What type of entity best suits your new business?
November 25, 2021

One of the specialities of our business is to assist new businesses (or ‘start ups’ as they are commonly known) to make astute decisions that will set them on the right course from day one.
There are a myriad of decisions for any new business to make and one of the first ones, if they are to be recognised and obtain the benefits of an established business, is to choose the type of business they want to be. So, what type of entity best suits your new business? – let’s find out.

Where to start

All businesses are governed in South Africa by the Companies Act, No 71 of 2008, and registered by the Companies and Intellectual Properties Commission (CIPC).

The first questions you need to ask are:
a) Will your company be operating to make a profit, or as a non-profit organisation?
b) Will you want to be able to sell shares in your company to generate capital?

Based on the answers to these questions we can choose from these 6 basic types of entities…

  1. Non-profit – Previously known as a Section 21(b) company, this company bears no profit and is usually the choice of charitable institutions. The company can be incorporated by three or more members and needs a minimum of three directors, but no income or property can be distributed to these members or Directors.
  2. Sole proprietor – All the rest of these entities operate for-profit and the smallest and simplest is the Sole proprietorship. With only one owner (it can have employees) the Sole proprietor’s liability includes his personal assets and any profit that the business makes is seen by SARS as the owner’s personal income.
  3. A partnership – This is a cheap option to choose ats a partnership does not need to be registered. Whether it’s between 2 or 20 people, each partner contributes funds, products or services, and profits are shared between partners as per the contract they set up with each other.
  4. A Private Company – (PTY) Ltd – This entity can be set up by one or several people but needs to have a minimum of one director and one shareholder (they do not need to be South African citizens or residents) but it cannot have more, and its shares cannot be sold to the public.
  5. A public company – Ltd – Now we are getting into what are usually much larger and more complicated entities. Again set up by one or several people, this type of company needs a minimum of 3 directors and one member, but because it can sell its shares to the general public there’s no limit to how many shareholders it can have. It does have to be audited though as it is regulated by both the CIPC and the JSE, and it needs a company secretary and has to hold an AGM.
  6. Personal liability – Inc – This type of company needs a minimum of one director and one shareholder and is typically used by professional associations, the directors of this kind of entity are liable for the company’s debts. It is a private company operating for profit.

Seek the best business solutions from day 1!

The best start any business can get is to seek the help of a business that specialises in turning other businesses into successful entities, whatever those entities may be. At Platinum Business Solutions, our core function is to position our clients ‘ahead of the curve’ by generating the vital competitive advantage that has become imperative in today’s business world. We base our solutions on a business philosophy and commitment to pursuing long-term, innovative, sustainable & intelligent business solutions for all our valued clients.
Start your business off on the right foot by taking advantage of a no-obligation consultation with us to show you what a great difference PBS can make to your business from day 1 and well into your future.

Thanks!

Thanks to all our loyal clients in 2021 – We wish you all a wonderful holiday season and the best new year you can possibly imagine, and we look forward to being of service to you again in 2022!

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