Difference between
Sole Proprietor,
Close Corporation, and Company

Comparison of Sole Proprietorship, Close Corporation, and Company
 
  Sole Proprietor Close Corporation Company
Naming Name used under
common/business law		 Name registered in
terms of CC Act		 Name registered in
terms of Companies Act
Name usage
e.g.		 J Jones t/a Kembul
Trading		 Kembul Trading CC Kembul Trading (Pty)
Ltd
Registration
number format		 Defensive name 2009/222222/23 2016/222222/07
Reg.No.
requirement		 Voluntary Must appear on
letterheads, etc		 Must appear on
letterheads, etc
Compliance advantage Owner always responsible
for debt, etc		 Member protected from
CC debt, etc		 Director protected
from CC debt, etc
Non-compliance penalty Owner always responsible
for debt, etc		 Member responsible
for debt, etc		 Director responsible
for debt, etc
Legal status Natural person – human
being		 Legal person –
juristic entity		 Legal person –
juristic entity
Ownership Business belongs to
owner		 Business belongs to
CC		 Business belongs to
Company
    CC belongs to
owner/Member		 Company belongs to
owner/member/ shareholder
More than one owner Proprietors/Partners Members Shareholders/Members
Management Business is managed
by owner		 CC is managed by
Member		 Company is managed by
Director
More than one manager Proprietors/Partners Members Directors
Maximum number 1 sole proprietor /
20 partners		 10 members 50+
shareholders/directors
Liability e.g. Owner must pay bills,
vehicle leases, etc		 CC must pay bills,
vehicle leases, etc		 Company must pay
bills, vehicle leases, etc
Financial liability Owner has full
liability to pay		 CC has full liability
to pay		 Company has full
liability to pay
  Owner does not have limited liability Member has
conditional limited liability		 Director has
conditional limited liability
  Owner can lose personal assets, house, etc Member’s assets conditionally safe Director’s assets conditionally safe
  Owner always liable Member liable if
signed surety for CC		 Director liable if
signed surety for Company
Risk e.g. Owner is sued for
loss or damage		 CC is sued for
loss or damage		 Company is sued
for loss or damage
Legal liability Owner responsible for
any payments		 CC responsible for
any payments		 Company responsible
for any payments
  Owner always fully liable Member has
conditional limited liability		 Director has
conditional limited liability
  Owner can lose personal assets, house, etc Member’s assets conditionally safe Director’s assets conditionally safe
Trading condition / requirement Care, honesty, good
faith		 Care, honesty, good
faith		 Care, honesty, good
faith
Penalties for breach of law Fine, imprisonment or
both		 Fine, imprisonment or
both		 Fine, imprisonment or
both
  No limited liability Loss of Limited
Liability		 Loss of Limited
Liability
Accounting
requirements		 Must keep full set of
books		 Must keep full set of
books		 Must keep full set of
books
Accounting
Officer		  – Required  –
Auditor  – When turnover is R100m or more When turnover is R100m or more
Annual
Financial Statements		 Required Required Required
Tax returns Required – for Sole Proprietor only Required – for CC & Members personal Required – for Company & Directors personal
AFS + Tax Returns fee e.g. R2 970 per year R2 970 per year + R885 R2 970 per year + R885
Annual Returns None Required Required
Deduction
permissibility		 Receiver disallows
deductions more readily		 Receiver allows
deductions more readily		 Receiver allows
deductions more readily
Marginal tax
rate (e.g. on R500 000)		 23.29% – –
Corporate tax
rate		 – 28.00% 28.00%
Dividend
tax (effective)		 – 15.00% 15.00%
Total profit tax
rate (e.g. on R500 000)		 23.29% 38.80% 38.80%
Tax on R500
000 profit e.g.		 R116 450 R194 000 R194 000
Calculation Based on 2017 tax year Based on 2017 tax year Based on 2017 tax year
If Director draws the
R500 000		 R116 450 tax R116 450 tax only, no corporate tax R116 450 tax only, no corporate tax

Our conclusion:
   If you need financial/legal protection and a corporate/organised image, a CC (cannot register new ones in SA) or Company might be best for you.
   If you do not want a second tax obligation, want to keep it basic and small, and do not mind being responsible for all the business bills, then you could choose  a Sole Proprietorship – you can still develop a good name and image.