Business Structures in SA

In South Africa we have three different “entities” excluding transacting on your own as a sole proprietor:

👉Partnership (up to 20 partners involved, not a separate legal entity and the partners are fully liable for all risk and entitled to all profits, income / taxes go straight to the partners accounts).

👉Close Corporation (similar to partnership as it’s not a separate legal entity and liability and risk still falls on the members who form the CC but does require own separate accounting records etc) They do not create CCs in SA anymore so the only option is buying one off the shelf.

👉Company (various different types here. The three main ones we need to know about are: 🤓NPO (non-profit), 🤓Ltd (Limited -which is a public company listed on the JSE) and 🤓Pty Ltd (Proprietary limited – which is a private company). A Pty Ltd is the main one most people would need. It is a separate legal entity so what this means is that it ringfences the risk for you as an owner and operates as its own. The admin is a bit more than a partnership or sole proprietor  – you will need to submit income tax returns, you will need to submit annual returns and you will need a set of financials according to IFRS for SME or the likes. The profits get taxed in the entity at corporate tax rate.

👉Sole Proprietorship: This is when you operate on your own as yourself. This gets a bit confusing from a tax and income perspective but is the cheapest option (taxes aside). 

Know that we know what’s available I will unpack each on in terms of their pros and cons.