In South Africa there are a few main trading entity types. The main types are listed here:
- Sole Proprietor
- Profit Company
- Non Profit Company
- Business Trust
There are of course other trading types and legal entities that could trade as well, for example Body Corporates, Estates under administration etc.
Sole proprietors make up a large percentage of the SMME (Small and medium sized enterprises) of the trading styles of any modern day capitalistic economy. Any individual person that could trade with no legal restrictions (non sequestrated, etc.) can close contracts and trade in their own name.
Partnerships in modern economies are still frequently found in professional trades and other trades where two or more people agree to trade as a singularity. The transactions and contracts of this partnership singularity attracts joint liability as stipulated int he partnership agreement. When contracting with a partnership one has to inspect the partnership agreements, especially when extending credit.
The use of business trusts as the legal trading entity are possible in South Africa
Two main types of Companies as per the Companies Act 2008
Non-profit companies and profit companies.
Profit companies are:
- Private Companies
- Public Companies
- Personal Liability Companies
- State Owned Companies
Non-profit Companies are:
- A company incorporated for public benefit or other object relating to one or more cultural or social activities, or communal or group interests
- The income and property of which are not distributable to its members, directors, officers or persons related to any of them.
Private Companies (Pty) Ltd
Private companies under the new Act are prohibited to offer securities to the public and the transferability of their shares are also restricted. Private companies however, are no longer limited to 50 members as was the case under the current Companies Act.
Public Companies (Ltd)
The definition of a public company is largely unchanged. The only difference is that a public company under the new Act only requires one member for incorporation compared to the seven(7) members under the current companies Act.
Personal Liability Companies (Inc)
The directors and past directors of such companies are jointly and severally liable together with the company for any debts and liabilities arising during their periods of office.
State-Owned Companies (SOC Ltd)
A State owned company is either a company defined as a “state-owned enterprise” in the Public Finance Management Act 1 of 1999 or a company owned by a municipality. The majority of the provisions of a public company will apply to state-owned companies as well.
Foreign and External Companies
A foreign company is a company incorporated outside of South Africa , irrespective of whether it is a profit or non-profit company or carrying on business in South Africa or not. A foreign company is prohibited from offering securities to the South African public unless it follows the specific provisions of the companies Act, relating to offers to the public.
A foreign company is required to register as en “external company” with the CIPC if it conducts or intends to conduct business in South Africa. The Companies Act in terms of Sect 23 lists a series of activities which will be regarded as conducting business. This list is much broader than the provision in the 1973 Companies Act relating to a “place of business” in South Africa.