The Wingman’s 8-Step Guide to Setting Up Your Own Business

September 25, 2017

Six million people (27.7% of the working population) are unemployed in South Africa, one of the worst unemployment rates on the planet. Needless to say we need to create jobs, and lots of them.

The National Development Plan estimates that 90% of new jobs will be created by Small, Medium and Micro Enterprises by 2030 (i.e. big corporates will contribute only 10% jobs growth). One can assume that many of these businesses don’t exist yet, so we would like to do our part by providing some guidance on how you go about setting up your very own company.

Below you’ll find several practical steps that you need to follow to register your own company and to set it up to be “ready for business”. We’re going to assume that you’ll be following the classic Do-It-Yourself approach, but rest assured that there are plenty of service providers out there who will gladly assist you with each of the steps below (for a fee, of course).

1. Choose a name for your business

I love the first step, because you’re selecting an identity for your new “baby”. Don’t rush through it, though, it is worth bouncing your preferred names with your mentors and friends to get their input. In step 2 you will check if the name is still available to be registered.

Cost: free, unless you pay someone to help you.

Things to consider: Will it be easy to hear over the phone? Long names or ones with difficult spelling makes it a nightmare to direct people to your website (or to share your email address) when you talk with potential customers over the phone.

2. Register a new company with the CIPC

The CIPC (Companies and Intellectual Property Commission) forms part of the Department of Trade and Industry. Their job is to register new companies, as well as intellectual property rights (trade marks, patents, designs and copyrights).

You can use the CIPC eServices portal to register a company. Just follow the link and setup your account. Once you have registered you’ll need to deposit funds in the CIPC’s bank account and wait for it to reflect on their side. These funds are loaded almost like airtime on your CIPC profile, which you can then use transact with them (for example to register a company).

We recommend selecting a February year-end, so that your financial year aligns with the tax year of SARS (it makes accounting a bit simpler).

Make sure that you select at least 1 000 shares as authorised share capital. This makes it easier to change shareholding in fractions. Initially you might issue only 100 shares to yourself, making you the 100% shareholder. When new shareholders come onboard you can issue new shares to them and dilute your own shareholding to the appropriate percentage.

Note that you have to issue shares yourself – the CIPC does not track the issuance of shares. To do this you need to draw up a formal share register and issue share certificates.

Cost: R50 to reserve a name and R125 to register a company, so R175 in total.

Things to consider: if the new company will have more than one shareholder (i.e. not just you), then you need to consider drawing up a robust shareholders agreement. Consult a commercial lawyer for help in this regard.

3. Register your domain

Now that your company is named and registered, it is time to register the website domain. This is the name of your website, as well as the extension of your new email address (for example the domain www.newbusiness.co.za will allow you to use yourname@newbusiness.co.za as an email address).

Go to Register Domain to check if your proposed domain is still available. If so, register a profile, then you can purchase the domain right then and there.

Cost: The domain costs R75 per year. If you build a website you’ll need to pay for hosting as well, usually between R150 – R2 200 per year, depending on disk space that you need (i.e. the size of your website). The cheapest option should be fine for now, as you can upgrade at any time later. Note that you can use different services/companies for the domain registration and for the hosting.

Things to consider: You will need to build a website at some point – the sooner the better. I used the Avada theme on WordPress to build ours, but there are several other easy-to-use options like Wix and Weebly. Don’t be afraid to give it a go yourself, you’ll be surprised how easy it is to setup a basic, great-looking website without any web-design background. When your business grows you can get experts involved to make it better (especially with regards to search engine optimisation, or SEO).

We use Office 365 Business Premium for email hosting. This costs about R220 per user per month and includes most of the popular Microsoft products like Excel & Word, 50 GB email storage as well as 1 TB general cloud storage on OneDrive.

4. Design a logo

You’ll need a logo for your invoices, website, letterheads, business cards, etc. There are great services online where you can do it for free (or for a relatively small fee). We created our Wingman Accounting logo for free on Square Space. We also use LogoJoy for some of our new clients, where you pay $65 for a high resolution logo.

If you require more input from designers, take a look at 99Designs. Designers bid to create your logo, which means you get a variety of options tailored to your needs, but it costs a bit more.

Cost: from free (Squarespace), to low cost if you design yourself (e.g. logojoy, $65 or R910) to expensive when you use designers ($300 – $1 300, or R4 200 – R18 200).

Things to consider: make sure you obtain high resolution images of your logo. When you create a website and social media pages you will need to resize your logo to different sizes (for example 600×600 pixels). Gimpshop is a great, free alternative to Adobe’s PhotoShop product, which you can use to edit and resize your logo file.

5. Open a business banking account

Once you have received your registration documents from the CIPC you can open a bank account for your business. You can go to any of the banks to open an account, just do a bit of research on their fees beforehand.

Cost: depends on the bank and the number of transactions. Expect to pay R75 – R350 per month in total. Usually there is a fixed monthly charge, then you are billed per transaction on top of that.

Things to consider: We recommend that you keep your business and personal banking separate, i.e. use different banks for your personal and business accounts. It is very important to keep your personal and business transactions completely separate, because there are tax implications for you if you blur the lines and run personal expenses through your business.

6. The South African Revenue Service (SARS)

When you register a business with the CIPC, you will automatically be registered for income tax with SARS and receive your income tax registration form. There are, however, a few steps that you still need to follow:

If you are going to employ anyone in your new business (either yourself or other staff members) you need to register for payroll tax. You can do this on your efiling profile.

  • Normally you’ll need to register for Pay-As-You-Earn (PAYE) and for the Unemployment Insurance Fund (UIF).
  • If you expect to spend more than R500 000 on salaries over the next 12 months, then you’ll need to register for the Skills Development Levy (SDL) as well.

You can only register for Value-Added Tax (VAT) once you exceed certain revenue thresholds. You have to register for VAT if you expect revenue of above R1 million over the next 12 months (“compulsory registration”), but you can choose to register once you can show SARS that you are generating more than R50 000 per month revenue (“voluntary registration”).

Cost: no registration fees, but you’ll need to pay tax when you submit returns!

Things to consider: Tax regulations are highly complex and could differ depending on the type of business that you are creating. There are myriads of different tax returns that you need to submit at various time intervals, depending on the types of taxes that you are registered for. We strongly recommend that you consult with a registered tax practitioner to make sure that you are complying with the relevant income tax provisions.

7. Accounting system

The Companies Act requires you to maintain accounting records for your business. As business owner you will predominantly use the accounting system to issue invoices to your customers (debtors) and to keep track of money owed to suppliers (creditors). This is also where you track all bank transactions and keep an eye on your cash flow.

We recommend a cloud-based accounting system like Xero Accounting (our weapon of choice), Quickbooks Online or Sage One. There are also free options available such as Wave Accounting. Don’t even consider desktop-based accounting packages (i.e. something that you install on your desktop or laptop), because that technology is on its way out. Desktop systems don’t allow collaboration of users via the internet, don’t have automatic back-up functionality, etc.

If you don’t understand accounting you can also consider SMEasy which is designed for small business owners who don’t have an accounting background.

We recommend Xero, because it is easy to use, includes unlimited users and they offer a comprehensive app store which you can use to build a customized, integrated system for your business. Want to automate your bookkeeping and keep suppliers up to date? Get Receipt Bank. Need a point of sale system? Use Vend or Yoco. The list goes on, but you get the picture. It also provides a live bank feed you’re your bank to make bank reconciliations super simple.

Cost: from free (WaveApps), fixed monthly rate with unlimited users (Xero – $30 per month, or around R390) to variable pricing based on number of users (QuickBooks Online & Sage One).

Things to consider: You need to issue Annual Financial Statements within 6 months after your company’s year-end. You need to engage a qualified accountant to do this for you.

8. Line up them customers!

You are good to go! Well, in theory at least. We didn’t talk about what your business will actually be doing – our focus has been on the practical steps to become “ready for business”.

Launching a new business is not easy. For many entrepreneurs the first problem is raising enough funding to launch the business (assuming you can’t bootstrap the business by using your own savings to get going). The next problem is letting people know about the stuff that you’re selling (for example marketing via Google Adwords, Facebook, etc.). You’ll also need to refine your business model, i.e. what pricing structure are you going to use, will you employ staff or use freelancers, work from your house or rent a premises, etc.

The number of variables to consider can become quite daunting, which probably explains why there are so many business books that aim to help entrepreneurs through this process (and, on a more cynical note, why so many businesses fail).

Please feel free to contact us if you are looking for some advice on any of the steps above. All of our clients are entrepreneurs in various stages of building their businesses, from very young start-ups to larger companies with several dozen staff members. We’d love to be a Wingman for your business too!

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