South Africa’s business landscape is governed under the Companies Act No. 71 of 2008.This Act distinguishes different types of businesses. Below are the types of business entities in South Africa.
Sole Proprietor – This is the simplest of business entities. A sole proprietor trades under his/her own name, with no separation of assets and liabilities. For example, Joe Soap, an accountant, trades as Joe Soap Accountants. There being no separation between Joe Soap’s personal assets and liabilities and those of his business, Joe Soap Accountants, he benefits from all the profits and assets accumulated through his business. However, he is also held personally liable for any debts that the business incurs. In other words, his sole proprietorship does not enjoy limited liability.
Private Company or Pty Ltd – This business entity may be founded and managed by just one director and must have at least one shareholder, but no more than 50.
Personal Liability Companies – These are business entities in which both current and previous directors may be held jointly and severally liable for any debts and liabilities which occur during their time in office. This form of business enterprise is most often used for firms of professionals, such as doctors, lawyers and accountants.
Public Companies – These are business entities which issue shares, and are often listed on a stock exchange. Public companies are liable to shareholders and management is invested in a Board of Directors.
State Owned Companies – These are business entities which are either state-owned, like Metrorail, or owned by a municipality, like eThekwini Electricity.