How to Register a Sole Proprietorship (Sole Proprietor / Sole Trader) in South Africa

Working as a sole proprietor in South Africa gives you the fastest, most flexible path to turning your skills or side-hustle into a formal business. There’s less red tape than owning a company, and you can often begin trading quickly.

On the downside, you carry all the risk yourself — you're not a separate legal entity, so personal assets can be exposed if things go wrong. The main benefits are ease, low cost, and full control; the main challenges are unlimited liability, keeping up with tax / statutory registrations, and managing business financials from day one.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in South Africa?

In South Africa, a sole proprietorship (sometimes called a sole trader) is a business owned and operated by one individual. There is no legal separation between the owner and the business. SARS describes it plainly: the business does not have a separate legal identity from the proprietor, and the owner includes business income in their own tax return.

How a sole proprietorship works in South Africa

Here’s a snapshot of how running a business as a sole proprietor looks in South Africa — what you register, who you deal with, how you’re taxed, and what risks you take on.

Sole proprietor vs private company in South Africa

Here’s a side-by-side comparison between being a sole proprietor and forming a private company (Pty Ltd), so you can decide which structure suits you best.

Step-by-Step Guide: How to register a sole proprietorship in South Africa

Here’s a clear walkthrough of what you’ll need to do to set up a sole proprietor business in South Africa.

Step 1: Decide on your trading name (if any)

You can trade under your own legal name (e.g., your full name) without registering anything, or pick a trade/fictitious name. If you choose a trade name and want it protected or formally recognized, you might register that name via the Companies and Intellectual Property Commission (CIPC). It’s optional, but can help for branding or banking.

Step 2: Register for tax with SARS

As soon as you begin earning business income, register as a taxpayer with SARS. If you already have a personal tax number, you’ll use that. If not, you’ll need to get one. You’ll need to inform SARS that you’re self-employed so that your business income is included properly in your personal income tax return.

Step 3: Determine if you need to register as a provisional taxpayer

If you expect your business income plus any other income to exceed the basic tax threshold, you’ll need to register as a provisional taxpayer. That means you’ll pay tax in installments throughout the year rather than waiting until year-end.

Step 4: Check if your turnover means you must register for VAT

If your turnover (sales) is likely to exceed R 1 million over a 12-month period, you must register for VAT with SARS. Even if you don’t reach that threshold, voluntary registration can be useful for some businesses to claim VAT-input credits.

Step 5: Handle other statutory registrations if you have employees

If you plan to employ people, you’ll need to register with SARS as an employer for PAYE (pay-as-you-earn), with the Unemployment Insurance Fund (UIF), and possibly with other statutory funds like the Compensation for Occupational Injuries fund.

Step 6: Obtain required permits or licenses (if applicable)

Depending on what your business does (food, trade, health, etc.) and where you operate, you may need municipal business licenses, health or safety permits, or industry-specific certifications. Check local city or provincial requirements.

Step 7: Set up accounting & record-keeping

Even though the structure is simple, you must maintain records of income, expenses, invoices/receipts, and bank statements. You’ll need these to calculate taxable income correctly, support deductions, and comply with SARS audits. Use an accounting tool or hire someone if needed.

Step 8: File your tax returns & pay any taxes owed

At year-end, you’ll file as an individual using the SARS ITR12 form, including all business income and deductions. You’ll pay income tax based on your taxable income. If you’re a provisional taxpayer, ensure you made the installment payments correctly. If VAT applies, file VAT returns as required.

Financial and tax obligations for sole proprietors in South Africa

• Income Tax: You include business profits in your personal income. South Africa uses progressive rates. Your taxable income (after deductions) determines how much you pay.

• VAT: If your turnover exceeds R 1 million in 12 months, VAT registration is mandatory; the standard VAT rate is 15%. Voluntary registration is possible below the threshold.

• Provisional Tax: If you expect significant taxable income beyond salary and enough to push you beyond thresholds, you’ll need to make provisional tax payments during the year.

• PAYE & UIF (if employees): If you employ others, deduct employee tax (PAYE), contribute to UIF, and make other required statutory deductions.

• Records & Documentation: Keep detailed records of income and expenditure, invoices, receipts, bank statements. Maintain them in case SARS requests them.

• Annual Return / Filing Deadlines: Submit your ITR12 during the SARS tax season, within prescribed deadlines. Pay any VAT, PAYE, etc., as required.

Launch your contracting career and stay compliant with Deel

Registering as a sole proprietor gives you independence, but it also means handling taxes, invoices, and records on your own. Deel’s all-in-one platform helps you manage obligations without the stress. With Deel, you can:

• Automate invoicing and expense tracking with essential Bookkeeping tools
• Create, send, and sign localised work agreements
• Keep accurate records for tax season
• Access expert tax advice and compliance support
• Get paid through multiple payment and withdrawal methods
• Spend your earnings in USD with the Deel Card
• Access funds early with Deel Advance
• Enjoy contractor perks from 150+ partners

Stay independent, without the admin overload. Sign up to Deel for free today.

FAQs

What is the minimum capital required to start as a sole proprietor in South Africa?
None. You don’t need a minimum investment to begin operating.

Do sole proprietors need to register for VAT?
Only if turnover is expected to exceed R 1,000,000 in any 12-month period. Otherwise, VAT registration is optional.

How much are the standard monthly or annual contributions?
It depends on your income. You’ll pay income tax based on taxable profits, any VAT if you’re registered, and if you have employees, PAYE & UIF. There’s no fixed “monthly fee” for the business structure itself.

Can a sole proprietor hire employees?
Yes. But then you're required to register for employer obligations (PAYE, UIF), withhold correct taxes from employee salaries, and comply with labor laws.

How long does it take to register as a sole proprietor?
If documentation is in order, registering tax status with SARS can be done relatively quickly (days to a week or two). Obtaining trade name registration (if desired) or licenses might extend the timetable, depending on the local municipality.

Can foreign nationals register as sole proprietors in South Africa?
Yes. Foreign individuals can operate as sole proprietors, provided they have valid identification, comply with immigration/residency requirements, and register for tax with SARS.

Do sole proprietors need a separate business bank account?
Not legally mandatory, but strongly recommended. Having a dedicated banking account for business improves record keeping, makes invoicing easier, and helps with audits or loan making.

What happens if I stop operating as a sole proprietor?
You should inform SARS that you have ceased trading for tax purposes. If you had VAT registration, close it. Ensure final tax returns are filed and any obligations cleared.

Are there government incentives or reduced rates for new sole proprietors?
There are various support schemes for small businesses via national or provincial government / local municipalities, but no blanket “first year zero tax” rate specifically for sole proprietors. Incentives or grants tend to be sector-specific or location-specific.

Can I use Deel as a sole proprietor in South Africa to get paid by international clients?
Yes. Deel supports contractors in South Africa. You can receive payments from overseas, issue invoices compliant with South African tax law, and use Deel’s tools to track income and expenses in ways that work for your SARS obligations.

Does Deel generate compliant invoices for sole proprietors?
Yes. Deel’s invoicing tools can include the details SARS expects (entity/trading name, tax reference, description of services or goods, VAT if registered, etc.).

Can Deel help me with taxes as a sole proprietor in South Africa?
Yes. Deel gives you records of your earnings, invoices, and expenses to help prepare for your tax return. While not a substitute for an accountant, these tools make life much easier.

Does Deel offer contracts for freelancers and sole proprietors?
Yes. Deel includes contract templates compliant with local South African law, helping you and your clients stay protected.