Benefits of registering a Private Company (PTY) Ltd
- Tax Benefits
As a Small Business, you are able to get numerous Tax Benefits / Deductions if registered as a PTY. Note that a Tax Practitioner will need to assist you with these Tax Submissions at year-end. It is however your responsibility to make sure you keep all your receipts. ** Some benefits follow:
- Auto expenses (car related deductions)
- Medical Aid
- Donations / Charity
- Home Office Space
- All business related expenses
- It is official and formal (Government Tenders / Contracts / Imports or Exports)
When registering a PTY you become a formal entity which can trade separately from its owners. As a business entity (with its own name and bank account) you can then apply for Tenders, sign Contracts and trade internationally (for Imports and Exports you need a permit).
- Less Risk
A PTY is registered as a separate entity, meaning that you (as the Owner / Director / Shareholder) take much less risk than when you are dealing under your own name. Please refer to the Companies Act.
- Save money
The Private Company (PTY) has replaced the Close Corporation (CC) business registration format. You do NOT pay any audit fees until you become a massive business (please refer to the Companies Act). It is currently the most inexpensive and suitable legal business format for an entrepreneur or business man / woman who want to start a business. This business format allows you to start and stay small or grow to a massive enterprise. PTY’s are also eligible for Tax and Vat related deductions.
Here are more advantages of the Private Company (PTY) business format:
- A Private Company needs one or more Director(s) to start. It can operate its business immediately after incorporation.
- A Private Company is required to perform lesser legal formalities as compared to a Public Company. It enjoys special exemptions and privileges under the Company Law. Therefore, there is greater elasticity of operations in a Private Company. For example, in most cases no auditing is required.
- In a Private Company there are less people to be consulted. If the Directors are also the Stakeholders of the Private Company, there is no law preventing them to make a decision quickly.
- A Private Company is not required to publish its accounts or file several documents. Therefore, it is in a better position than a Public Company to maintain business’ trade secrets or Intellectual Property (IP).
- Much less of a Financial Reporting obligation is required for Private Companies than other company formats or the ‘old’ Closed Corporations format.
- Private Companies are more liquid in their share allocation and can consist of more than 50 shareholders.
** Regarding tax: A (PTY) Ltd may register for either Turnover Tax, or VAT.
Turnover Tax is aimed to help small or micro businesses so that they do not have to pay a lot of tax. It works on a sliding scale and looks as follows:
|Turnover in Rand||Rate of tax in Rand|
|0 – 335 000||0%|
|335 001 – 500 000||1% of R1 above 335 000|
|500 001 – 750 000||1 650 + 2% of the amount above 500 000|
|750 001 and above||6 650 + 3% of the amount above 750 000|
(Please note that not all types of micro and small business are eligible to register for Turnover Tax)
- It is mandatory for any business to register for VAT if the income earned in any consecutive twelve month period exceeded or is likely to exceed R1 million.
- Any business may choose to register voluntarily if the income earned, in the past twelve month period, exceeded R50 000.
- Only if you have registered for VAT may expenses such as the ones listed in Nr.1 become tax deductible.
- You may only register for VAT if your company has been in business for a minimum of three months
What I would need from you to register a (PTY) Ltd:
- Completed information sheet (I send this to you)
- Certified copies of the Identity Documents of every director
- Proof of address of every director
- Payment of R975-00
- After completion of the simple information sheet and payment, I will lodge a name reservation on your behalf. Depending on the name, this might take anything from one hour to five working days. (They do a name, as well as a comparative name check)
- Once a suitable name has been accepted and reserved, I will email you a form to sign which is then lodged with the company registration and all the other supporting documents.
- Once the company registration is complete, I send you one other form which literally just needs your, and the other directors’, (if there are any) signatures.
Please note that the registration of the company includes registration at SARS. I do not charge extra for this. You do still, however, have to register for the specific tax that you choose.
And that is all!
I will then send you all the documents you need to open a bank account in your company’s name, and start trading.
These documents include the following:
- Notice(s) of incorporation – COR14.1 and COR14.1A
- Registration certificate – COR14.3
- Memorandum of Incorporation (MOI) – COR15.1A
I hope that this information has helped you in answering any questions you might have. If you do have more, please don’t hesitate to contact me on the details listed below.
I hope to hear from you soon and to welcome you into the world of Entrepreneurship!