Types of Business
Company registration in South Africa is governed by the Companies Act (Act 61 of 1973). Companies are registered with the Companies and Intellectual Property Registration Office (CIPRO). South African law allows for a number of different types of company registration, and you will need to choose one according to your specific situation and needs. They are listed below.
* Sole proprietor
* Close corporation
* Private company (Pty Ltd)
* Public company
* Business trust
* Non-profit organisation
A sole proprietor, or sole trader, is an individual who conducts business as themselves. In other words, they “are” the business, and, under South African law, they are liable for the liabilities of the business. This means that if you trade as a sole proprietor and you fail financially, your personal assets such as your house and motor vehicle can be attached by your creditors. A typical example of a sole proprietor would be a plumber who operates from home and employs a casual assistant.
A partnership is similar to a sole proprietorship, except that as the name suggests it consists of more than person, and is subject to whatever business agreement the partners have entered into.
A closed corporation (CC) has one or members who have a percentage share in the business. The members are not liable for business debts, unless they have traded irresponsibly. CCs are being phased out in South Africa.
A private company (Pty Ltd) has shareholders and directors. Private companies are usually larger operations than CCs, although this is not necessarily the case. It costs more to register a private company, and the financial statements of the company have to be audited every year. It is useful to have a private company if you want to have many people at director level, controlling the business and adding value, since a private company can have many more directors than a CC can have members.
Whichever form of registration you decide to choose, you should base your decision on the nature of your intended business and your operational aims. If you are going into business with several other people, a CC or partnership could be the best option, whereas if you are going to start up a large organisation, a private company could be a better way.