Which Business Structure?

When contemplating what an appropriate business structure should be, one should consider both the maintenance cost and tax consequences of the entity being formed.

Business structures could be: Companies, Close Corporations (only if you had one prior to 1 May 2011), Partnerships, Trusts or trading as a Sole Proprietor (in your personal name).

With the implementation of the Companies Act, 2008, on 1 May 2011; the audit for most  smaller group companies fell away (one can however still opt to have a voluntary audit). Companies have therefore become a preferred entity form for running a business.

The formation of new Close Corporations fell away on 1 May 2011 and by looking at the CIPC statistics; there has been a dramatic increase in the formation of new companies effective 1 May 2011. From 2008 to 2010 the average amount of new companies formed (as per the CIPC) was approximately 25 000 per year.

The new statistics for the period 1 May 2011 to March 2014 shows an average amount of new companies formed as being approximately 181 693 per year.

One should also consider using a separate company or even a separate asset trust for passive income assets which needs to be protected against trading risks. It is never a good idea to mix risk with a long term asset. By keeping the two separate; you can also shield yourself against the next generation’s possible bad business decisions.

It is therefore important to choose your business structure wisely as each structure comes with their own intricacies.

B Square Financial offer Business Boot Camp Seminars to the public and various training seminars for accounting professionals nationally. They also consult on company tax matters, offer BEE Verification services and support small businesses on financial matters.

Contact Martin or Suzette to discuss your business needs: 0325254079