Import and export ventures often start as a hobby or side hustle which means its legalities and finances are meshed with its owner’s. Operating a business in this way means you are trading as a sole proprietor. If you are importing or exporting as a means of making money, it is however best to register a company.

Here’s why:

1.     Company registration protects your brand

If a company is legally registered, others may not claim your business name as their own. If you have an unregistered enterprise someone else can register your name and legally force you to change yours, which means you risk losing the brand creditably you’ve built.

2.     You and your registered company are separate financial and legal entities.

Even if you give your import export venture a trading name, until it is registered it remains, for all legal purposes, you. A registered business is a separate financial entity. This means that your personal assets and funds cannot be seized to repay debts owed by your business – unless you have personally guaranteed them.

Company registration also means you have separate liability from your business. If your company should therefore be involved in a lawsuit, your personal assets cannot be seized.

3.     Registered companies have better access to financing

Banks do not give business loans to unregistered companies. This is more a matter of convention than a legal one, but registered businesses get taken seriously and unregistered businesses don’t. Similarly, investors will only put money towards a venture they feel has potential. Trading under your name may put them off investing in your venture.

4.     Registered companies get better tax rates

If your import export business is an additional source of income, mixing its finances with your primary earnings may push you into a higher tax bracket, even if the venture’s income is paid into a separate bank account in your name. A registered business may have its own banking profile and incur tax separately at a flat (non-bracketed) rate of 28% of taxable income.

Many company running expenses are tax deductible, the taxable income is your income after subtracting deductibles.

5.     Registered companies can change hands

If, down the line, you decide to sell your import export business, hand it over to a successor, or put it in your will, it would have to be separated from you in a legal and financial sense for someone else to take over.

As an example, an import export license that belongs to an individual (sole proprietor) is linked to their ID number and cannot be transferred. An import export license that belongs to a business is linked to the company’s registration number. Although customs would require an update of the director’s details, the import export license can be handed over to the company.

What you need to know about company registration

The most common company registration type is Property limited or Pty Ltd. This is a CIPC-registered company that trades for profit. A Pty Ltd is a separate legal entity from its shareholders (owners) and is registered as a taxpayer according to The Companies Act.

Click here to register a Pty Ltd.

Click here to register a Pty Ltd with share certificates and an affidavit for B-BBEE exemption.

South African traders may also register one of the following entities:

• A Trust – An entity registered by the Master of the High Court to protect assets by placing them under the control of trustees. A Business Trust allows trustees to use the trust assets to do business for profit to benefit the trust beneficiary or to further the aims of the trust.
• A Co-operative company (or Co-op) – A business undertaken by a group of people who work together for profit. Co-ops are often used in agricultural commerce and must be registered at the Registrar of Co-operatives.
• A Personal Liability Company, or Incorporated Company – Best suited to registered practitioners like attorneys, doctors, and accountants who, by law, may not enjoy limited liability. Although a Personal Liability Company is a separate entity, its directors are responsible for any debt and liability it incurs.
• A Non-Profit Company (NPC) – An entity set up to lobby a cause, like a church, charity organisation, or cultural organisation. The primary objective of an NPC is to benefit the public, not to make a profit. Its income may therefore not be distributed amongst its incorporators, members, or directors. NPC registration is with the CIPC, not to be confused with NPO registration which lies with the National Department of Social Development (DSD). An NPC may also register as an NPO – the main benefit being access to funding for which NPO registration is required. Both NPCs and NPOs may apply for government funding and tax exemption with SARS. Click here to register an NPC.

The snags

Although the benefits of registering your import export business are notable, company registration comes with its own set of responsibilities.

Assuming you trade as a Pty Ltd, which is the predominant registration in import-export, you would be liable for:

• Annual returns – Submitted to the Companies and Intellectual Property Commission (CIPC). Click here to learn more and submit your returns.
• Provisional tax – An advance payment towards your yearly income tax which must be filed twice a year and paid to SARS, after six months and at year-end.
• Income Tax – 28% of the company’s taxable income annually, paid to SARS one year after the financial year-end.

Depending on your business, you may also have to file for:

• VAT returns – Only if you are VAT registered. Submitted by means of a VAT201 form everyone, two, six, or twelve calendar months depending on the tax period allocated by SARS. Click here to learn more and get VAT registered.
• PAYE, UIF, and SDL – Only if the company has employees, by means of an EMP201 form. Click here to learn more and get these registrations.
• Dividend tax – A tax of 20% paid to SARS when declaring dividends. Dividends are money paid regularly (typically annually) by a company to its shareholders out of its profits. Young companies tend to push their profits into acquiring assets for further growth, so this may only be a concern down the line.

FAQ’s regarding company registration

Need assistance with registering your company? No problem we’re here to help. Click one of the below options to get started.

Not sure what you need, simply get in touch with our friendly and knowledgeable consultants to find out which registrations are right for you.