When are you legally required to register a company in South Africa?

… and what happens if you don’t?

Thinking about starting a business but not 100% sure when you ACTUALLY have to register it? You’re not alone. In fact, one of the most common questions we get at Govchain is:

“Do I really need to register my company, or can I just run it informally?”

Here’s the short answer:

• Yes, you can operate a business informally as a sole proprietor.
• Butttttt in certain situations, registering your company becomes a legal requirement, and skipping that step can cost you.

Let’s break it down.

1. When you don’t need to register a company

If you're running a small side hustle under your own name, like baking from home, freelancing, tutoring, or running a stall at a local market, then you’re considered a sole proprietor.

This is the simplest type of business and doesn’t require CIPC registration.

BUT: As a sole proprietor, you and your business are legally the same person.

This means that…

1. You’re personally liable for all debts.
2. You can’t separate your personal and business finances.
3. You miss out on tax breaks and funding opportunities reserved for registered businesses.

Soooo… even if it's not legally required yet, registering can still make your life easier (we’ll get to that in a sec, don’t worry!)

2. When it is legally required to register

There are a few key moments when registering your business with the CIPC becomes non-negotiable.

You have to register your business if…

You're earning above the tax threshold

SARS expects you to file taxes on your business’ income.

While you can do this as a sole proprietor, once your earnings grow, it’s often better to register and operate as a Pty Ltd for tax and liability reasons.

You're hiring employees

The moment you employ anyone (even just one person) you become legally responsible for things like:

1. Registering for UIF
2. Providing employment contracts
3. Contributing to COIDA (workers’ compensation)

And for all of that, having a registered company is often essential.

You're applying for tenders, funding, or contracts

Do you want to…

• Apply for a government tender?
• Approach a bank for a loan?
• Pitch to corporate clients?

Then you’ll need a registered business (usually a Pty Ltd) with all the supporting documents (like a registration certificate, tax number, and B-BBEE affidavit).

There are several benefits to registering your business as a Pty Ltd in South Africa.

You’re working with larger businesses or government

Many bigger organisations legally can’t work with informal sole traders.

They’ll ask for your registration number, tax clearance, and other compliance documents, and without them, you’re out of the running.

3. What happens if you don’t register when you should?

If you avoid registering, you could be…

• Disqualified from contracts or funding
• Personally liable for debts and legal issues
• Penalised for non-compliance (e.g. not registering for UIF or tax)
• Missing out on benefits like limited liability, tax deductions, and credibility

In other words: staying unregistered might seem easier now, but it can hold you back later.

4. So when should you register?

Honestly? The best time to register is as soon as you know you’re serious about your business.

Whether you’re scaling up, starting to hire, or just want to look professional… a registered company sets you up for growth, compliance, and peace of mind.

And when you’re ready, Govchain makes it simple to register your business online – fast, easy, and fully compliant.