Registering as an Incorporation means that you may have one or more owners and all the directors will have shared control of the business. It is a lot more complex than a Sole Proprietorship. You will have to register the Incorporation with CIPC (Companies and Intellectual Property Commission) and remain compliant with their rules and regulations.
Running an Incorporation, though means that should the company become insolvent for any reason creditors cannot claim the debts from the owners in their private capacities. As you the owner are a separate legal entity to the business.
You will need to file annual tax returns with CIPC and all business income and expenses will have to be declared on the business’s tax return. You will need to register for PAYE (Pay As You Earn) and UIF (Unemployment Insurance Fund). The Business will also need to register with SARS as an income taxpayer and as a provisional taxpayer. There will be 3 tax returns due per year for the business.
- 2 Provisional tax returns (August and February)
- 1 Income tax return (Based on when the INC was registered)
Company profits are taxed at a flat rate of 28%. Financial statements must be compiled by an Accounting Officer and submitted to SARS. You will also need to register the business as an employer with SARS and the owner/s and directors will need to be placed on the payroll. This means that you will draw a monthly salary in your personal capacity and the company will have to deduct PAYE and UIF monthly and pay these deductions to SARS each month.
I would advise that if you are a one-man show then begin as a Sole Proprietor as there is less paperwork and admin needed to begin with. It also is more tax-efficient to begin this way and once you earn a lot more, it may become more efficient to switch to an INC. So that you can benefit from the 28% tax rates.
If you are starting your practice with a partner then you will need to set up the business as an in corporation.