Congratulations! You are planning to open a new company. Setting up a new company can feel like an exhilarating roller coaster! You will experience, at times, nerve-wracking lows but also adrenaline-pumping highs. Connecting with experienced and knowledgeable peers to provide advice, support, and guidance, is one way to make the experience more enjoyable. Below is some advice and knowledge we wish to share with you!

  1. Open a bank account in the name of the business – A company is a separate legal entity, and therefore you cannot use your personal bank account for the company. The bank account must be in the name of the company, and the director will have signing rights, and will have the fiduciary duty to manage the account on behalf of the company.

Why?

This can help you manage all your business-related financial transactions in one place. Separating your business and personal finances may help you maintain a clearer picture of your company’s cash flow and financial health apart from your personal assets and liabilities. A separate business account can help make your business appear more established and reputable.

2. Ensure that the accounting is done by a professional accountant. This will be to your advantage as the accountant will know best to allocate transactions, and to ensure that you are legally compliant and will also know what is best to ensure that you pay minimum tax within the law.

Why?

A common mistake made by business owners is poor financial management, monitoring, controlling, protecting and reporting on a company’s financial resources. We have encountered that many times the companies might not maintain, for years, proper accounting records and reports. This happens by and large with start-ups and entities in the SMEs (Smaller & Medium Enterprises). SARS is getting tough on tax offenders. The CIPC is also zooming in on reporting, with emphasis on who the beneficial owners are. We have encountered that after one or two years such SMEs realise the importance of maintaining proper financial and management reports and look for accounting firms to prepare these.

3. There are annual returns payable to the CIPC. This is payable on the anniversary of the company. Please ensure that this is paid otherwise your company will be de-registered with non-compliance.

Why?

The CIPC can be deregister a company either manually, if referred to do so by a nominated representative of the company or automatically, by failing to file annual returns. Deregistration will begin automatically when a company fails to file two or more annual returns.

4. Beneficial ownership of the company must be submitted to the CIPC. Should there be changes to the shareholding of the company, it must be reported to the CIPC within 10 working days after the change.

Why?

The primary goal of beneficial ownership transparency, and especially beneficial ownership records, is anti-money laundering. If your business does not comply, fines and penalties may be levied against you.

5. All companies are automatically registered for company income tax, as well as provisional tax. This means that all companies must pay provisional tax 6 months before the end of their financial year, as well as on the last day of their financial year. The final tax return for that financial year, is due before the end of the following financial year.

Why?

SARS is the tax agency of South Africa that collects and administers taxes, customs, and excise duties. Tax practitioners play a critical role in bridging the gap between taxpayers and SARS. Legislation, regulations and tax laws are continuously changing and evolving, it is imperative for companies to keep abreast of such changes. Your tax practitioner will assist you to do so and ensure that your company continues to meet its tax obligations.

6. The company must be tax compliant, and to prove the tax compliance of the company, you can apply for a Tax Clearance PIN from SARS.

Why?

Your businesses may be required to provide, confirm, or share tax clearance information to another entity, such as, potential customers or suppliers. Proof of tax compliance is an indicator of a company’s good standing in terms of its legal obligations and how well it is managed. Non-compliance will negatively impact on your business’s ability to trade.

7. The company is required to prepare financial statements within 6 months after its financial year end. Some companies are required to have the annual financial statements independently reviewed, or audited, depending on the Public Interest Score of the company.

Why?

Annual financial statements are a tool for stakeholders to monitor, control, protect and report on a company’s financial resources. They offer crucial data that you can utilize to monitor a business’s financial operations and draw in possible investors.

“Logic will get you from A to B. Imagination will take you everywhere.”

– Albert Einstein

Allow us to be your logical partner, freeing you up to dream, imagine and realise your new business and its success!