Business entities in South Africa

South African business entity setup servicesThe South Africa Companies Act allows registration of companies by foreigners in most industries, and type of business structure most commonly setup by Healy Consultants for our Clients is the limited liability company, locally known as a private company (Pty. Ltd.). The main challenge for registration of a company in South Africa for businessmen living abroad is the need to appoint a local bank signatory. To protect their interest, most of our Clients request Healy Consultants to provide nominee services for such appointment. See our nominee services page for further details or read the page below for detailed information on the different types of business entities available in South Africa.

Different forms of business entities in South Africa:

Doing business in South Africa with a local entity

The South African limited liability company (proprietary limited company)

  • A South African limited liability company (locally known as a “proprietary limited company” or Pty. Ltd.) can be setup with 1 director and 1 shareholder, both of whom can be foreigners residing abroad. Furthermore, there is no statutory share capital requirement;
  • Nonetheless, a company incorporated in South Africa is required to appoint a public officer. This individual will be resident in South Africa and may be an employee of the company. He/she will be deemed to be the registered representative of the company in South Africa;
  • All LLCs must submit an annual return and financial statements to the Companies and Intellectual Commission (CIPC). It is possible the company may be requested by the CIPC to submitted audited financial statements;
  • Best uses for a South African proprietary limited company: The South African Pty. Ltd. is an attractive vehicle for most industries, thanks to its low share capital requirements. It is the type of entity most commonly setup by foreigners and locals alike in South Africa.

The South African free zone company (IDZ company)

  • Our Clients may also choose to setup their operations in one of South Africa’s Industrial Development Zones (IDZ). For this purpose, our Clients will need to setup a Pty. Ltd. and open a corporate bank account. Our Client will additionally need to lease space within the IDZ and secure an operating permit. For further information, kindly refer to this free zone section;
  • Best uses for a South African free zone company: The South African free zone company is an attractive vehicle for an export oriented manufacturing business. For further information, kindly refer to this free zone section.

The South African public limited company (public limited company)

  • Under the Companies Act, this entity is referred to as the “public company”. A PLC may be setup with 3 directors and 1 shareholder, who can be foreigners and non-residents. Furthermore, there is no minimum share capital requirement; however, at incorporation, the company will be required to disclose how it plans to raise its capital;
  • Like a Pty. Ltd., a PLC will i) appoint a resident public officer and ii) submit annual returns and tax returns. Additionally, the PLC will i) appoint a resident company secretary and ii) submit audited financial statements;
  • Best uses for a South African public limited company: this business structure is recommended when our Client wishes to raise capital from the South African public. However, there is no obligation for the company to be listed on the local stock exchange.

The South African joint venture (joint venture company)

  • Foreign companies may enter into a joint venture (JV) with a South African company to offer goods/services in South Africa. A JV is generally used if two or more entities need to cooperate on a specific project. The joint venture can be a limited liability company (Pty. Ltd.) but it is not necessary to register one, in which case the partnership will be run as per the terms of the JV contract;
  • Best uses for a South African joint venture: a joint venture is recommended when our Client plans to implement a project of a limited duration and already has a reliable joint venture partner in South Africa.

The South African partnership (Partnership)

  • While partnerships exist in South Africa, the Commercial Registrar does not allow registration of a partnership as a legal entity. Moreover, all partners are subject to unlimited liability for the partnership debt and losses and at least one of them must reside in South Africa for the partnership agreement to be valid;
  • Best uses for a South African partnership: we do not recommend our Clients to do business in South Africa through a partnership unless they already live in the country.

Doing business in South Africa with a foreign entity

The South African branch office

  • In South Africa, this business entity is referred to as the “external company”. This type of business structure is not considered separate from its overseas head office, which is consequently legally liable for all losses incurred by its South African branch;
  • The branch registration process will be the same as the company incorporation process. For a complete overview of the steps, please refer to this incorporation webpage;
  • Like an LLC, the branch will also submit i) annual financial statements to the CIPC and ii) annual tax returns to the South Africa Revenue Service (SARS). The branch will also appoint a resident public officer as the “registered representative”;
  • The income from a branch office will be taxed at the corporate tax rate. Furthermore, there will be no additional withholding tax or branch remittance tax on that income;
  • Best uses for a South Africa branch office: registering a branch is advisable only in industries subject to high capital requirements (like the banking sector) or if our Clients expect that their customers will feel more comfortable dealing directly with their company, rather than a South African subsidiary.

The South African representative office

There is no representative office in South Africa. Representative offices in this country are actually branches without commercial operations.

Table of comparison between different entity types

Operations and logisticsLLCFree Zone CompanyPLCJoint VenturePartnershipBranch
Also known as?Pty. Ltd.IDZ Pty. Ltd.Ltd.Joint venture Pty. Lrd.PartnershipBranch office
Doing business in South Africa permitted?YesYesYesYesYesYes
Allowed to sign contracts with local Clients?YesYesYesYesYesYes
Allowed to invoice local Clients?YesNoYesYesYesYes
Can rent local office premises?YesYesYesYesYesYes
Allowed to import raw materials?YesYesYesYesYesYes
Allowed to export goods?YesYesYesYesYesYes
Accounting and tax
Corporate tax rate?28%0%28%28%0%28%
Corporate bank account?HSBC South AfricaSCB South AfricaDB South AfricaStandard Bank South AfricaSCB South AfricaSCB South Africa
Statutory audit required?NoNoYesNoNoNo
Annual tax return to be submitted?YesYesYesYesNoYes
Access to DTAAs?YesYesYesYesNoYes
Company law
Issued share capital required?NoneNoneNoneNoneNoneNone
Resident director required?NoNoNoNoYesNo
Resident bank signatory requiredYesYesYesYesYesYes
SA shareholder required?NoNoNoNoYesNo
Minimum number of directors?113111
Minimum number of shareholders?11112Parent company
Individual shareholders allowed?YesYesYesYesYesNo
Corporate director(s) allowedYesYesYesYesNoNo
Corporate shareholders allowed?YesYesYesYesYesYes
Public register of shareholders and directorsYesYesYesYesNoYes
Immigration
Can the entity hire expatriate staff?YesYesYesYesNoYes
How long to get work permit approved1 month1 month1 month1 monthN/A1 month
Fees and timelines
How long to set the entity up?2 weeks4 weeks3 weeks2 weeks2 weeks7 weeks
How long to open corporate bank account?4 weeks4 weeks4 weeks4 weeks4 weeks4 weeks
Estimate of engagement costsUS$12,330US$9,630US$15,830US$9,630US$11,380US$10,780
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Contact us

For additional information on our business setup services in South Africa, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Mr. Paavan Chhabra, directly:
client relationship officer - Paavan