General Business Archives

Most service providers charge about R2 000 to register a new company including registering the name of your choice. Some of them will provide the share certificate(s) and securities register included in their fee. But, if you are looking for the lowest cost option, you can do the job yourself via the CIPC website. It will cost you R250 in CIPC fees. You then have to create a share certificate and share register, and you need to know how to download all the company documents. The option that most people choose is to get us to do the job…

Let’s say that you own 50 shares and they represent 50% of a company’s share capital. They cost you R1 000. The net Asset Value of the company has grown to R200 000, so your 50% is worth R100 000. Then the directors issue another 100 shares and sell them for R100 000. You now have 1/4 of the share capital and the Net Asset Value is R200 000 + R100 000 = R300 000. So, your shares are now only worth 1/4 x R300 000 = R75 000. Have you suffered a Capital Loss of R25 000 in tax…

I’ve just been looking at a trial balance that shows that there’s R13 750 in the petty cash box. I look at the transactions and all I see is R13 750 going into Petty Cash and nothing coming out. Clearly this is wrong. Now, in the old days, we used to keep a Petty Cash Book and recorded all payments made with cash. This had to reconcile to the amount of cash in the box. A nightmare! Then someone came up with the idea of the Imprest Petty Cash System. Here it is – Put say, R4000 in the box.

This is almost a daily question so, here’s our advice. The response depends on whether or not you want the company alive. If you don’t want the company We have come up with a simple solution. Provided the company has never traded, we may agree to take it over, restore it and deal with the penalties. At the same time we will also register a new company for you at no charge if you want one. Your problem solved! You end up with a clean company and we deal with the dirty one. Send me an email to derek@harb.co.za giving…

I love this one. I revisited it when someone asked me pretty much this question in a comment to one of my articles. I decided to ask my AI friend, Perplexity.ai, to tell me specifically where in the Companies Act does it state that a company must issue shares, because I have been unable to find such a requirement. The AI responded with various “expert opinions”, all of which said that a company must issue shares. But the AI could not give me a reference in the Companies Act. So, here’s how I responded to the person who posted the…

When we do the bookkeeping for small companies we so often see payments to Wimpy, Dischem, Pick n Pay, Spar and the like. All quite obviously personal expenses. Is there anything wrong with this? Not in law, because the astute bookkeeper will debit these expenses to the business owner’s loan account. The problems are – Some personal expenses will get missed and will be deducted from the company’s taxable income. This is tax fraud. Some business expenses may be inadvertently treated as personal expenses and not be deducted from the company’s taxable income. The additional bookkeeping time spent sorting out…

Because of the business we’re in, we tend to register more companies in our group than we actually need. So, when we ran short of older shelf companies, I dug around and found a 1996 Close Corporation that we had formed, never used and allowed to be deregistered. It’s now possible to reinstate companies that were not trading at the time of deregistration, so we reinstated the old CC, paid R3 500 CIPC penalty fees to complete the 14 outstanding Annual Returns and we then had an antique on the shelf. We renamed it “In Business Since 1996” It sold…

Let’s take a look at what the Companies Act says about this. s13(1) One or more persons may incorporate a profit company, or three or more persons may incorporate a non-profit company. So, we’re back to the definition of a “person”. Interpretations Act – Definitions (x)(b) “person” includes any company incorporated or registered as such under any law. So, yes, it would appear that a company can be one of the incorporators of an NPC. Notice that the Act does not require that the incorporators be unconnected. That only comes into the Income Tax Act. Here’s what the Income Tax…

This is a follow on to my article of two weeks ago “How do I buy property cheaply? The seller’s attorney had originally drafted the Sale Agreement and I was engaged by my client to modify it to ensure compliance with SARS’ requirements for zero rating of the sale of a going concern. The seller’s attorney, who clearly didn’t understand the VAT Act, kept putting obstacles in the path until my clients got fed up to the point where they were going to tell the seller that they were walking away from the purchase. I suggested that rather than walk…

Almost every day, I get a phone call from someone who wants to buy a VAT registered shelf company. It’s usually because they want to buy a going concern business (most commonly a commercial property) at zero rate from a VAT registered company. As I explained in my February article a shelf company cannot, by definition, be VAT registered, because a shelf company is one that has never traded. Taking any route to buy such a company is therefore very risky. There is, however, a solution: Register a new company. Sign the Offer to Purchase (OTP) in that company’s…

My simple answer is NO!! Why? Because if you need to ask that question, you are not ready for the obligations that come with companies. Here are some of them with approximate costs. Cost of company R600 Beneficial Ownership Return within 10 days of registration R2 000 Bookkeeping from R7 000 per year 3 tax returns a year R4 000 to R6 000 per year Beneficial Ownership and Annual returns to CIPC R4 500 per year Then you decide to shut the company down. Cost about R13 000 plus all the outstanding returns. Rather spend R460 on my book “16…

I often I get asked whether to “buy” a car on a Lease or buy on Instalment Sale and then whether the firm should own the vehicle or the Director. The answer to the first does depend on the answer to the second, so let’s tackle the second one first. (How confusing is that?!) If the object is to minimise the combined tax bill of the company and the director, then it is worth while doing the numbers. But the chances are that, if the vehicle is in the middle to upper bracket and the director does a fair amount of…

How do you feel about the new User Interface that Standard Bank are trying to shove down our throats? There’s an option to revert to the old UI, but next time you log in you’re stuck into the new one. I feel I’m getting shunted around and having to either enter my password or scan my QR code just to get in and then again to go to the old UI. Then, we have four business accounts and two personal accounts. Where are the personal accounts? Nowhere to be seen! And you want to pay a beneficiary? Sorry chum, there…

It just gets worse and worse. Trusts Here’s the latest stuff up, an email from the Master: The staff member concerned is the one tasked with submitting all our clients’ Beneficial Ownership returns. She has NO authority to disclose the contents of the return. The Master, however, is giving her that power. We have two Growth Trusts on our books and there are another two on the portal, and the email does not give the trust number. Companies Here’s the old news: When completing the submission you have to select “Company without Beneficial Owners” or “Company with Beneficial Owners”…

I get so many questions about “Trading As” that I again feel that I have to explain what is actually a very simple concept. Any company can “Trade as” as many different business names as it likes. There is NO control over this, no regulations and no registrations. Yes, you can do what you like, despite what the Consumer Protection Act tried to instigate*. Only two things you must bear in mind: Do not incorporate a wellknown brand, like “Woolworths” by trading as, for example, Woolworths Retailers. Their attorneys will demand that you withdraw the use of that name. Do…

So many people are confused by this. So, here it is in as simple terms as the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act of 2022 will allow. Beneficial Ownership of Companies Every company, whether active or dormant, is required (correctly) to submit a BO return to CIPC within 10 days of any change of beneficial ownership. CIPC are also insisting (incorrectly) that this be done annually, before the submission of the normal Annual Return. The beneficial owners of a company that is owned by natural persons are: The shareholders Anybody else who has control over the…

I have been puzzled by the fact that we are still selling a lot of shelf companies. After all, it only takes a few days to register a new company, and the cost is R610, compared to R4 240 and upwards for a shelf company. As the sales are online, we don’t get to ask the question. I can only assume that they want an old company so that they appear to have been in business since its registration. What really does make sense is to buy one with an import or export licence if that’s what you need, as…

You’ve built your small business (one with assets valued at no more than R10m) and now you want to sell it, use the proceeds to add to your property portfolio and retire. What are the CGT implications? We have to go to the Eighth Schedule of the Income Tax Act para 57 2(c). Provided you are 55 years or older or that you are selling because of ill-health, infirmity, superannuation (why can’t they say retirement?) or death, the first R1,8m capital gain is ignored. Isn’t that lovely? The company cost you R100 (shares). It’s now worth R10m, so you’ll only…

According to the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 2022, the Directors of every company are required to submit a return of the Beneficial Owners (usually the shareholders) of their company to CIPC. Then they only have to submit another if, and when, the beneficial ownership changes. At this stage, I am not convinced that CIPC will only impose this obligation once or will require a new Beneficial Ownership along with the submission of every annual return. We’ll have to wait and see whether or not they get it right. In the meantime, however, they have…

You are thinking of going into business. You haven’t really made up your mind but you figure you may as well register a company in the meantime. Bad decision! We register hundreds of companies, and it is truly sad to learn later just how many of them never even started trading. The usual message is “Hi Derek, you may remember that you registered a company for me back in 2018. It’s never traded, so I didn’t submit tax returns or any of that stuff. Now SARS has hit the company with Administrative Penalties totalling R35 500! I’m not sleeping at…

General Business

What is the cheapest way to register a South African company

Do I suffer a capital loss if my shares get diluted?

How do I deal with Petty Cash properly

My deregistered company is being hit with penalties by SARS – the solution

Must a company issue shares?

Can my company pay my personal expenses?

Old shelf companies

Can a company be an incorporator of a Non Profit Company?

What must I look for in a Contract?

How do I zero rate a going concern when I don’t have a VAT registered company?

Should I register a company?

Should I buy or lease my business car?

Trouble at Standard Bank

Beneficial Ownership returns. The greatest stuff up we’ve ever dealt with.

When can a company “Trade As”?

Beneficial Ownership Explained

Why buy a shelf company?

CGT allowance on sale of small business on retirement

How often must I submit a Beneficial Ownership return to CIPC?

Should I form a company?