For people starting a business in South Africa there are a few different types of business entities to choose from:
- Non-Profit Organisation - NPO
- Sole Proprietor
- Private Company – (Pty) Ltd
- Personal Liability Company – Inc
- Public Companies (Ltd.)
- State Owned Companies – SOC
Non-Profit Organisation - NPO
A non-profit organisation is incorporated for public benefit. The income and assets are used for the organisations charitable goals, rather than the organisations stakeholders.
A sole proprietor is the simplest way to do business if you are just starting out. It means that you are just trading under your own name, meaning there are is no separation between assets and liabilities of the business and your own.
This may be simple but the down side is that because there is no separation of the entities, meaning you would be personally liable for any debts that the business incurs.
The other types of businesses listed below are considered juristic persons, meaning there is a separation of the assets and liabilities of the business. In short, this means owners/shareholders benefit from limited liability.
Private Company – (Pty) Ltd
A (Pty) Ltd is the most common form of company in South Africa. It must be managed by at least one director and have one shareholder.
Personal Liability Company – Inc
A personal liability company is most often used for firms of professionals like doctors, lawyers and accountants.
This type of business makes both current and previous directors held liable for any debts and liabilities which occur during their time in office.
Public Companies (Ltd.)
Public companies are business entities which issue shares to the public, mostly found on the stock exchange.
Public companies are liable to shareholders and is managed by a board of directors.
To create a public company is extremely costly and usually reserved for the large and wealthy businesses.
State Owned Companies – SOC
These are companies that are owned by the government.