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Comparison of Sole Proprietorship, Close Corporation, and Company
  Sole Proprietor Close Corporation Company
Naming Name used under common law Name registered in terms of CC Act Name registered in terms of Companies Act
Name usage e.g. J Jones t/a Kembul Trading Kembul Trading CC Kembul Trading (Pty) Ltd
Registration number format - 2009/222222/23 2009/222222/07
Reg.No. requirement - Must appear on letterheads, etc Must appear on letterheads, etc
 Compliance advantage [Owner always responsible for debt, etc] Member protected from CC debt, etc Director protected from CC debt, etc
 Non-compliance penalty [Owner always responsible for debt, etc] Member responsible for debt, etc Director responsible for debt, etc
Legal status Natual person - human being Legal person - juristic entity Legal person - juristic entity
Ownership Business belongs to owner Business belongs to CC Business belongs to Company
    CC belongs to owner/Member Company belongs to owner/member/shareholder
 More than one owner Proprietors/Partners Members Shareholders/Members
Management Business is managed by owner CC is managed by Member Company is managed by Director
 More than one manager Proprietors/Partners Members Directors
 Maximum number 1 sole proprietor / 20 partners 10 members 50+ shareholders/directors
Liability e.g. Owner must pay bills, vehicle leases, etc CC must pay bills, vehicle leases, etc Company must pay bills, vehicle leases, etc
 Financial liability Owner has full liability to pay CC has full liability to pay Company has full liability to pay
  Owner does not have limited liability Member has conditional limited liability Director has conditional limited liability
  Owner can lose personal assets, house, etc Member's assets conditionally safe Director's assets conditionally safe
  Owner always liable Member liable if signed surety for CC Director liable if siged surety for Company
Risk e.g. Owner is sued for loss or damage CC is sued for loss or damage Company is sued for loss or damage
 Legal liability Owner responsible for any payments CC responsible for any payments Company responsible for any payments
  Owner always fully liable Member has conditional limited liability Director has conditional limited liability
  Owner can lose personal assets, house, etc Member's assets conditionally safe Director's assets conditionally safe
Trading condition / requirement Care, honesty, good faith Care, honesty, good faith Care, honesty, good faith
 Penalties for breach of law Fine, imprisonment or both Fine, imprisonment or both Fine, imprisonment or both
  [No limited liability] Loss of Limited Liability Loss of Limited Liability
Accounting requirements Must keep full set of books Must keep full set of books Must keep full set of books
Accounting Officer  - Required  -
Auditor  - When turnover is R100m or more When turnover is R100m or more
Annual Financial Statements Required Required Required
Tax returns Required - for Sole Proprietor only Required - for CC & Members personal Required - for Company & Directors personal
 AFS + Tax Returns fee e.g. R1 970 per year R1 970 per year + R850 R1 970 per year + R850
Annual Returns None Required Required
Deduction permissibility Receiver disallows deductions more readily Receiver allows deductions more readily Receiver allows deductions more readily
Marginal tax rate (e.g. on R500 000) 23.50%
Corporate tax rate 28.00% 28.00%
Dividend tax (effective) 10.00% 10.00%
Total profit rate (e.g. on R500 000) 23.50% 30.80% 30.80%
Tax on R500 000 profit e.g. R117 545 R154 000 R154 000
 Calculation Based on 2015 tax year Based on 2015 tax year Based on 2015 tax year
 If Director draws the R500 000 R117 545 tax R117 545 tax only, no corporate tax R117 545 tax only, no corporate tax
Our conclusion:
If you need financial/legal protection and a corporate/organised image, a CC (cannot register new ones in SA) or Company might be best for you.
If you do not want a second tax obligation, want to keep it basic and small, and do not mind being responsible for all the business bills,
then you could choose a Sole Proprietorship - you can still develop a good name and image.
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