South Africa | Sole Proprietorship vs Close Corporation

Visas
Foreign Exchange
Property
Tax
Insurance
Banking

Visas

Intergate Immigration Service has an expert team of immigration consultants and certified Home Affairs practitioners. The team has the latest knowledge on immigration legislation and has well established researched information on expected relocation procedures and changes.

Foreign Exchange

Exchanging money can be a daunting experience. Our well-informed experts can save you avoidable charges. Incompass Financial Solutions will guide you through the exchange process. The experts will advise you on the best solutions, whether it is a lump sum of money or a staggered monthly transaction.

Property

SA Homebuyers has been established with the aim of providing a sophisticated property buyers service. Acting as an independent property consultant, the service provides an unashamed bias towards protecting the buyers interest and assists in securing you the right property, in the right area and at the best price.

Tax

Seeking tax advice is never high up on anyone's shopping list, however the perception that tax advice is a necessary evil is not always correct. Yes it is true that tax advice helps you to comply with legislation and ensures compliance but it can also offer the opportunity to structure your affairs in the most tax advantageous fashion.

Insurance

Whether it is house and home, car insurance, medical aid or commercial cover, Incompass Insurance offers a free and independent assessment on your specific insurance needs. Furthermore, Incompass Insurance is one of the biggest guest house insurance brokers in South Africa.

Banking

Opening up an appropriate bank account in South Africa often proves more difficult than you may think. We are able to provide our clients with advice on local banking, cash accounts for lump sums and Swiss banking.

Comparison - Sole Proprietorship versus Close Corporation

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Factors

Sole Proprietorships

Close Corporations

Characteristics

Owned and managed by an individual
No legal requirements for registration except for ensuring that owner is registered for income tax purposes
Type of business traditionally used for managing shop, consulting, hairdressers, taverns, and similar small business

Subject to Close Corporations Act 1984
Has characteristics of both partnerships and companies
Established by way of a founding statement containing details of members, proposed name, interests of members
The name must end with cc

Legal persona

It does not have a legal personality
There is no existence of the business without the owner
All assets and income belong to the owner in his personal capacity
He is taxed in his personal capacity

It is a separate entity that exists separately from its members
Membership must be expressed as a percentage and total 100%
Members both own and control the business
Usually two or more members have to sign legal documentation
Each member makes a contribution when he joins and it does not have to be equal to other contributions

Liability

The owner is liable for all debts and claims against the business

CC is a legal person so members are not liable in their personal capacity
Members are held jointly and severally liable in specific instances
Exceptions to personal exemption: abuse of powers, fraud, etc
Profit taxed as company tax and not in the hands of the member

Control and authority

The owner has direct control over all decisions
All profits go to the owner
Free to make all decisions and changes
Business demands high level of commitment from owner in terms of time and his or her resources

Fiduciary duties (in good faith)
Each member has authority to bind corporation to transactions

Capital acquisition potential

Limited to the owner’s personal and financial credit rating
Expansion is limited because of the limited availability of funds
Exposure to excessive loan capital can result in the owner having to forfeit control, authority and freedom

Transfer of Ownership / Lifespan and continuity

Owner can decide at any time to sell, close down to transfer to someone else
The lifespan of the business is usually linked to the owner’s capacity
If the owner dies or becomes insolvent, or otherwise legally incapable, this usually means the end of the business

Not influenced by the withdrawal of members
Can be transferred to individual if all members agree
Can be terminated in a Court of Law

Legal prescriptions

None

These are not strict and registration costs are low
Does not need an auditor but does need an accounting officer
Financial statements must be drawn up within 9 months of the year-end and approved by all the members

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