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[ Useful Tips when Buying/Selling a Business ]

How should I run my business ?

Gold Bar

IF YOU OWN A BUSINESS, YOU NEED TO CHOOSE WHAT BUSINESS ENTITY, OR BUSINESS VEHICLE, TO USE FOR THE BUSINESS - IN OTHER WORDS WHETHER TO RUN THE BUSINESS SIMPLY AS A ONE-PERSON SHOW, OR TO USE A MORE COMPLICATED STRUCTURE LIKE A COMPANY. MOST COMMON IN SOUTH AFRICA ARE SOLE PROPRIETORSHIPS (THE "ONE-PERSON SHOW"), PARTNERSHIPS, COMPANIES AND CLOSE CORPORATIONS. EACH HAS ITS OWN CHARACTERISTICS AND LEGAL ADVANTAGES AND DISADVANTAGES.

THE SOLE PROPRIETORSHIP (Anna Adams trading as "Anna's Fish & Chips")

This is the most common for a small-scale businessperson. Here, Anna Adams owns the business and receives all the profit. There is no distinction between what Anna owns and what the business owns - they are all the same thing. The income earned by the business is taxed as if the business is an individual person.

BUT
Useful Tips when Buying/Selling a Business
THE PARTNERSHIP
("Anna & Partners Fish & Chips Shop")

This is an extension of the sole proprietorship, as there is more than one owner. It is an association of between two and twenty people who have a contractual relationship with each other. In other words there is an agreement between Anna and her partners on how the business is run, what each of them contributes to the business (this can be money. goods or services) and how the profit of the business is shared -

BUT THE CLOSE CORPORATION ("Anna's Fish & Chips CC")

This is a simple, cheap and flexible type of business entity for a small enterprise. A CC exists separately from the people who own the CC - in other words, the law treats a CC as a person in its own right (unlike the sole proprietorship, where the law sees no difference between Anna and her business).

BUT THE PRIVATE COMPANY ("Anna's Fish & Chips (Pty) Ltd")

As with a CC, a company has a separate existence from its owners. A company is a more sophisticated and more complicated business entity than a CC.

BUT gold bar
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