How to start a construction company in South Africa

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If you want to start a construction company in South Africa, it's easy to get overwhelmed by the amount of paperwork required to trade legally and/or apply for construction tenders and contracts.

However, the basics are actually relatively simple once you jot down exactly what you need, where to get it, and once you understand why you need it.

This article will help you identify the documents you need and where to get them, whether you're an informal business who wants to step it up a notch (by employing staff and applying for RFQs, tenders, and contracts) or an entrepreneur looking to start a new construction company in South Africa.

If the list of documents below still overwhelms you or if you need precise guidance, there are compliance companies like Pty Company Registration who can assist you through the process of acquiring the various documents at a small fee.

The basics of Construction Compliance Documentation (what you need and why you need it)

You can group the essential Compliance Documents you need into two sections. The first section is general. It's the paperwork every South African company needs to trade as a Pty Company, pay tax to SARS, and to legally employ staff.

The second specifically relates to construction companies in South Africa with the eye on successful tenders and contracts.

There are exceptions to whether the following documentation is absolutely compulsory or not, but generally speaking, these are the documents/registrations you'll need. We've tried our best to stipulate the exceptions, but it's important to make sure what your unique business needs are.

Section 1: General Documentation

The most popular documents include:

1. Company Registration (register at the CIPC)

There are various forms of a company, but if you're interested in starting a construction company, a Pty Company would be the most common company structure. Registering for a Pty Company would imply different taxation and legal responsibility for both you and your company.

If you already have a business, you're automatically considered a Sole Proprietor. This means you need to submit your expenses and your income as part of your personal taxes to SARS every year.

You can advise an accountant if you feel you'd like to consider other formats too, however, a Pty Company is the most popular structure for construction companies in South Africa and we would recommend a Pty structure.

Helpful links:

2. Employer Tax Registration (register at SARS and/or the UIF Office)

When registering, you might also be prompted to register for SDL (Skills Levy Development) or UIF (Unemployment Insurance Fund) to contribute an extremely small monthly amount for each employee. SDL adds to a fund that'll allow your employee to pursue useful training. UIF adds to a fund that'll offer your employee temporary financial relief if they ever lose their job with you.

You probably won't be contributing UIF to SARS if your employee works for you less than 24hours a month. You also shouldn't worry about SDL if you expect your total salaries to be less than R500 000 over the next 12 months.

Helpful link: Employer Difficulty Registration

3. B-BBEE Affidavit or Certificate (register with a Commissioner of Oath or with the CIPC)

If your business's turnover is less than R10 million, you don't need a B-BBEE Certificate, you just need an Affidavit. You can simply fill out a B-BBEE Affidavit accurately and have it signed by a Commissioner of Oath. This affidavit will serve as your B-BBEE certificate until you exceed a yearly turnover of R10 million; then you need an official B-BBEE Certificate.

Helpful links:

4. Letter of Good Standing (this implies COID Registration at South Africa's Labour Department)

Besides needing a Letter of Good Standing (which is essentially proof that you've registered with the workman's Compensation Fund and your payments are up to date) to apply for contract and tenders, it safeguards you against very serious lawsuits.

The Compensation Fund is a form of national insurance that will compensate your employers if they are harmed at work in any way. The fund will protect you because it allows your casual and full-time employees to claim compensation directly from the Fund for work-related injuries and disability.

You need it for tenders because contractors want to be sure your employers won't become their financial responsibility in the case of harm or injury.

Helpful link: Acquire COID Registration and a Letter of Good Standing

5. VAT Registration (register at SARS)

The first thing you need to know about VAT Registration is that VAT Registration is mandatory when your company’s turnover/sales are over R1 million for the past 12 months. Before you hit that turnover milestone, its voluntary.

Helpful link: VAT Registration at SARS

Section 2: Construction Documentation

The most popular documents include:

1. CIDB Register for Contractors

CIDB (Construction Industry Development Board) registration is compulsory. It's required by South African law (Act 38 of 2000) for all construction companies to register if they want to apply for contracts and tenders.

The only exception is if you're a home builder and you have no interest in tenders or public sector construction work. Another possible exception is if you're focused specifically on providing labour or supplies for building companies.

It's the CIDB's responsibility to ensure that there are national standards and a Code of Conduct that all construction companies uphold across South Africa.

Helpful link: A CIDB application form

2. NHBRC Registration

The NHBRC (National Home Builders Registration Commission) is a voluntary regulatory organization with a database of registered builders. It's important to register your business on the NHBRC database because clients often request them and they are almost always a prerequisite for contract-, tender- and building loan applications.

Helpful link: The NHBRC

3. MBSA Membership

Master Builders South Africa is a voluntary association. Membership won't necessarily be required for tenders and contracts, but many people value membership as a group of trustworthy contractors.

Helpful link: The benefits of the MBSA

The content in this article was provided by Pty Company Registration.

About Pty Company Registration:

Pty Company Registration is South Africa's leading Company Registration Service Provider, with a team of over 30 dedicated experts who have assisted over 20 000 South African Businesses to grow into legitimate Companies since 2006. We offer over 120 Company Services, including Company Registration, Shelf Companies, Tax Clearance, VAT Registration, Letter of Good Standing, COID, Website Design, Logo Design and Tender Documents. You can be located anywhere in South Africa (or the world) as everything happens over the Internet. You will receive support from your own dedicated Consultant.

For more information, contact:

Tel: 0800 007 269 (toll-free)

Website: https://www.ptycompanyregistration.co.za/

Contact form: https://www.ptycompanyregistration.co.za/contactus/

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