Setting up a South Africa business, or establishing a branch in South Africa for your existing company (Company Formation), whether as a Pty Ltd or external company, as the vehicle to incorporate your business are just some of the options open to corporates when forming a company in South Africa.
Company formation requires the company to consider a number of options, and professional advice should always be sought.
Below we provide some useful information on South Africa company formation
Details of the three most popular types of business structures (sole proprietorship, close corporations and private companies) are detailed in these web pages. Please note that close corporations were replaced in 2011 leaving just the Pty Ltd information but details are still contained here as some shell companies may still be available or the overseas company may be buying into an existing close corporation.
In the event of you requiring a Section 21 company (non profit company) or if you are setting up a company that has foreign ownership, the decision and advice process is extremely complex. In this instance it is more essential than ever to seek professional advice.
South Africa Company Formation Options
External Companies / Foreign Branches
If you are an existing company based outside of South Africa you should also consider the option of establishing an external company / foreign branch. There are various advantages to this but due consideration must be given, we strongly recommend you contact us in this regard and more information can be viewed here.
What is a close corporation?
A close corporation (CC) is similar to a private company in that it is a legal entity with its own legal personality, perpetual succession and a tax payer in its own right. The owners of a close corporation are called members. Membership is restricted to natural persons and, under certain conditions, to trusts. Such members do not hold shares but have a member’s interest in the entity. This member’s interest is expressed as a percentage. The minimum number of members is 1 and the maximum number of members allowed is 10. From a taxation perspective, the close corporation is treated in a similar manner as a company.
Why Register for a CC?
Small businesses, whose members have a close relationship and want to start up with simple administration and legal procedures, usually register for a CC. This is a common form of business entity for smaller businesses but highly unlikely as an option for a South Africa Company Formation for a foreign company commencing operations.
Private Company ((Pty) Limited)
This business entity is treated by law as a separate legal entity and has to register as a tax payer in its own right. It has a separate life from its owners and is required by the Companies Act of 2008 to perform rights and duties of its own. The owners of a private company are shareholders. A company may not have an interest in a close corporation. The Act dicatates a minimum of one Director in a private company and there is no limit to the amount of shareholders. The rights and obligations of the shareholders vis-a-vis each other and vis-a-vis the company are set out in a Memorandum of Incorporation as well as a shareholders agreement. The name of a private company must end with the words ‘(Proprietary) Limited’ or ‘(Pty) Ltd’.
Other information you may be interested in
- How to commence operations in South Africa as a foreign company
- South African company structure options
- Learn about South African Branches of your international company
- What is an external company
- How to set up an NGO in South Africa
- How to open a branch in South Africa
- Starting a business in South Africa as a Foreign Company
- How to employ foreign staff in your company
- South African Work Visa Options For Foreign Companies
- The importance of a shareholders agreement