Formal registration of companies has many immediate benefits for the companies and for business owners and employees. Legal entities can outlive their founders. Resources are pooled as several shareholders join forces to start a company. Formally registered companies have access to services and institutions from courts to banks as well as to new markets. And their employees can benefit from protections provided by the law. An additional benefit comes with limited liability companies. These limit the financial liability of company owners to their investments, so personal assets of the owners are not put at risk. Where governments make registration easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and generating more revenue for the government.
Below is a detailed summary of the bureaucratic and legal hurdles faced by entrepreneurs wishing to incorporate and register a new firm in South Africa. It examines the procedures, time and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy's per-capita gross national income.
| No. | Procedure | Time to Complete | Associated Costs |
|---|---|---|---|
| 1 | Lodge formation documentation with the Companies and Intellectual Property Commission (CIPC) for registration | 5-7 days | ZAR 175 |
| 2 | Open a bank account | 1-2 days | no charge |
| 3 | Register with the office of the local receiver of revenue (SARS) for income tax, VAT, and employee withholding tax (PAYE and SITE). | 12 days | no charge |
| * 4 | Register with the Department of Labor for Unemployment Insurance. | 4 days (simultaneous with procedure 4) | no charge |
| * 5 | Register with the Comissioner according to the Compensation for Occupational Injuries and Diseases Act. | Around 10 days, simultaneous with Procedure 4 | no charge |