A number of years ago, a friend and I created an online website and membership club (much like a sports club) which has grown profoundly over the past two years.
We often run events (such as fun runs, volunteer rallies and the likes) which have product sponsors ("donors" if you will) of prizes and infrastructure. A number of them have expressed the desire for us to register as a legal entity and register for VAT as a non-profit/public benefit organisation.
Having practically no business experience, I've had to do quite a bit research on the topic and have got some advice from family friends etc.
Suggestions I've gotten so far:
-- Register a Section 21 Company (Companies Act)
-- Register that as an NPO (Nonprofit Organisations Act, 1997)
-- Register with SARS as a Public Benefit Organisation
I also found this article very informative (although its not based in South African law).
Now, a few questions:
-- What is the most cost effective way to get a company of this kind setup? Commercial Law attorney? CA? We generally try to invest any funds available back into the organisation, so there isn't exactly a huge fund available for us to get this off the ground. Some people have indicated that attorney costs can fly as high as R1000/hour whilst others say you can setup the company for a fraction of that cost if you do some of the work yourself? I've read through the CIPRO forms and I suppose some of them I can do myself, but others I would need someone to review post draft, to make sure I have all avenues covered.
-- Can a Section 21 company have "token members"? As a public company, we are required to have a minimum of 7 members when incorporating. As there are only 2 of use really involved in the organisation, is it possible to "override" this rule in the articles of association by 2 allocating 2 director positions which have significantly higher voting power than the non-executive members? Then only if there was a disagreement between Directors, the non-exec members would have the "swing vote"...basically allowing the company directors to nullify any votes by the members? Is this possible? Legal?
-- What are the tax implications for the sponsors/donors? Where does SARS draw the line between a sponsor who sponsors equipment in exchange for advertising and a donor who donates for the feel-good? Would we be able to "sell" the donation of prizes as some form of tax deduction for the donor company?
-- Is a Section 21 company better suited to a "club" of this kind? Or should we be looking at a Association incorporated under Common Law (universitas)? What are the benefits either side?
Any advice or direction is greatly appreciated