Are you looking at starting a business? Do you know how you are going to trade and what the benefits are that are associated with each type of entity?
If not, carry on reading to make sure you make the right decision at the start.
Sole Proprietorship
Also known as a sole trader, this business type does not separate the owner from the entity, the businesses profits, losses and liabilities ultimately fall on the owner in their personal capacity. There is no cost to setting up a sole proprietorship but the owner will be personally liable for the debts of the sole prop which poses massive risk to them. Furthermore, obtaining credit can be more challenging as a sole prop. Sole traders are taxed at individual tax tables and SARS registrations are attached to the owners name.
Partnership
In South Africa, a partnership includes two or more partners that enter into and run a business. A partnership can have a maximum of 20 partners. They’re easy to set up and relatively inexpensive. You will need to prepare a partnership agreement before registering a partnership. As with the sole trader, a partnership has no limited liability and its profits are included in the taxable income of the partners and taxed at their respective tax rates.
Company
A company is an independent legal entity that has the ability to apply for credit, go into debt and take legal action. Stakeholders, specifically shareholders, enjoy limited liability, except in instances of negligence, recklessness or illegal activity. The Company is run by the directors and taxed according to company tax rates.
Trust
A trust is an entity, whereby the trustees (maximum of 20) use assets earn profits/income for the benefit of the beneficiaries of the Trust. Trusts offer excellent asset protection and can also reduce estate duties.
What is a shelf company
There is no difference between a company that you have registered yourself and a shelf company. A shelf company is a company that has already been formed by someone else and gives you the benefit of having a company number available immediately. When buying a shelf company there is still a lot of admin involved in changing directors, changing the name, getting share certificates etc. which also come with additional costs. It is quicker, and often cheaper, to form a new company.
How Can We Help You?
By law, companies are required to maintain records and statutory books within the parameters defined by the Companies Act. Our team can help you fulfill these obligations and offers the full range of services required to start a company and make any changes thereto which include:
Formation of new companies
Conversions of CC’s
Maintenance of statutory records – updating director details etc.
Amendments to statutory details – changing directors, shareholders etc.
Annual CIPC submissions
Assistance with all CIPC matters
Contact My Finance Partner today for assistance! info@mfpartner.co.za