9 Benefits of registering a company

Benefits of registering a company . There are many advantages of registering a company so let’s jump right into it. We at SwiftReg have found that the number one reason for people registering company is to lend legitimacy to their business. Our clients do not want to be seen as sole proprietors with a fly by night operation but rather a legitimate registered company with the postfix (Pty) Ltd behind their company name.

The second reason why people register their companies is to protect their business name so that nobody else can use or trade with a similar name. This will then allow them to spend money on building their brand knowing that the name is registered and secure.

I would seriously advise that you also register your company domain name; because if you don’t your competition could legally register your domain name and effectively forward all internet searches meant for you to their website.

I must also warn you that trademark registrations trump company name registrations so even if CIPC approves your company it is only truly secure after a year has passed. During this 12 month period, you may be forced to change your company name should there be a conflict with a registered trademark. This is because the CIPC company name database is not checked against the trademark database. I know it’s crazy…

Anyway, back to the benefits of registering a company. From a legal perspective the greatest advantage of registering your company is the limited liability protection. What this means is that your personal assets are separated (and therefore protected) from the liabilities of the company.

Let me give you and example. Assuming you are a building contractor and you make a mistake and the roof of your client’s house cracks and falls down. If you do not have a registered company, you would be transacting as a sole proprietor and therefore personally liable for the damages. If a claim is made against you; you could lose your personal assets.

Now, if the same happens but you had a registered company the claim is made against the company and not you personally. It must be remembered that this limited liability protection does not apply if you were fraudulent, gross negligent, misrepresenting or signed personal surety.

The next major benefit is tax efficiency. In South African company tax rate is a flat rate of 28% of all net profit while an individual is taxed at an escalating scale of up to 45% of your salaries if you earn over R1.5m Therefore once an individuals personal tax rate moves past the 28% then the company becomes more tax efficient than the sole proprietor.

A further benefit of registering a company is that it reduces any potential future conflict in terms of decision making power. This is because the decision making power is linked to the shareholding which is agreed upon at the start. It is important to note that if you register a company directly with CIPC they do not cater for shareholding neither do they issue share certificates. This value added service is usually handled by accountants or professional business registration companies.

We have developed a very user-friendly shareholding management system which is compliant with the companies Act and uses a simple drag and drop technology to manage your shareholding.

A further advantage of owning accompany is the ability to raise capital. It is much easier to raise money when compare to a sole proprietor and this is because you can sell shares in your company to raise equity capital.

Companies also have perpetual existence meaning that even if the owners passes away or leaves the company; the legal entity continues to exist. This is very handy when it comes to estate planning.

Ease of transfer-ability is another advantage. The owner is not tied to the company and he or she can sell their shares with little or no effort.

Finally, because your company is a separate legally entity it can have its own business bank account and the advantage is here is the business expenses can neatly be separated from your personal expenses as the company now is its own cost centre making it much easier to manage and maintain.

In terms of cost; I should mention that we charge R460 to register a company which includes all the supporting documentation you need to immediately open a bank account. This includes the Memorandum of Incorporation and share certificates.

You should also be aware that the government or CIPC also charges annual returns to keep the company active on their database. We offer an innovative online quoting system on our website.

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   • 9 Benefits of registering a company  

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