Builders: Choose your business structure

Which business structure will work best for you, builders?

There are various business structures available for builders. However, the following three are the most common:

Builders as Sole Proprietors (or Sole Traders)

• Builders trade as themselves. For example, they may offer to build walls for a fee.
• This is the simplest business because there is no need to set up a company name or structure. If builders do decide to use a trading name rather than their personal name, they will need to register this name with the Companies and Intellectual Property Commission (CIPC).
• Builders must inform SARS of their extra income.
• Because builders are the business, their creditors can seize their assets (their house, car, stock portfolio etc.) to recover the money they owe, if their business fails.

Builders with a Close Corporation (or CC)

• This business structure has been discontinued. Builders may not register as a Close Corporation anymore, but pre-existing Close Corporations can continue to function.

Builders with a Private Company (or Pty Ltd)

• A new entity (a company) is created and named.
• This entity will have owners (shareholders) who own the company, and managers (directors) who run the company. Sometimes, the same people own and manage the company.
• These companies must be registered with the CIPC. Each year, an annual return must be submitted to the CIPC to prove the company is still trading.
• Smaller companies will be required to employ an accountant to do an annual accounting review (this is like a simple audit). This helps to ensure that the business is running properly and abiding by the law.
• The company’s debts belong to the company. Therefore, if something goes wrong, builders will lose their investments rather than their private assets.

Whichever structure builders choose, the government requires that they register for income tax, VAT, UIF, COID and PAYE. Builders will also need to apply for certain licenses, depending on the industry they choose, the size of their company and whether or not they’re employing staff.

And now? Builders: Compile your business plan.

Compiled by Daniella Favis for Builders’ Space. Source: Bizempire. Photograph: Tax with Integrity.