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This content is brought to you by Sable, specialists in securing secondary residency and citizenship for South Africans. Sable can help relocate yourself and your family, along with your business to the UK.*
By Scott Brown*
Over the last decade more and more South African companies, whether they be massive multinationals, international franchises or small to medium enterprises, have been setting up shop in the UK. There are many benefits to having an operation in the UK, but there are also various factors to consider when setting up a business far from home.
Push and pull factors
Due to several factors, confidence in South Africa’s ability to successfully incubate long-term entrepreneurial projects is at a low and many local businesses are beginning to look offshore.
We all know that the Rand is an extremely volatile currency, so economic stability is a high priority when considering how best to expand your business. After years of riding the Rand roller coaster, many entrepreneurs are now looking to secure their financial futures, and that of their businesses, by taking positions that effectively hedge against the Rand.
Judging from the last six years and looking into the medium term, the Rand and the South African economy seem set to struggle on. The country will be lucky to avoid a technical recession this year, with GDP growth barely remaining above 0%. This is, unfortunately, not the kind of environment a business can easily expand in and the red tape and business unfriendly policies of the current government only add to the difficulties.
As a result of all this, many in South Africa have what is often called a “plan B”, not just for their businesses, but also for themselves and their families. Establishing a business in another country is a great way to relocate to that country with one’s family and the UK offers a range of visas for entrepreneurs and their dependants*.
Many South Africans then choose to expand their lives into the UK, and it’s easy to see why. With a shared history going back hundreds of years, a common language and even similarities in corporate legal systems, the UK has always been a preferred expansion destination for South African business owners.
Choosing the right business structure for your expansion
If you’re thinking about expanding into the UK, you will have to choose whether or not you’d like to open up a branch or a subsidiary. Both company formations have very different implications for a business owner, so you need to be sure you are picking the one that suits not just your business’s needs, but also your personal immigration needs.
Let’s take a look at these two structures briefly:
Opening a branch
When you open a branch you are opening an extension of your parent company’s operations. You will operate what is effectively an overseas company within the UK, which has several legal and tax implications. Key to note in this type of structure is that the parent company remains responsible for any liabilities incurred by the branch.
As a result, a poorly performing branch can drag your entire organisation down, so it can be risky. It’s also likely that UK service providers will be hesitant to enter into legal contracts with branches because these branches may be subject to laws that govern the parent company back in South Africa.
Opening a subsidiary
A subsidiary, on the other hand, is a UK limited company that you set up independently from the parent company. While the initial set up is more onerous than a branch, a subsidiary has more independence from its parent, which comes with several benefits.
A subsidiary ring-fences liabilities, removing the risks that arise in the event of liquidation proceedings. It’s also far easier to enter into contracts because, as a UK limited company, your subsidiary will be subject to UK company law.
Registration as a limited company in the UK also enhances an operation’s autonomy. Should you choose to close down the South African parent company, the operation in the UK will remain a going concern regardless.
So which structure is best for you?
It might make more sense to open a subsidiary if you wish to relocate yourself along with your business. The autonomy of a subsidiary will eliminate some of the hurdles you may run into with a branch, should you decide to close up your operations in South Africa.
Conversely, if you want to keep your base of operations in South Africa while also drawing on profits derived from an entrance into the UK market, you could consider using a branch structure.
How Sable International can help you internationalise your business
Choosing what kind of company structure is best for your needs is not an easy decision to make, which is why you’ll need UK-based experts to help you out.
Our team of Chartered Accountants, UK payroll, human resources and tax experts will help you set your business up in the UK as efficiently as possible. We can also make sure that the day-to-day administrative and accounting tasks your business relies on run as smoothly as possible. This way, you can focus on driving your operation’s profits and pursue new avenues of growth in the UK and beyond.
We opened for business in the UK 20 years ago when a young South African, Reg Bamford, started a small accountancy practice on Kensington High Street. Since then, we’ve grown into a multinational concern with offices in London, Cape Town, Melbourne and Hong Kong. Reg is still our CEO and his entrepreneurial experience is encoded into our operation’s DNA, so we know what it takes to start up and expand a business in the UK.
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