Episode 6: Small Business Corporations: “The S Corporation: Small Business, Smart Benefits”
Unlock Smart Benefits for Your Small Business! Discover the S Corporation – a strategic choice for small and medium-sized enterprises (SMEs) seeking tax advantages without the complexities of a traditional corporation.
This is perfect for those who prefer simplicity while enjoying the benefits of the corporate world. However, there are eligibility criteria and specific tax rules to consider.
Accountants often highlight the savings, and if your company qualifies, you will save a significant amount. But as your business grows, it’s essential to think about scaling to protect your assets and plan for generational wealth.
Focus Shift:
This means shifting from a short-term focus to creating long-term value for future generations.
Tax Benefits for Small Businesses:
Small businesses with an annual turnover of up to R20 million may qualify to pay Income Tax at a reduced rate. If you indicate that you are a small business on your Income Tax Return (ITR14), and meet all the requirements, the reduced rates will be applied automatically.
Small Business Corporations (SBC)21 February 2024 – No changes from last year:
Years of assessment ending any date between 1 April 2024 and 31 March 2025 Taxable Income (R) Rate of Tax (R)1 – 95 750 0% of taxable income95 751 – 365 000 7% of taxable income above 95 750365 001 – 550 000 18 848 + 21% of taxable income above 365 000550 001 and above 57 698 + 27% of the amount above 550 000
Qualifying Criteria for Small Business Corporations (SBC):
Legal Requirement: Your entity must be a close corporation, private company, co-operative, or personal liability company. Only companies, NB: NO individuals, qualify for SBC relief. Holder of Shares Requirement: All shareholders must be natural persons. A natural person is an individual human being, as opposed to a legal entity such as a corporation.Gross Income Limitation:Your entity’s gross income should not exceed R20 million annually. If your business started mid-year, this amount is prorated.
Give us a Call:
If this sounds complex call me for a FREE 3 hour at The Glass Castle Business Hub, for a session to unpack you business: Contact Barteldt Bakker :Email: bart@theglasscastle.co.za or Glenys Dempers my esteemed partner and our real expert in the accounting space. Email: glenys@theglasscastle.co.za
Business Activity Requirement: No more than 20% of your income can come from investments or personal services.
Important Definitions: Investment Income: Income from dividends, foreign dividends, royalties, rental from immovable property, annuities, or similar income.Interest as contemplated in section 24J, amounts in section 24K, and other income treated as income from money lent. Proceeds from investment or trading in financial instruments, marketable securities, or immovable property.Immovable property typically refers to exclusive use of a property for periods exceeding one month. Shorter-term rentals are not considered investment income.
Personal Service: Services in fields like accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, consulting, education, engineering, financial broking, health, IT, journalism, law, management, real estate broking, research, sport, surveying, translation, valuation, or veterinary science. This applies if performed by someone with an interest in the entity or a connected person.(Unless the personal service company employ 3 or more non-related or connected parties)
Personal Service Provider: Defined in the Fourth Schedule as a company where services are rendered personally by a connected person and: The person would be regarded as an employee if they rendered the service directly services are mainly performed at the client’s premises under their control or supervision. More than 80% of the company’s income comes from one client or associated institution.
Understanding the Small Business Corporation Philosophy:
The SBC structure is designed to provide tax relief, improving liquidity and cash flow for small businesses. The South African Revenue Service (SARS) has streamlined compliance for SBCs, recognising their economic importance (SME’s are the backbone of the worlds economy) . Specific tax incentives have been introduced to motivate entrepreneurs.
Ready to take the next step? Here’s what you need to do:
Constact Us to help you to scale: “The Glass Castle Business Hub“
1. Evaluate Your Current Structure: Understand your business’s vulnerabilities.
2. Set Clear Objectives:Define your asset protection, tax efficiency, and estate planning goals.
3. Develop a Plan: Work with advisors to create a detailed restructuring plan.
4. Implement Gradually: Transition to the new structure in stages to manage costs and minimise disruptions.
5. Monitor and Adjust: Regularly review and adjust your plan to ensure it meets your goals.
Feeling Overwhelmed? Let’s Simplify It Together!If this sounds complicated, it’s time to speak with an expert. Book a FREE 3-hour consultation with me for an honest opinion about scaling your business and using more complex structures when the time is right.
Contact Barteldt Bakker:Email: bart@theglasscastle.co.za or Glenys Dempers my esteemed partner and our real expert in the accounting space. Email: glenys@theglasscastle.co.za
Partner with Excellence: Unlock Success Together Our success is powered by our incredible partners, and they can do the same for your business. To achieve greatness, align yourself with those who mirroryour aspirations.
A huge thank you to Xero , Dext, Attooh Financial Services contact: Email Riaan.smit@attooh.co.za , and the thousands of other solutions we rely on. Xero, visionary approach enables thousands of app integrators to build on their platform, solving real-world problems efficiently.
Why reinvent the wheel when you can plug into existing solutions that integrate seamlessly with your accounting software?
Save valuable time and focus on what matters most: growing your business. Partner with the best to unlock your true potential!
