Open Source Content Management

Hello,

I am currently in the process of starting up a small web-based company selling proprietary intellectual property. This relevant data pertaining to this business:

• Operated from home
• Wholly owned by myself
• Managed by myself without any employees
• Probably have a turnover of less than a million during the start-up phase which should qualify it as a micro-business for tax purposes
• The initial business model is quite simple so I will probably end up generating my financials internally to keep costs down.

I am concerned however by the compliance requirements of operating a company.

1. Firstly, what would the annual audit requirements surrounding this company be? As far as I could gather from the CIPC I would only be required to conduct an annual independent review of my internally generated FS’? Is this correct and roughly how expensive is it to have this review carried out on a micro-business? I just need a rough estimate for a viability budget.
2. Secondly, how would my personal remuneration work? I’m assuming there are a few ways to structure this such as having a loan account within the business that is offset annually by a dividend declaration or a similar structure? Would it be easier (And more cost effective) to just classify myself as an employee and pay myself accordingly? What are the relevant tax implications to my personal and corporate income tax?

Thanks in advance!

Kind Regards,
Arno Pienaar

Hi Arno
Firstly congrats on taking the right first steps by getting these details in order up front. Retrospective accounting just doesn't work and SARS work on the rule of taking transactions into account on the accrual date, not the payment date so there is no such thing as back tracking in tax.

With regards to your annual review for your cipc annual return, this is low key and can be done by any accountant or bookkeeper. This will be fairly cheap.

With regards to tax administration, you will not qualify as a small business according to sars as you will be seen as a personal services company. You would need to have 5 employees on the books to qualify for smme tax benefits. it is therefor important to plan for any tax liabilities up front and to ensure that personal expenses paid from the business account are recorded properly as sars will see those as fringe benefits and not tax deductable expenditure. Accounting for tax on your provisional tax returns would be the best way to do this even if you draw a salary monthly. This will save you a ton of admin as you will not have to register for paye.

Sounds like you have a lot of planning to do. Feel free to give me a call on 0734398384 or email me at This email address is being protected from spambots. You need JavaScript enabled to view it. and i'll gladly give you some tips and advice in more detail.

Cheers,
Matthew