When evaluating business visa applications, the Department of Trade and Industry, as well as the Department of Labour, want to see that the proposed business fit one of the acceptable South African company structures.
These are the South African company structures you could register your business as:
A sole proprietorship is a business owned and run by one person. The company is however allowed to employ staff. Most forms of business can be conducted under this classification.
Please note that a sole proprietorship does not have its own legal entity. This means the income of the business is for the owner, as are the taxes and any liabilities.
A partnership is a business jointly owned by between 2 and 20 people. The partners would each make a contribution towards establishing the business. They would also need to contractually agree to operate the business together and to split any profits in a fair manner.
Just like a sole proprietorship, a partnership is not a separate legal entity.
Private Company (Pty Ltd)
This is the preferred choice of most foreigners setting up a business in South Africa. Their choice is driven by the fact that a private company does not place prohibition on foreign shareholding. Furthermore, only one shareholder and one director is required.
Unlike the first two business structures on this list, private companies are considered separate legal entities. As such, the company is taxed in its own right. This offers shareholders protection against liabilities.
Public Company (Ltd)
Public companies are primarily set up to offer shares to the general public. The purpose of this strategy is raising capital.
Just like a private company, only one shareholder is needed. Instead of one director, however, here three directors are necessary.
As a separate legal identity, a public company is taxed in its own right and thus offers shareholders protection against liabilities.
Personal Liability Company
In this type of company, directors and past directors are jointly and separately liable, together with the company, for any debts and liabilities. This would be for the time period when the directors are or were contracted by the company.
A state-owned could be a company defined as a ‘state-owned enterprise’ in the Public Finance Management Act 1 of 1999 or it could be a company owned by a municipality.
Non-profit Company (NPC)
A non-profit company is a trust, company or other association that is established for a public purpose. This could be, for instance, supporting disadvantaged people or cultural activities.
Apart from reasonable compensation for services rendered, stakeholders in a NPC do not receive property or income from the company.
Foreign or External Company
External companies are foreign-owned companies, incorporated outside of South Africa but trading in South Africa. As such, this type of company structure is used by foreign companies to set up a branch in South Africa.
Foreign-owned companies must register as an external company with the CIPC (Companies and Intellectual Property Commission). One other major stipulation is that the company may not offer securities to the South African public.
Another major stipulation for external companies is that they may not offer securities to the South African public.
If you have any questions on South African company structures, contact us
Our consultants will be more than happy to answer any questions you may have on South African company structures. Get hold of them either in Cape Town on +27 (0) 21 424 2460 or in Johannesburg on +27 (0) 11 234 4275. Alternatively, request a free call back and a consultant will contact you instead.
If you haven’t applied for your business visa yet, remember that you have to do that first. The consultant you speak to during your conversation about South African company structures will be able to answer any questions about the visa too.