined benefit to the public or a particular community. In South Africa, nonprofits are exempt from corporate tax. Contrary to popular belief, these organizations can generate a profit, but this must be used to further the stated aims and objectives and not be returned to shareholders or directors.

If you set up a nonprofit or NGO in South Africa, you need to register it with the CIPC with a minimum of three incorporators and three directors. You can register with or without members. The process costs less than R500 and takes about a month to complete.

All nonprofits in South Africa must have a Memorandum of Incorporation (MOI) that clearly defines the company’s purpose and public benefits. You can use a standard MOI provided by South African law or a customized MOI tailored to your company to meet legal standards.

Nonprofits in South Africa must also register with the Department of Social Development (DSD) to apply for public grants or donor funding.

In addition to non-profit companies, there are two other types of charitable organizations in South Africa:

• Voluntary associations: usually smaller and less formal, requiring only three people to agree on a common objective and without any need for registration; these organizations often don’t generate any income as part of their day-to-day activities
• Non-profit trusts: set up to manage property or funds to achieve a defined public benefit or charitable goal, as laid out in the Trust Property Control Act

Administrating your business in South Africa

Along with arranging necessary visas, registration, and licenses, there are several other administrative aspects that you will need to consider when starting a business in South Africa. These include:

• Insurance – public liability and motor vehicle insurance are compulsory for most South African businesses, along with unemployment insurance and employer’s liability if you have staff
• Banking – incorporated businesses will need a business bank account to manage their funds, and it’s also advisable for sole traders and unlimited partnerships to open a separate account to keep track of things
• Accounting and taxes – you will need to keep official accounts for at least seven years and follow the accounting/auditing requirements for your type of business, paying taxes such as corporation tax, VAT, and dividend tax as required
• Hiring staff – if you employ staff, you will have to register them for PAYE tax and social security if they earn over R40,000 a year, plus you need to pay the Skills Development Levy (SDL) if your payroll exceeds R500,000; bear in mind visa requirements and quotas (maximum 40% foreign workers) if hiring overseas staff
• Social security – self-employed business owners in South Africa are responsible for registering themselves (along with any employees) with the Unemployment Insurance Fund (UIF), which covers unemployment benefits along with benefits such as maternity pay and sick pay; it is compulsory to register employees but self-employed workers can choose whether or not to enroll

Support and advice when starting up a business

The Department of Trade, Industry and Competition (DTIC) is an excellent place to start regarding financial support for new businesses. You can find information on a wide range of financial assistance available and details on South Africa’s Special Economic Zones (SEZ), which are geographical areas offering incentives such as tax breaks to encourage business growth.

Another useful resource is the Small Enterprise Development Agency (SEDA). This government agency provides mostly non-financial support and development services for small businesses in South Africa.

Other support and advice for South African businesses includes:

• SME South Africa – a one-stop shop for small businesses in South Africa
• National Small Business Chamber (NSBC) – membership organization offering support and networking opportunities
• Industrial Development Corporation (IDC) – information on funding and grants for businesses in South Africa
• Simodisa – support for South African startups
• South African Chamber of Commerce and Industry (SACCI) – national representative body for business in South Africa
• National Empowerment Fund (NEF) – promoting economic empowerment of black and minority groups in South Africa, with information on funding opportunities
• Business Women’s Association of South Africa (BWASA) – support for female entrepreneurs
• Women In Business – networking and information-sharing non-profit for women in South Africa
• GreenCape – nonprofit that promotes green business solutions and helps South African companies to be more eco-friendly and sustainable

South African corporate social responsibility (CSR)

Businesses in South Africa have a long tradition of philanthropy at a local level, often donating money to improve education and healthcare in their communities. Post-apartheid, the King Codes, starting in 1994, introduced a national framework for business governance. This sets out principles and practices that companies can adopt.

The 2003 Black Economic Empowerment (BEE) Act has significantly influenced businesses, pushing them to improve performance and reduce apartheid-era inequalities. Since 2010, the Johannesburg Stock Exchange (JSE) has furthered this cause by requiring all listed firms to comply with CSR principles and produce annual reports. However, South Africa has yet to establish a national CSR strategy or action plan.

Businesses in South Africa have a variety of options to incorporate CSR approaches. These include donating a percentage of profits to causes, encouraging employees and executives to volunteer on community projects, strengthening worker rights and promoting employee empowerment, committing to ethical supply chains, and adopting environmentally sustainable practices. Each of these approaches can make a significant impact on the community and the environment.

Business training courses in South Africa

If you want to brush up on your business skills before or after setting up your South African business, you might want to consider a short study course or online course that you can do in your spare time. Places such as the South African College of Business (SACOB) and the Gordon Institute of Business Science (GIBS) offer a range of suitable courses.

You could also consider studying a more in-depth program depending on available time and finances. For example, a degree or postgraduate course at a South African university. It’s worth investigating the different study options if you feel it may provide long-term benefits for your new business.

Useful resources

• Department of Trade, Industry and Competition (DTIC) – government department responsible for business growth in South Africa
• gov.za – South Africa’s central government website
• Companies and Intellectual Property Commission (CIPC) – responsible for business registration in South Africa
• BizPortal – online portal for business registration
• South African Revenue Service (SARS) – deals with business taxes in South Africa
• InvestSA – information on investment opportunities in South Africa
• Department of Home Affairs – requirements for the financially independent person visa application