Registering a business: sole proprietor or company?
Most South African side hustles start as sole proprietorships, with nothing to register at the CIPC. A private company, a (Pty) Ltd, costs from R125 on BizPortal and keeps the business separate from you. Here is how each works.
General information, not legal or tax advice. KayaHustle is not the CIPC or SARS. Fees are as shown on BizPortal when we checked.
Sole proprietor
- You and the business are the same legal person. You can use a trade name.
- Business profit is added to your other income on your own tax return, at personal rates.
- You are personally liable for the business's debts.
- You will usually be a provisional taxpayer, paying tax twice a year in advance.
Private company, (Pty) Ltd
- A separate legal person: its debts are usually its own, not yours.
- Pays 27% company tax on profit (or lower small business corporation rates), and you pay tax on the salary and dividends you take out.
- More admin: annual returns to the CIPC, financial statements, its own bank account and tax returns.
Registering a company on BizPortal
- Register as a customer on BizPortal (bizportal.gov.za).
- Choose to register a company with or without a name: R125 without a name (the company gets its registration number as its name) or R175 including a name.
- Add the directors and pay. The company is registered for income tax with SARS automatically.
- Open a business bank account, and register with SARS for VAT or as an employer if needed.
Not sure which is cheaper for your profit? Use the sole proprietor vs (Pty) Ltd calculator.
Frequently asked questions
Do I have to register my side hustle?
Not with the CIPC: you can trade as a sole proprietor in your own name or a trade name. You must still declare the income to SARS.
How long does company registration take?
BizPortal registrations are often done within days, but it depends on the name reservation and the CIPC's workload.
Do I need a separate bank account?
A company needs its own bank account. As a sole proprietor it is not required, but a separate account makes your records and tax return much easier.