Types of trading formats

You have several options when you set up a business. For the purposes of starting an SME, you can operate as a sole trader, partnership, CC or company. Aspiring entrepreneurs often ask, rather anxiously, whether they are legally obliged to register a formal business. The short answer is, "No, you are under no legal obligation to register a formal business." However, unless the business you plan to start is extremely small to begin with and you expect it to stay this way indefinitely, registering a formal entity has its advantages and is definitely recommended.

Why you should consider registering a formal business:

• Should you decide to operate as a sole trader, your business has no legal personality of its own as you are trading under your personal name. You are free, of course, to add a by-line to your name, such as John Smith, sole proprietor, trading as Master Plumbers, but your name must be stated on all business-related documentation.
• Unless you are a very famous personality, trading under your own name is unlikely to impress prospective customers. This makes it difficult to market the business effectively - people tend to forget names that they cannot associate with a specific product or service.
• Under intellectual property law, the trading name of a sole trader is not protected. Should your business become highly successful, someone else could register your trading name as the name of a CC or company and use it without fear of repercussion.
• A possible way around this is to register the trading name of your business as a trademark but you would still have to use your personal name in all business dealings.
• Government agencies and many large corporations have a policy of dealing with registered entities only. This means, that as a sole trader, you would be automatically disqualified from participating in many tender opportunities.
• SARS offers certain tax benefits to small businesses that are not accessible to sole traders.
• To qualify for assistance schemes offered by government agencies, for example export marketing subsidies offered by the Department of Trade and Industry, you need to operate through a registered entity.
• In a legal sense, you and the business are one and the same. This complicates matters should you want to dispose of the business.

In practice, the close corporation is the most popular, primarily because of the relative simplicity of setting one up and operating it.

Registering a CC or a Pty (Ltd)

The business format that is most commonly used in the SME environment is the CC. Registering a CC is straightforward and inexpensive.

Alternatively, you can purchase a pre-registered shelf company. 

Accaboeka is able to take care of all your company registration needs such as registering new Close Corporations, reserving Company names, changing Members details etc.