The Types of companies in South Africa

Question 1

What is the definition of a sole trade/sole proprietors?

Answer 1

A business that is owned and run by one individual and there is no legal distinction between the owner and the business.

Question 2

What are some disadvantages of a sole proprietorship?

Answer 2

~ Unlimited liability
~ Limited ability to raise capital
~ Limited skills

Question 3

What are the tax implications for a sole proprietorship?

Answer 3

Personal income tax owner as an individual

Question 4

What are the accounting requirements for a sole proprietorship?

Answer 4

None

Question 5

What is the cause of the termination of a sole proprietorship?

Answer 5

~Death
~Sequestration

Question 6

What is the meaning of Sequestration?

Answer 6

The action of sequestrating or taking legal possession of assets

Question 7

What is a Partnership?

Answer 7

A business relationship between two or more people who join to carry on a trade or business.

Question 8

What can a partner of a partnership contribute?

Answer 8

Money, Property, Labour or Skills

Question 9

What are the tax implications of a partnership?

Answer 9

Personal income tax owner as an individual

Question 10

Accounting requirements for a partnership?

Answer 10

None

Question 11

What is the cause of the termination of a partnership?

Answer 11

~ Death
~ Sequestration
~ Dissolution

Question 12

What is the meaning of dissolution?

Answer 12

company officially and formally closing down its business affairs

Question 13

What is a Private Company?

Answer 13

A business venture that has a number of shareholders or owners, with a potentially high annual turnover

Question 14

What are the requirements for a private company?

Answer 14

~ Must be legally registered.
~ A minimum of one shareholder and have a managing director.

Question 15

What are one of the most attractive features of a private company?

Answer 15

The law sees it as its own legal entity, so shareholders cannot be held liable for any debt the company might incur during the course of doing business, or should the business fail.

Question 16

With whom must a private company be registered with>

Answer 16

Companies and Intellectual Property Commission (CIPC). Previously known as CIPRO.

Question 17

What are some disadvantages of a private company?

Answer 17

~ Many legal requirements
~ More difficult and expensive to establish and operate than other forms of ownership, such as sole proprietorship or partnership

Question 18

What are the tax implications of a private company?

Answer 18

Taxed at company tax rate, capital gains tax, and dividends tax

Question 19

Accounting requirements for a private company?

Answer 19

~ Requires an audit by a certified auditor
~ They have to ensure they adhere to the companies act.

Question 20

What is the cause of the termination of a private company?

Answer 20

~ Liquidation
~ Deregistration

Question 21

What is the meaning of liquidation?

Answer 21

Liquidation of a company refers to the process of selling all the assets, paying off creditors, issuing any remaining assets to the shareholders, and closing the company.

Question 22

What is a public company?

Answer 22

A public company can have any number of shareholders and shares can be freely traded. Raising capital is done by selling shares.

Question 23

What is the requirement when it comes to the number of members that must be in a public company?

Answer 23

At least 7 members are required, at all times, of which 3 members have to be directors. (7 to unlimited members)

Question 24

What are the tax implications of a public company?

Answer 24

Taxed at the company tax rate. Capital gains tax. Dividends tax.

Question 25

What are the accounting requirements of a public company?

Answer 25

Requires an audit by a certified auditor and reporting needs to be done according to IFRS or IFRS for SME's

Question 26

What is the cause of termination of a public company?

Answer 26

~ Liquidation ~Deregistration

Question 27

What is a co-operative company?

Answer 27

An independent association oof persons who join together to meet economic, social and cultural needs through jointly owned and democratically run enterprise

Question 28

Are members of a co-operative liable for debts and why?

Answer 28

A co-operative is a legal entity, which means that the members are not personally liable for debts of a business.

Question 29

What percentage of the surplus must be put aside, annually, for future investments in a co-operative?

Answer 29

5%

Question 30

How many members is required to form a co-operative?

Answer 30

At least 5 founding members, to form a primary co-operative.

Question 31

What are the characteristics of members of a co-operative?

Answer 31

~ It is an association of persons ~ Membership is voluntary ~Mutual or common economic, social and cultural needs. ~ Jointly owned and democratically controlled by the member. ~ Operate according to co-operative principles

Question 32

What are the values of a co-operative?

Answer 32

~ Equality ~ Self-reliance ~ Self- help ~ Self- responsibility ~ Social responsibility

Question 33

Name the different types of co-operatives

Answer 33

1. Primary Co-operative 2. Secondary Co-operative 3. Tertiary Co-operative

Question 34

What are the tax implications of a co-operative?

Answer 34

Companies tax

Question 35

What are the liabilities of debt when it comes to a co-operative company?

Answer 35

Limited liability to the extent of outstanding membership fees

Question 36

What are the causes of termination of a co-operative?

Answer 36

Shares may be carried over in the instance of death of a member, members may withdraw membership or be forced to leave the co-operative, in the cases of inactivity.

Question 37

What is a non-profit organisation (NPO)?

Answer 37

An organisation that does not distribute its surplus funds to owners or shareholders but instead uses these funds to help pursue its community goals

Question 38

What are the tax implications of an NPO?

Answer 38

NPO has to register as a VAT vendor. There are certain tax benefits

Question 39

What are the liability debts of an NPO?

Answer 39

No personal liability on debts

Question 40

What are the tax requirements of an NPO?

Answer 40

They have to be audited once a year and has to send these financial statements to CIPC

Question 41

What are the causes of termination of a NPO?

Answer 41

Deregistration

Question 42

What is a Close Corporation?

Answer 42

A type of business entity that was available in South Africa before the implementation of the Companies Act,2008

Question 43

What happens to existing CC's and can new CC's be formed?

Answer 43

Existing CC's may continue trading as such, but new CC's will not be formed. The new companies act prevents registration of new CC's

Question 44

What is another option if an entity owns a Close company?

Answer 44

The CC can be converted to a company but will have to file a notice of conversion with a certified copy of a special resolution approving the conversion and a prescribed fee.