How Doctors Register an Inc. in South Africa

As your medical practice grows, there comes a point where running it in your own name stops making sense. Many doctors in South Africa then move their practice into an incorporated company, known as an Inc.

An Inc. can bring real benefits, but it is a different kind of company from an ordinary (Pty) Ltd, with its own rules. Here is what you need to know before you register.

What is an Inc. (personal liability company)?

An Inc. is a personal liability company under the Companies Act 71 of 2008. It is set up like a private company, with two important differences:

• Its name ends in "Incorporated" or "Inc." so that anyone dealing with it knows what kind of company it is.
• Directors share liability for its debts. The directors and past directors are jointly and severally liable, together with the company, for the debts and liabilities the company took on during their time in office.

This is why professions like medicine, law and accounting use Incs: the company structure brings tax and admin benefits, but the professional cannot hide behind it.

HPCSA rules for incorporated practices

The HPCSA's Business Practices Policy lists personal liability companies (incorporated practices) among the business structures it accepts. The key rules are:

• Only registered health practitioners may own the practice. Ownership by someone who is not a health practitioner, directly or indirectly, is not allowed.
• Unregistered people may not share in the profits, including through shares.
• Fees belong to the practice. There must be no "hiving off" of fees to another entity.
• You remain personally responsible. The policy states that a practitioner should not hide behind the corporate veil.

If you want to bring in a non-practitioner as a partner or investor, speak to us and the HPCSA first.

Why doctors choose an Inc.: tax and other benefits

• Tax: company profits are taxed at 27%, compared with personal tax rates of up to 45%. Profits you take out as dividends are taxed again at 20%, so the benefit depends on how much you take out and how you pay yourself.
• Structure: the practice has its own bank account, contracts, staff and assets, separate from your personal finances.
• Growth: it is easier to bring in other doctors as directors and shareholders.
• Credibility: banks and medical schemes deal with the practice as an established entity.

The trade-offs are more admin (annual returns, financial statements and a company tax return each year) and the fact that your personal liability does not go away. Your professional indemnity cover also remains your own.

How to register an Inc. for your medical practice, step by step

1. Plan the structure. Decide who the directors and shareholders will be (all must be registered health practitioners), the company's year end, and how you will pay yourself.
2. Register the Inc. with CIPC. An Inc. needs a Memorandum of Incorporation that states it is a personal liability company, so it can't use BizPortal's quick standard registration. We prepare the MOI and file it on CIPC's eServices.
3. Set up SARS. Appoint a registered representative for the company, and register for PAYE, UIF and SDL if the practice employs staff. Check whether the practice must register for VAT.
4. Apply for a BHF practice number. The Board of Healthcare Funders issues practice numbers through its PCNS system, with a specific application form for incorporated practices. Medical schemes pay claims to this number.
5. Open a business bank account in the Inc.'s name.
6. Move the practice across. Update medical scheme details, supplier contracts, staff employment contracts and your billing system to the new practice number, and agree a date from which all new patient accounts are billed by the Inc.

After registration: ongoing compliance for your Inc.

Your Inc. has the same ongoing obligations as any company: CIPC annual returns, beneficial ownership filings, annual financial statements, a company tax return, and provisional tax twice a year. Each doctor also keeps their own HPCSA registration and annual fees up to date.

Frequently asked questions

How EasyComply can help

Medical practices are our speciality. We register Incs from start to finish, including the MOI, CIPC filing, SARS registrations and the BHF practice number application. We also handle your accounting, payroll and tax, and through our subsidiary, Reportify Med, we can take care of your medical aid billing from day one.

Sources: HPCSA Business Practices Policy (April 2024); BHF PCNS application forms; Companies Act 71 of 2008, sections 8(2)(c), 11 and 19(3).