CLOSE CORPORATIONS PAGE 143 144 LIABILITY WHO IS

CLOSE CORPORATIONS PAGE 143 -144

LIABILITY WHO IS RESPONSIBLE FOR FINANCIAL AND LEGAL PROBLEMS? ARE THE BUSINESS AND OWNERS SEPERATE? Sole Proprietorship Partnership Close Corporation

What ACT governs Close Corporations? Close Corporations Act 69 of 1984 & Companies Act 71 of 2008

Why choose a CC instead of a company? A (CC) is a more simplified and flexible business. Suited to small businesses. The managerial and administrative requirements are less formal. Audited financial statements are not required. No required meetings, unless for a special

Why choose a CC instead of a Sole Proprietorship or Partnership? Advantages of both Sole Trader & Partnership Limited liability “If Accounting Officer has regularly reviewed CC statements. ” Continuity … Life is in the CC not the members. https: //www. youtube. com/watch? v=d. Yw. QNdjff 74

How easy is it to register? Members can register You need an accounting officer (with the appropriate qualifications) Fill in an application for reservation of the name of the CC. Founding Statement “see see” CC Small cost

What would you put in the FOUNDING STATEMENT? Full name of the CC Letters CC added to the end of the businesses name Postal address of the registered office Principal activity of the CC Details of each members contributions to the CC Full names and identity numbers of each member Interest of each member which needs to be expressed in percentage Date on which the financial year ends Name and address of the accounting officer of the CC

QUESTIONS: write down your answers 1. 2. 3. 4. 5. How will you know that a business is a close corporation by looking at its name? Provide the correct name of the “owners” of a close corporation. How many “owners” do you expect to see in a close corporation? Which ACT states that a CC must be registered with the Registrar of Companies? TRUE/FALSE: It is no longer possible to start a new CC in South Africa.

ANSWERS 1. The name ends with “CC” 2. Members 3. 1 -10 4. Close Corporations Act 69 of 1984 5. True

Do MEMBERS have to work in the business? Members of CCs do not all have to take an active role in the running of the business. Although in most CCs, the “members” are also the managers of the business.

ADVANTAGES Own legal identity Limited liability Profits according to % membership interest Can buy out the interest Reduce costs Loans can be provided from members Not expensive to start No requirement for an audit. Why?

DISADVANTAGES Capital is limited 1 -10 members Pay personal tax Pay company tax Each member acts of behalf of the organisation Conflict in decisions

QUESTIONS Write down your answers. 6. 7. 8. 9. 10. Who manages the CC? Where does the finance come from? What is the correct term given for the members’ share in the CC? What is the difference between “limited liability” and “unlimited liability”? What are the two different forms of tax that must be paid by a CC and members?

ANSWERS 6. 7. 8. 9. 10. The members Member Interest Limited liability=business debts are not owed by members. Business went bankrupt not the owners. Unlimited liability=business debts are owed by the owners. Owners went bankrupt not the Business as its not a legal entity. Company tax and personal tax

REFERENCES http: //www. cipro. co. za/products_services/cc_regis tration. asp http: //southafrica. smetoolkit. org/sa/en/content/en/ 7707/Close-Corporations-under-the-new. Companies-Act http: //www. ccguide. co. za/registering-a-closecorporation. html https: //morrisonleadership. wordpress. com/author/ morrisonleadership/page/4/ (image 1) http: //solutionsunited. us/worlwide_locations(image 2)