A presentation given to the Xtraordinary Women in Business Network in Blouberg on 18 April 2013 by Nicolene Schoeman from Schoeman Attorneys TOPIC: Sole Proprietor vs. Pty: Legal meets Finance So, they say – “Rome was not built in a day” and that is certainly true for any business. Most small businesses start off as sole proprietorships or even partnerships, simply in order to save costs. Some on the other hand because the other options are often widely misunderstood. Is there really a cost saving and if there is, is cost saving really worth the risk? An insightful morning was spent with Nicolene Schoeman and Chris Farquharson as they shared the legal and financial practical business solutions to these challenges.

1. Sole proprietor vs Company
NICOLENE
SCHOEMAN
Director
–
Schoemanlaw
Inc
t/a
Schoeman
A;orneys,
Conveyancers
and
Notaries
Public
LLB
cum
laude
(UFS)
LLM
(UFS)
PracIsing
A;orney,
Conveyancer,
Notary
Public
and
B-­‐B
BEE
consultant
t
021
425
5604
f
021
421
8913
e
nf.schoeman@schoemanlaw.co.za
w
www.schoemanlaw.co.za
a
8th
Floor,
80
on
Strand
Street,
Cape
Town,
8000
p
PO
Box
507,
Cape
Town,
8000
© NF Schoeman 2013
Tailored.
Entrepreneurial.
SoluIons.

2. Disclaimer
• Both
this
presenta1on
and
slides
are
copyright
protected.
• In
terms
of
the
Copyright
Act
No.
98
of
1978,
no
part
of
this
presenta1on
and
slides
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or
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permission
from
the
author.
• This
presenta1on
and
slides
are
for
educa1onal
purposes
only
and
does
not
cons1tute
legal
advice.
• The
author
and
Schoemanlaw
Inc
t/a
Schoeman
ABorneys,
Conveyancers
and
Notaries
Public
(Schoeman
ABorneys)
do
not
accept
any
liability
for
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loss
or
damage
that
may
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occasioned
as
a
result
of
the
reliance
by
any
person
on
the
informa1on
contained
in
this
presenta1on
and/or
slides.
© NF Schoeman 2013

3. The
vehicle
• Choosing
the
right
enterprise
/
vehicle
is
imperaIve
to
the
success
of
any
business
enterprise:
– Sole
proprietor
– Partnership
– Trust
– Close
Corpora1on
– Company
– Co-­‐opera1ve
© NF Schoeman 2013

4. Sole
proprietor
• Most
businesses
start
as
sole
proprietors
because
it
is
cost-­‐effec1ve
• No
legal
personality
i.e.
you
are
the
business
and
the
business
is
you
• Unless
there
is
sound
reason
(tax
reason)
this
is
a
high
risk
vehicle
© NF Schoeman 2013

5. Partnership
• Is
regulated
by
the
common
law
and
law
of
contract
• Can
consist
of
up
to
20
partners
and
be
no
less
than
2
• No
legal
personality
• Partners
are
jointly
and
severally
liable
for
the
debts
of
the
partnership,
in
propor1on
to
the
contribu1on
to
the
partnership
• Exemp1on
of
partners
to
share
in
losses
is
very
limited
• High
risk
vehicle
© NF Schoeman 2013

6. Trust
• Regulated
by
the
provisions
of
the
Trust
Property
Control
Act
57
of
1988
• Although
regulated
by
legisla1on
the
trust
is
further
regulated
by
contractual
provisions
(the
trust
deed)
• No
“pre-­‐incorpora1on”
agreements
are
possible
• Func1onaries
in
the
trust:
The
founder
The
trustee
(s)
The
beneficiary
(
ies)
Purpose
must
be
clear
and
sound
Trust
should
be
set
up
with
care
otherwise
high
risk
vehicle
© NF Schoeman 2013

7. Co-­‐operaIves
• Co-­‐opera1ves
are
regulated
by
the
provisions
of
the
Co-­‐opera1ves
Act
14
of
2005
• Coopera1ve
structure
is
similar
to
that
of
the
company
except
that
each
member
of
the
co-­‐opera1ve
only
has
one
vote
regardless
of
amount
contributed
• Facilitates
bulk
buying
power
–
smaller
businesses
specifically
• Primary,
secondary,
ter1ary
structures
• Limited
liability
and
separate
legal
personality
• Only
suitable
where
circumstances
are
appropriate
• Low
risk
© NF Schoeman 2013

8. Close
CorporaIon
• A
close
corpora1on
is
currently
par1ally
regulated
by
Close
Corpora1ons
Act
69
of
1984
and
Companies
Act
71
of
2008
• Exis1ng
close
corpora1ons
con1nue
to
exist
with
same
name
and
registra1on
number
• Limited
liability
and
separate
legal
personality
• Members
automa1cally
take
part
in
management
with
out
restric1on,
unless
provided
for
otherwise
in
the
associa1on
agreement
• A
close
corpora1on
was
the
cost-­‐effec1ve
structure
and
had
no
inherent
audit
requirement.
Now
audits
are
based
on
the
calcula1on
of
the
public
interest
score
(PIS)
=
status
quo
remains
• Conversion
into
company
structure
only
if
in
best
interests
of
business
• Low
risk
=
more
than
1
member
=
associa1on
agreement
© NF Schoeman 2013

9. Companies
© NF Schoeman 2013
Types
of
Companies
Profit
Not
for
profit
“NPC”
Public
“Ltd”
Personal
liability
“Inc”
State
owned
“SOC”
Private
“(Pty)
Ltd”

10. Company
• Companies
regardless
of
size
regulated
by
Companies
Act
71
of
2008
• Limited
liability
and
separate
legal
personality
• Division
of
management
(directors)
and
ownership
(shareholders)
• Smaller
companies
have
less
regulatory
requirements
to
meet
than
larger
companies
• Audit
requirement
no
longer
compulsory
=
PIS
• MOI
now
vital
document
• Exis1ng
companies
=
Implement
MOI
+
shareholders
agreement
before
window
period
lapses
and
new
companies
tailor
MOI
• Group
structures
• Low
risk
=
suitable
MOI
and
shareholders’
agreement
© NF Schoeman 2013

11. Thank
you!
© NF Schoeman 2013
Email:
nf.schoeman@schoemanlaw.co.za
Tel:
021
4255604
Website:
www.schoemanlaw.co.za
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