When making the decision to set up a company it is important to know the advantages and disadvantages of the different types of companies to ensure you choose the best solution for your business.
In South Africa there are various possibilities available to entrepreneurs; in this article we will be focussing on the most popular entities namely:
- Sole proprietorship
- Private Company
- Public Liability Company
To know what’s right for you, first ask yourself the following questions:
- What is the potential size of your company
- Do you have partners in the business
- Who are the stakeholders of your business
- How much liability are you willing to take on
- Is the business operating for the primary reason of making a profit
- What is the nature of your business
Types of companies: a comparison
What to do prior to registration
Choose a company name and reserve names
Choose the type of entity you would like to register
Elect the directors
Find designated shareholders / identify investors
Determine the number of shares and how they will be divided
REMEMBER: Partnerships and Sole Proprietors are not registered at the CIPC
Common misconceptions when registering a company
The incorporator and director are the same person:
The incorporator, the person who registers the business, may also be the director but it is not the rule. The incorporator may be a party that is not the director or shareholder.
The incorporator must be a natural person:
The incorporator can be a juristic person e.g. the incorporator can be a trust.
Registering a company is expensive and difficult process:
Registering a company does not have to be expensive when the process is understood, and it is done correctly.
You can register a memorandum of incorporation after registering the company:
This is only half true. It is true that you can register a MOI at any time after the registration of your company however, at the time of registration a standard MOI (if not altered) will be registered. This MOI will be binding on your company until a new MOI has been successfully registered.
Your company name is your trademark:
Your company name and trading name may differ, neither of which is necessarily your trademark. Trademarks have to be registered
How can we help?
- We can register your company for you
- Assist you through the process of deciding on the right entity/type of company for your business
- Draft the relevant agreements for your company including partnership agreements and MOI’s tailored to your company
- Assist with all compliance issues
- Take the journey with your company and help manage risks that threatens the future success of your company
The information shared on this article/blog/vlog should be read and understood within the current legal framework of South Africa. It is meant purely for educational discussion and does not amount to legal advice. For specific legal advice, please consult a legal practitioner prior to application.