Key:
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Characteristics
Sole Trader
Formation procedure
Not registered thus quick to start,
no registration fees involved.
NO separate legal personality
Number of owners
Management and
Control
Tax
Continuity of existence
Partnership
Not registered thus quick to start, just
need Partnership Agreement.
NO separate legal personality
Characteristics
Advantages
Disadvantages
A company is defined
as a legal entity
incorporated in terms
of Act 71 of 2008.
Definition
Companies
A company must be
registered with
the Companies and
Intellectual Property
Commission (CIPC).
Companies
Registered with the / Companies and
Intellectual Property Commission, and
must hand in MOI.
Limited Liability
Complex & complicated process,
Cost involved.
1 to unlimited shareholders
More Capital is available.
1 owner
Owner takes all profits
Growth limited, owner takes all
responsibility.
2-20 partners
More Capital is available, skills combine
Growth is limited, partners are all
responsible.
Self-involved in management
Quick decision making, gain
experience in all aspects.
Relying on self, no substitute for
leave.
As per partnership agreement (also profit
& loss split) – good faith
Better decision making, sharing
responsibility, division of labour.
Slow decision making because
everyone’s input is needed.
Managed by board of directors
Public company = distinction between
owners and management
Progressive tax paid by owner.
If profit is low, tax can be less than
28%
If profit is high, tax can be greater
than 28%
Progressive tax paid by partners based on
profit received from ratio agreed.
If profit is low, tax can be less than 28%
If profit is high, tax can be greater than
28%
Fixed on 28%
If income is high, still pay 28%
If income is low, still pay 28%
No continuity- dependant on
lifespan of owner
No continuity- dependant on lifespan of
partners
Has continuity of existence
independent from life of shareholders.
Thus company continue even if
shareholders die.
to encourage entrepreneurship and thereby
promote participation in all different sectors of the
South African economy
to promote the overall well-being of the South
African economy
Purpose of the
Companies Act
to simplify the registration and management
process of a company as a form of ownership
to ensure that the rights and obligations of
shareholders and directors align with each other by
ensuring that companies are managed responsibly
to ensure that non-profit companies are
established and managed in a way that will make
their functioning more effective ensuring
accountability at the same time
State owned
companies
Profit companies
Different types of
Companies
Private companies
Non-profit companies
Personal liability
companies
The name of a
company
Public companies
Liability
Unlimited liability thus owner fully
responsible.
Unlimited liability thus partners carry
jointly and severally full responsibility
The business is the legal entity:
Limited liability thus owners loose
only that invested in business.
Other
Own capital borrowed in personal
capacity.
No need to audit financial
statements.
Own capital borrowed in personal
capacity.
No need to audit financial statements.
Appropriate form of ownership
regardless of size of business.
Formation procedure
The prospectus
Prescriptions of the
Companies Act no. 71
of 2008
Meetings
Duties of Directors
Financial obligations
Consumo Publishers
Forms of Ownership