Types of business structures

Sole Trader/Proprietor: One person owns the business and the law makes no distinction between the person and the business that they are operating. The assets and debts of the person are also assets and debts of the business. Sole traders must refer to their business as “Name t/a (trading as) business name”.

Partnership: A business that is owned by between two and 20 partners. As with a sole trader, there are no distinctions between the assets and debts of the individuals and those of the business. It is advisable to have legal agreements in place that establish profit sharing, asset management and actions in the event of a partner wishing to leave.

Close Corporation: A business model allowing up to ten individuals to start a business with limited liability. The assets and debts of the business belong to the Close Corporation rather than to the Members. The suffix “CC” must be written after the business name on official documentation. If this is omitted, the law does not see the assets and debts of the business as separate from those of the Members. It is also common for suppliers to ask for a guarantor when dealing with Close Corporations in order to ensure payment.

Company: A business model consisting of over ten people, constrained by the laws of the Companies Act. It comprises the owners (or shareholders) and the directors (managers of the organisation) and its assets and debt belong solely to the company. The name of the company must always be followed by the suffix “Pty (Ltd)” and the names of the directors and the registration number must always be included on the company letterhead.

Companies can take many forms. These include:

  • State owned company
  • Private company
  • Public company
  • Personal liability company
  • Non-profit company
  • External profit company
  • External non-profit company

It is advisable, and in many cases necessary, to seek legal assistance when forming a company. A private company must have at least one director, a company secretary and a public officer. The same person cannot be both the sole director and the company secretary. A company must also have an auditor who is a South African resident to accept formal notices on its behalf.

A co-operative business model is one formed and owned by a group of people, who each buy shares to become members.


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