Difference between
Sole Proprietorship,
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.