What type of company are you?

Launching a new company takes courage and hard work. Add the legal red tape to this situation and what should be an exciting new endeavour can become overwhelming chaos. Where do you start? The next couple of blog articles are aimed to offer bite-size info on some of the procedures and laws surrounding company registrations.

Firstly, your company should be registered correctly. What type of company is the most suitable option for you? According to the Companies Act of 2008 your company can either be registered as a non-profit company or a profit company. Profit companies are further divided into: private -, public-, personal liability - and state-owned companies. Let me explain the difference...

Non-Profit Companies

NON-PROFIT COMPANIES (NPC)

These are companies created to help people, protect the environment or support a cause. The objective of an NPC is to benefit the public, not to make a profit.  Non-profit organisations usually involve cultural or social activities, for example churches or charity organisations. The income and property of the company may not be distributed to its members, directors etc., except as reasonable payment for their services.

PRIVATE COMPANIES (Pty) Ltd

This means that the company is owned privately, and so the filing requirements are less strict than those of public companies. Private companies have shareholders and issue stock, but their shares will not be traded on public exchanges.  The business has a legal personality separate from its members. It is owned by one or multiple shareholders and overseen by a board of directors. With the new Companies Act members are not limited to 50, as was the case with the previous Act.

Public Companies

PUBLIC COMPANIES (Ltd)

Public companies are traded on at least one public stock exchange. For this reason public companies have to answer to their shareholders and certain changes will be voted on by the shareholders. They must meet more rigid requirements than private companies and are obligated to publically disclose financial statements and annual reports.

Personal Liability

PERSONAL LIABILITY COMPANIES (Inc)

Professionals such as doctors, lawyers or engineers usually register this type of company. Directors of this company are jointly liable with the company for debts and liabilities arising during their periods of office. 

State-Owned

STATE-OWNED COMPANIES (SOC Ltd)

This is either a state-owned enterprise or a company owned by a municipality. These companies are legal entities created by the government to carry out commercial activities on its behalf. Examples are companies such ESKOM and SAA.

Foreign Companies

FOREIGN AND EXTERNAL COMPANIES

This is a company incorporated outside of South Africa. These companies need to register as an “external company” with the CIPC if they intend to conduct business in South Africa. Any activities such as holding meetings, opening a bank account, opening offices, buying property or  employing locals are considered to be “conducting business” in South Africa. 

Parterships

Other options available to individuals include:

SOLE PROPRIETORSHIP- a business owned by one person who may employ others but is personally liable for all debts incurred by the business. 

PARTNERSHIP- Two or more people operate a business to make a profit. Each partner is liable for debts of the company.

Registering a company might seem complicated and daunting, but with the help of an expert you can avoid legal and financial hassles without having sleepless nights about it. Contact James Grove Chartered Accountants for more advice and information on the subject.