The benefits of registering your import export business

Import and export ventures often start out 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 own 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 in a separate bank account in your name. A registered business may have its own banking profile and incurs 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 you 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 details, the import export license can be handed over with the company.

What you need to know about company registration

The most common company registration type is a 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 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 it under the control of trustees. A Business Trust allows trustees to use the trust assets to do business for profit in order 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 dept 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 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 you 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 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 every one, 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 to further growth, so this may only be a concern down the line.

FAQ’s regarding company registration

The directors oversee running of the company (typically in exchange for a salary), the shareholders are the owners and share in its profits or losses. A person may be a director and a shareholder at once.

The company must have at least one director who is based in South Africa. Proof of a South African address is required for registration.

No, your license is linked to a specific ID number or business registration number and cannot be transferred between entities. You can however get a new import export license for your company once it is registered.

No, an import export license must correspond to the entity stated on a shipment’s commercial invoice, and the bank account that funds are paid in and out of.

You can apply for an import export license in your dormant company’s name if you’ve paid your annual CIPC renewal fees. If you have not paid your renewal fees, CIPC may have deregistered the business.

Your business will need an active bank account in order to get an import export license. Click here to open a business bank account.

Yes, a Pty Ltd requires a minimum of one director and one shareholder. You can be both. There are no minimum income requirements. If you want to stop trading you may keep the business registration as a dormant company, which means no taxes are due as long as there is no income, or de-register it. You are therefore not “locked in” to running a company once you have registered one.

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.

About the author

Frieda-Marié de Jager

With a degree in design from CPUT, Frieda-Marié started her career in digital and content marketing in 2013. Since joining Import Export License in 2019, she’s created several e-books, guides, blog posts, and newsletters on international trade. On weekends you can find her building Lego with the family, walking her beagle, or whipping up a storm in the kitchen.