Terminology

Independent Legal Entity (company)
A CC, Trust, (Pty) Ltd and Sec 21 are all legal persons which have the same rights as natural persons. For example, a company can own property, employ people, make profits, pay tax, sue people, as well as be sued, just like a natural person like you and I.

Limited Liability
This is the protection which the Independent legal entity (company) offers to its members or directors in the event of it being sued. Claims are made against the company and the assets which are owned by the company, and not against the personal assets of the members or directors. However, no protection is offered if the members/directors were negligent, fraudulent, misrepresented themselves or have signed personal surety.

Sole Proprietor
A sole proprietor is a one-man business, which requires no registration. An example would be an informal trader or a street vendor. A sole proprietor is not an independent legal entity and there is no legal protection against claims. The sole proprietor is thus sued in his personal capacity and his personal assets are at stake.

Partnership
A Partnership is similar to a sole proprietor in terms of liability. The partners are jointly and severally liable for all claims, meaning even the "innocent" partner, who may be totally unaware of the claim, can be held personally liable and loose his personal assets in the event of a successful claim.

Closed Corporation (BK)
This is a legal entity and the member(s) have the protection of limited liability. A maximum of ten natural people are allowed to hold membership in a CC. There is no limitation in respect of the number of employees in the CC.
100% of the membership must be owned. This means that if there are 5 members, all with equal membership (20%) and one member desires to resign, the remaining 4 must take up his membership and now all will own 25% each. All parties must agree to any membership change. A bookkeeper also needs to be appointed.

Private Companies - (Pty) Ltd
A private company is also a juristic person where the liabilities of its shareholders are limited. The shareholders own the company and appoint the directors to run it on their behalf. (a shareholder can also be a director)
A Private Company can not have more than 50 shareholders and its shares may not be offered to the general public. If a shareholder wants to sell any shares, he has to offer it to another shareholder in the same company.
A private company does not have to lodge interim reports and its annual reports are not available to the public.

CC vs. Pty

Close Corporations	Private Company
Members	Directors and shareholders
Maximum of 10 members	Maximum of 50 shareholders
Companies can NOT be members	Companies can be shareholders
Members contribution	Share Capital
Accounting Officer	Auditor (Chartered Accountant)
30% tax rate	30% tax rate
Cheaper than R350	Expensive R900
Limited liability	Limited liability
No AGM required	Must convene an AGM

Public Company Ltd
A public company can have any number of shareholders and the shares can be freely traded, and for this reason, quarterly reports and annual financial statements have to be lodged with CiPRO, where they become available for public inspection. These are the type of companies which are usually listed on the JSE.

Incorporations
These are the same as private companies. These are used by Professionals, e.g. Accountants, Lawyers and Engineers.
The only difference is that all present and past directors are liable together for the company debts contracted during their period of office.

External Company
An External Company is a company that is registered in another country and that wishes to establish a company in South Africa. For example, if a German registered company, "Munich Transport", wishes to establish an external company in South Africa, the company will be called "Munich Transport SA"
When registering an external company, the Registrar will require that a notary, from the country of origin, must certify each page of the Memorandum and Articles.

Sec21 - Not for Gain
These companies are formed not for gain, and are usually charitable institutions. A section 21 Company must have a minimum of 2 directors, which helps with accountability and 7 subscribers to appoint the directors.
Auditors have to be appointed. 70% of the income of the company must be allocated to the object of the business, which is normally a community based business initiative. The directors may however draw reasonable salaries. No assets or properties can be sold but must be donated to a similar organisation.

Shareholder
The shareholders of the company are the people who contribute finance to run the company by purchasing the shares. They appoint the directors to run the company for them. However, the shareholders can also be directores of the company.

VAT
Value Added Tax (VAT) is tax charged on the supply of most goods and services by businesses (vendors) on behalf of the Receiver of Revenue (SARS).

Input Tax
This is the VAT which the vendor pays on purchases, e.g. rent.

Output Tax
Is the VAT charged to customers.
The output tax less the input tax in the tax period results in the amount payable or refundable.
A person selling mostly to consumers (who are not VAT registered) will benefit from NOT being registered for VAT because his value-add is not taxed. A business selling mainly to other VAT vendors, should consider registering voluntray because the VAT paid on its inputs is deducted from the VAT it charges its customers.

Income Tax
The Receiver of Revenue automatically registers a Company or Close Corporation for tax during the registration process. The new members of the CC are in turn responsible for registering as provisional taxpayers and submitting provisional tax returns twice a year for both the CC and themselves.

Registered address
The registered address is the address which all CIPRO and tax correspondence is sent to. However, the residential, postal, business and registered address can all be the same.

Copyright
Esclusive right given to an author, designer, musical worsks, etc. for original work. Protection lasts for 50 years.

Patent
Exclusive right granted for an invention. Protection is granted for 20 years.

Trade Marks
Brand name (Coca Cola), slogan or logo. Protection is forever, but must be renewed every ten years.