1. Sole proprietorship, an enterprise owned by a single owner.
2. Partnership, either as an unlimited or en commandite partnership.
3. Company:
     3.1 having limited liability, either public or private.
     3.2 having joint and several liability.
4. Close corporation.
5. Business trust.

Liability of the Entrepreneur:

The first in determining which business regime is the possible liability of the entrepreneur for the debts of the business. In both the sole proprietorship and partnership the entrepreneurs are personally liable for the debts of the enterprise, however, whereas in a sole proprietorship the assets of the enterprise form part of the entrepreneur’s estate in a partnership the partners are only liable for the debts of the partnership in the event that the partnership liabilities are not able to be met by the partnership assets.

On the other hand members of the company or close corporation are not, in principle, personally liable for the corporate debts of the enterprise, unless they have bound themselves as surety to a creditor of the enterprise or if the company is a company incorporated in terms of Section 53B of the Companies Act, where the members are, similar to a partnership, jointly and severally liable for the debts of the enterprise. For a business trust, like a company or close corporation, the trustees are, in principle, not liable for the debts of the business trust.

Possible registration and other formalities:

Another consideration to be evaluated before proceeding is the possible registration and other formalities that are applicable to the different business enterprises.

For sole proprietorships and partnerships there are no formal registration requirements or accounting formalities, except that in a partnership the partnership is constituted by a partnership agreement between the partners. Close corporations and companies are to be registered at the Registrar of close corporations and companies, whereas a business trust is to be registered at the Master of the High Court prior to being able to proceed with this form of enterprise. The accounting requirements, however, differ for a close corporation, where the only requirement is that the accounting records be kept by an accounting officer, whereas for a company and business trust, the accounting records are to be audited annually.

Conculsion:

These are only a few of the considerations, together with the varying cost implications, which need to be carefully considered before starting up new enterprise.

Should you wish to start a business enterprise and are unsure as to what form would meet your requirements the best or assistance with any other questions you may have in respect of any corporate law issues, feel free to contact us to arrange an appointment at your earliest possible convenience.