The Corporations Act of 2008 specifies the proper sorts of business structures for companies in South Africa. Whether you’re applying for a business visa or a visa endorsement, you’ll need to choose the correct business structure.
Since 2006, Immigration has advised people and businesses on the many forms of business structures available in South Africa, as well as the subsequent setup.
Business Structures
If you’re starting a business in South Africa as a foreigner, here’s a look at the several sorts of business structures you can use.
Sole Proprietorship
A sole proprietorship, often known as a sole trader, is a business structure owned and operated by a single person.
Because the owner of a sole proprietorship has no limited liability, it’s crucial to remember that his assets are included in his liabilities.
The sole proprietorship’s net profit is considered personal income by the business owner and is taxed in his name under the South African Income Tax Law’s income tax tables.
It’s vital to remember that a sole proprietorship has no legal distinction between the owner and the business structure — the company doesn’t have its legal entity. In practice, this means that all of the business’s profits, as well as any taxes and responsibilities, belong to the owner.
Partnership
A partnership is defined as a group of two to twenty people who have contractually agreed to conduct a profit-generating business together. They also agree to divide any gains in accordance with their agreement and in proportion to their respective interests.
Each partner must contribute to the partnership, and unlike a sole proprietorship, the partnership is not a separate legal body, therefore partners are generally accountable for obligations.
Private Companies
Most foreigners who start a business in South Africa choose this option. Foreign shareholding is not prohibited in this sort of business structure in South Africa, and only one shareholder and director are required.
A Private Company (Pty Ltd) cannot offer securities to the public under the new Companies Act.
Private firms are treated as separate legal entities that are taxed separately and provide liability protection to their stockholders.
Reservation of a company name, preparation of a memorandum of incorporation, and written agreement of the auditors, if any, to work for the business are all required for a Pty Ltd.
Public companies
A public corporation is primarily formed to raise funds by selling shares to the general public. A minimum of one shareholder and three directors must be present.
Limited liability businesses (LLCs) are public companies with legal personalities.
Personal Liability Companies
If a company is formed under section 8(2)(c) of the Companies Act, its memorandum of incorporation (MOI) states that the company’s directors and prior directors are equally and severally liable, together with the company, for any obligations and liabilities incurred during their terms of office. Typically, this refers to professionals who apply section 8(2)(c) of the Companies Act, such as solicitors and accountants.
State-Owned companies
A firm defined as a “state-owned enterprise” in the Public Finance Management Act 1 of 1999 or a corporation held by a municipality is referred to as a “state-owned company.” The majority of the laws that apply to public firms will also apply to state-owned enterprises.
Non-profit Companies (NPC)
A public non-profit corporation is formed for a specific purpose, such as cultural or social activities or communal/collective interests. This form of business organization does not provide income to any stakeholders.
Foreign and External Companies
External corporations are foreign-owned businesses that are registered outside of South Africa yet conduct business there. Foreign-owned enterprises must register with the CIPC as an external corporations, and they may not offer securities to the South African public.
Foreign corporations interested in establishing a branch in South Africa use this sort of corporate structure.
