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We previously looked at the general rules to follow when starting a business.

Let us now look at the various business entities.

Some of them are Juristic persons.

Firstly; there are Public Companies. These are companies listed on the Stock Exchange; and are owned by their shareholders and run by a board of directors. They are usually big Companies like Anglo American, De Beers, Pick n Pay, Woolworths etc and only really come into the picture when your business has grown exponentially; and you decide to list your company on one or more of the Stock Exchanges.

Secondly: there are Private Companies. These are smaller businesses with private owners, shareholders and directors. They have the suffix: Proprietary Limited after their names: Eg: ABC (Pty) Ltd. They are usually small to medium size businesses. They have to have auditors and have their books formally audited at least once a year; and there are many rules and regulations governing them and how they are allowed to operate.

Then we have Close Corporations; which are legal entities less formal and less regulated than Pty Ltd companies; and do not need to be audited annually; and have less regulations and rules governing them. It is a less formal business entity and has an accounting officer in charge of its finances and the members are the owners and run the close corporations; as opposed to a board of directors running a Pty Ltd company. This has been a very popular vehicle for small business; but unfortunately the Government has now stopped the registration of any new close corporations; as it is promoting the use of company’s and a new Company’s Act which has been passed in recent times. You can however buy a shell or current close corporation and use that for your business.

We also have an entity known as a partnership, where two or more partners run a business in partnership; and also own the business and are responsible for its liabilities.

Lastly we have small firms and sole proprietorships that are similarly privately owned and run by their owners personally or with managers and is the most popular business vehicle for small and start-up businesses.

The above is a very simplistic set out of the different business entities and vehicles for your business; but it is important to understand the distinction between the various business entities; and to decide which is best suited to your business and the way you want to operate.

If you want any advice in this regard; do not hesitate to contact us.

Please visit our website at www.legaladviceoffice.co.za or send us an email to This email address is being protected from spambots. You need JavaScript enabled to view it. and we will revert within 48 hours with a reply.

Thank you.

The Legal Advice Office Team.

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Legal Advice Office

South Africa

Kandelaar Street, Vermont, Hermanus
Phone: +27 (028) 316 2832
Email: info@legaladviceoffice.co.za

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