The old saying still holds true: there are only two things in life that are certain - income tax and death.

It is income tax that is the deciding factor on you running your business as a freelancer.  You have to see yourself as someone who employs you.  You may be a one-person business, but you are still the only employee and you have to pay income tax on a monthly basis.

The are certain advantages to forming a close corporation, but there are also advantages to remaining a sole trader.

However, as a sole trader, you are liable to have the people who use your services deduct tax at source.  The rate at which they are obliged to deduct tax is very high, so it is often better to form a close corporation, charge VAT, and claim all the deductions you are entitled to.  However, it will cost you the services of an accountant, and perhaps that is not worth your while.

WARNING: If you work for the same employer on contract, or if you are submitting invoices to only one person for longer than a few months, SARS will deem you to be an employee and you will have PAYE deducted at source.

If however, you work for a few people and send out two or three invoices a month, then you will want to have in your possession a very highly prized document known as a "Tax Clearance Certificate".

This Certificate, issued by SARS and valid for six months, declares that you as a close corporation have:

• A close Corporation registration Number.
• An Income Tax number.
• A VAT registration number.
• A PAYE employers registration number.
• An SDL number and
• a UIF number.

To have all of these things, you, as the close corporation, have to paying you (the sole employee) a monthly salary; that you deduct the correct amount of PAYE, UIF, and Skills Levy every month, and that you pay it over to SARS.  You will also find that you are subject to Workmen's Compensation and RSC levies just to add to the money you seem to be paying over.

However, just to be able to produce the Tax Clearance Certificate opens doors to you that you will appreciate within a very short time.

First of all, you will probably find that what you pay your accountant is a smaller amount than you save in tax.  You are also a respected member of society, and you are respected by the people who want to employ you.  You are also entitled to claim against your Skills Levy for any training you undergo (just check with your local SETA what the procedures are).