Generic selectors
Exact matches only
Search in title
Search in content
Search Posts
Search in pages
Search Products
Filter by Categories
Company Secretarial
General Business
General Interest
Investing in Property
Personal Growth
Personal Wealth
Trusts and Estate Planning

I have already discussed whether a trader should trade through a company, but what about a service provider? A service provider is a business that supplies services rather than goods. Should it be a company?

If the services are provided mainly (80% or more) to one client, then the company may well be classified as a Personal Services Company, in which case the client must deduct PAYE from all invoice payments.

This often discourages the client from doing business with you. However, the same would be true if you sold your services directly. In that case the client would have to put you on their payroll.

The exception to this is if you employ at least three independent, full time employees, active in the business of providing the services and not under the direct supervision of the client. Then your company would not be classified as a Personal Services Company, your clients would not have to deduct PAYE and the company may be elligible to classify as a Small Business Corporation, an option that is not open to sole traders.

If you have to register as a VAT vendor (either at the insistance of a client or because your turnover exceeds R1m a year), then being a sole trader has the advantage that, provided your turnover is under R2,5m, you can account for VAT on the cash basis, an option that is not open to companies. this means that VAT will no be tied up in your debtors’ book after you have paid it over to SARS.

So, the answer very much depends upon the particular circumstances.


XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Need help with your Trust or Buisness?

Contact us today or set up a free meeting with our CEO, Derek Springett. We have been offering expert advice and business services since 1971. You can also visit our online store to see our full list of services.