BUSINESS START UP - WORKSHOP - REGISTERING YOUR BUSINESS

Ok, so now you have made the decision to going solo! No more working for a boss for you. You have decided on the widget that you are going to sell or you have streamlined the service that you are going to offer and now you need to get started. You’ve decided on the name of the company and now you have to get it legal! One of the first things that you need to do is Register your company.

Please note that should you wish to Register either a Close Corporation and/or a Company (Pty), I strongly recommend that you obtain the services of a Company that specializes in this or your Accountant. If you wish to register everything by yourself, this is what you will require and why.

Registering your Company
You have 3 different options here. A sole prop, a Close Corporation or a Company.

The Sole Proprietor
The first one being a Sole Proprietor is the easiest and the one where your personal assets are most at risk. For a Sole Proprietor all you really have to do is open up a bank account. For example Jane Doe T/A (trading as) ABS Consulting. Done and finished!

The Close Corporation
The Close Corporation or CC takes a bit more time, effort and money, than a Sole prop. There are legal implications that you need to take into account.

It is much easier to register a CC than a Company. A CC acquires its status by it’s incorporation in terms of the CC Act.

A CC is ideal for a small business that does not need a complicated legal structure. A CC can have one member, or if you decide to work with partners, it can have up to 10 members. It is a separate legal entity from its owners: however it is still a simple legal form that needs to be completed and submitted.

A CC provides a Limited Liability to its members, except in the case where the members indulge in fraudulent and/or reckless business practices.

Instead of shares, the members hold an interest in the business and these are held as a percentage. They are easier to form as well as easier to dissolve, than a Pty.

A CC is required by law to keep proper accounting records and to prepare an annual financial statement, but it is not required to have an audit. The financial statement must be reviewed and signed off by a professional accounting officer.

A CC is a separate Taxable Entity and as such enjoys some of the tax benefits that are not available to individuals. In terms of the Tax Act, a CC is considered to be a company and therefore it will be taxed at the company tax rate that is payable on taxable income.

A CC provides a more stable business life than a Sole Proprietor. The ownership of the Business is easily transferable. The profits remaining after tax may be distributed to its members by way of a dividend. A CC is a provisional taxpayer; this means that it will have to make provisional tax payments. The members of a CC must also register as provisional taxpayers.

Some of the disadvantages of a CC are, but not limited to:
1. The members of a cc must either be natural people or a Trust. Another cc or (Pty) cannot be a member of a cc.
2. It is subject to more regulations than a Sole Proprietor or a partnership.
3. It is more expensive to organise than a Sole Proprietor or a partnership, if it is drawn up by a legal entity.
4. It is limited to 10 members.

The only requirements for the formation of a CC are the registration and a membership agreement. Remember that it is advisable to have a membership agreement in place in order to have proper legal entities in place.

To register a CC, you need to reserve a name. The name cannot resemble the name of any other company or CC and the Registrar must consider it acceptable.

The reservation and approval of the name must be approved by the Registrar before you can lodge a founding statement for your CC. To do this a CK7 form must be completed in duplicate and submitted to the Registrar, together with the prescribed fee. Once the name has been approved the CK1 document must be completed and submitted, together with the approved name, original accounting officers letter and the prescribed fee.

The name reservation is valid for two months from the date of issue.

Remember to pay your members contribution timeously to avoid penalties.

The Registrar will assign a registration number to the CC and will notify you of this number. The member’s certificate and deposit of contribution must also be retained. This is your evidence that you have complied with all the requirements for registration. Your documentation must be kept safe – it is your proof of registration and must be available for inspection by any person.

It is suggested that the registration be handled by an Accredited Accountant as this will ensure that the documents are correctly completed and submitted. After registration a certificate of member’s interest for each member must be completed, signed and retained for audit purposes.

Companies

Companies have more administrative formalities and/or statutory requirements than a CC. The tax implications for a private company are the same as those for a CC.

A Company offers, but is not limited to the following benefits:

1. It is a legal entity separate from its shareholders;
2. The shareholders have a limited liability, which means that they cannot be called upon to contribute to the debts of the company limited by share capital.
3. There is perpetual succession. This means that the company will continue to exist even if the individual shareholders and/or directors change.

Registration and incorporation are complicated. There are two types of Companies that are limited by share capital:

A Public Company, and
A Private Company

A Private Company has but is not limited to the following criteria:
1. It may have up to 50 members
2. It must have at least 1 Director
3. Shareholders can transfer shares freely, unless they are restricted by the Articles of Association.
4. Shareholders have the right to elect directors at the AGM
5. Directors may exercise their powers through the Memorandum and Articles of Association.
6. Shareholders cannot act as agents of the Company.
7. Private Companies are prohibited from offering shares to the public.

Consult a specialist who deals with company registration as it is a complicated process. You will need to register the Memorandum & Articles of Association.

To secure the incorporation of a Company, the requirements of the Companies Act must be fulfilled.
The Registrar will issue a Certificate of Incorporation. This proves that you have satisfied all the requirements of the Act.

To register a Company you must reserve the name on a CM5. Various other forms need to be completed and submitted. These are, but not limited to:
· CM 5
· CM 1 = Certificate of Incorporation, memo, subscriber page(s), articles and subscriber page(s)
· Notarially certified copies and notary certificate on top
· CM 46 = Certificate to commence business
· CM 47 = Adequacy of capital (each Director must sign one)
· CM 22 (in duplicate) = Registered addresses of each Director
· CM 27 = Consent to act as a Director (each director must have one)
· CM 29 (in duplicate) = Content of the Registration of Directors and the approval of the Auditor
· CM 31 (in duplicate) = Consent form from the Auditor
The Articles of Association govern the internal affairs and management of the Company whereas the Memorandum relates to the external characteristics of the Company, therefore the Articles deal with matters such as shares, share certificates, transfer of shares, and so on.

A Notary Public Official will affix a seal to the certified copy (or however many additional copies you require), of the Memorandum, for certification purposes.

The original memorandum plus the Articles of Association, together with the certified copy and the other documentation must be lodged with the Registrar of Companies.

Registering the Business

Remember, if you decide to register, either a Company or a CC, you will need to deal with the respective registrars, namely either the Register of Companies or in the case of a CC the Registrar of Close Corporations. Both of these Registrars are at the same location, just different offices.

In each case, you will be required to complete the official forms which can be purchased at Government Stationers or approved stationery stockists.

In each instance the Registrar will advise you what fees apply to what. These can be purchased at the Registrar or Professional’s who work with these documentation on a daily basis, such as Corporate Consultants (www.corpcon.co.za).

The Founding Statement

The Founding Statement serves as the Charter of the CC and sets out its structure.

It is currently in either English or Afrikaans at this stage and must contain the signatures of every person who will be a member.

It must contain the following:

1. The full name of the CC;
2. Details of the main business activities of the CC;
3. The written consent to act as the Accounting Officer must accompany the statement:
4. The date of the Financial Year end.
5. The full address of the Registered office.
6. The name of the profession to which the Accounting Officer belongs;
7. The full name(s), ID number(s), Residential and Postal Addresses of each member.
8. The percentage of each member(s) interest and/or share in the Corporation.
9. Particulars of each member(s) contribution to the Corporation.

A CK1 must have been completed, in duplicate and lodged with the Registrar together with the prescribed fee.

The CK7 form, together with the Founding Statement, as well as the Letter of Consent and the Appointment of the Accounting Officer should also be enclosed.

Upon Registration of the Founding statement, the Registrar will assign a registration number to the CC and will notify you of the Incorporation. This will be conclusive evidence that you have complied with all the requirements for registration.

It is always important to keep copies of all the documentation as proof of registration. These documents must always be available for inspection by any person.

Registered Office

Every Company must have a Registered Office. The CM22 form gives details of the Registered Office and its postal address.

The Company will receive all legal notices and documents a this address.

Records that the Registered Office must keep

It is incumbent on the Directors of the Company to ensure that the following documents and/or records are maintained and kept:
The minute book of the general meetings of the Company;
Accounting Records, including a Register of Fixed Assets;
Registers of allotment of Shares, Members’ Pledges and Bonds, Debenture Holders, Directors and Officers, the material interest of Directors and/or other Insiders in the Shares and/or Debentures of the Company and the Attendance Record of Directors and/or Managers meetings.