Different types of business ownership

Entrepreneurs usually have a vision of how they want to run their business. Achieving this vision means that they need to choose the best type of business ownership. Here are the various business types you can register in South Africa:

Sole Proprietor:
The simplest business entity, sole proprietorships are businesses started and owned by individuals. There is no separation of assets and liabilities and these businesses cannot have partners, but only employees. The sole proprietor is held personally liable for any debts that the business incurs.

Private Company (Pty) Ltd:
This type of company may be founded and managed by just one director. This business is a separate juristic person. A Memorandum of Incorporation is required, along with an annual accounting review. Business owners are required to register the company with the CIPC.

business ownershipPersonal Liability Company (Inc.):
Both current and previous directors may be held jointly and severally liable for any debts and liabilities which occur during their time in office. These companies are most often used for forms of professionals, such as doctors, lawyers, accountants, etc.

Public Companies (Ltd):
The minimum requirements for this type of business include one shareholder and 3 directors. Management is invested in a board of directors and the company is liable to shareholders. Shares are issued to the public to raise more capital and these companies are often listed on a stock exchange.

State-owned Companies (SOC):
Government usually has a controlling share of an SOC. The company is viewed as part of government from a legal perspective. A benefit that comes with this type of business ownership is that funding is unlimited, but a disadvantage is that decision-making may be limited and hampered by unnecessary red tape.

Non-Profit Companies:
These companies are established for some form of cultural or social activities or communal/group interests. Income is not distributed to any stakeholders and the company doesn’t have as many legal restrictions.

Co-operatives:
These are jointly-owned and democratically controlled companies and function as a separate legal entity. Pooled resources are an advantage, but there are usually low returns on capital.

 

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