Common mistakes to avoid when registering a business in South Africa

If you’re an entrepreneur based in South Africa, registering your business is a crucial first step towards success. You need to step carefully so you can get it right the first time and avoid costly setup delays. Keep reading our blog for the most common errors made by new business owners and how you can avoid them during the registration process. 

Failing to choose the right business structure

The legal structure of your future business is not a decision you should take lightly. It has an effect on all aspects of your company, from the taxes you pay to liabilities. Many South African small businesses make the mistake of choosing a business structure that appeals to them at first glance without delving into the finer details. 

When registering a business in South Africa, you typically have three choices: 

• Sole Proprietorship: The easiest to set up. However, it doesn’t legally separate personal and business liabilities. 
• Private Company (Pty Ltd): Offers limited liabilities and is easier to raise capital. 
• Partnership: Best for small businesses. Any partners are personally liable for your business debts. 

Choosing the wrong legal structure for your South African business could be detrimental. A sole proprietorship might seem like the right choice, but it means you’re legally responsible for any business debts. On the flip side, a private company does allow you to raise capital easily, but it’s subject to more regulations and compliance under South African tax law. 

Consulting with a professional on which legal structure to choose will help you make better-informed decisions. 

Incomplete or incorrect documentation

Submitting all the correct documents on time when you register a business online can feel overwhelming. There are a lot of documents to file, which trips up many South African entrepreneurs. 

One of the most common mistakes made is submitting forms with the wrong company name listed. Because this doesn’t match supporting documents, the registration request will be denied. 

Failing to provide shareholder information can also delay the registration process since the Companies and Intellectual Property Commission (CIPC) needs this to verify ownership. 

While these minor mistakes might not seem like a big deal, they can cause major delays when you register a business. To avoid this, always triple-check your forms and documentation to ensure they meet the CIPC requirements before submitting.

Overlooking tax registration requirements

Registering a business in South Africa also requires you to think about your tax obligations, including income tax, value-added tax (VAT), and Pay As You Earn (PAYE) with the South African Revenue Services (SARS). 

Some entrepreneurs overlook their tax registration requirements, which, if left unchecked, can lead to penalties and even legal action from SARS. You won’t be able to run your new business without following registration requirements.

VAT registration is mandatory once your business reaches a revenue threshold of R1 million in a 12-month period. If you’re an employer. You must register for PAYE with the SARS within 21 days.

 Neglecting to register for necessary licences and permits

Depending on your industry, you may need to apply for the relevant licences and permits with the SARS. Without these, you’ll struggle to operate your business and may even face hefty fines. 

For instance, if you’re selling food and drink or starting a restaurant that serves alcohol, you will need to acquire a liquor licence and health permit. 

If you’re unsure whether your business requires a licence, check here or with your local municipality. They will be able to give you guidance on applying for and receiving your permit. 

Not reserving a unique business name

Picture the scene. You’ve found a business name that speaks to you, and you’ve started developing your brand and logo, only to find that there’s already a business with a similar name operating in South Africa. You’ve wasted time, money, and effort and now need to come up with a new concept. 

To avoid this all-too-common mistake, use the Intellectual Property Commission (CIPC) name reservation tool. There, you can check the availability of your potential business name and reserve it before it’s taken. 

QuickBooks can help you keep track of your registration documents in real-time, allowing you to see how far along the process you are. 

Failing to prepare an accurate business plan

Without a salient business plan, your future business will struggle to get off the ground. Think of this document as a roadmap–it should guide your every move, even during the registration process. If you don’t present a well-thought-out plan to investors or banks, you won't secure the funding your business needs. 

It’s all too easy for investors to get ahead of themselves and register their business without thinking about the finer details. Don’t fall into this trap. Instead, make sure you have the key elements of your business plan drafted, including:

• Financial forecasts 
• Market research 
• Sales plan 
• Risk assessment 
• Competitor analysis

Having this on hand will help you understand how you’re going to manage your expenses and scale your operations. It’s also essential if you want to secure funding for your new venture.

Skipping professional advice

Many entrepreneurs think they can skip professional advice and rely on a quick Google search instead, whether it’s to save on costs or speed up the registration process. However, consulting with accountants, legal advisors, and business consultants is the way to go. South African tax and compliance laws are tricky. One wrong move, and you could find yourself back where you started. 

Enlisting the help of a professional will help you avoid costly mistakes, like registering for the wrong tax, missing documents, or failing to get the right permits. They’ll ensure that your business is registered and operating legally, so you can start making money as soon as possible. 

Conclusion

We hope this article has taught you how to register a business in South Africa​ while avoiding common mistakes. Remember that seeking professional advice is the best way to save time and money in the long term. 

QuickBooks can also support you as you get your business up and running. Our cloud-free accounting software streamlines your bookkeeping and accounting tasks, so you can focus on other aspects of running your small business. Sign up for our 30-day free trial today to find out more about how our software can help you.