Registering a private company

When you're setting up your business, one of the first decisions you'll have to make is what kind of legal entity to register. Each business entity has its own pros and cons, so don't make the decision in a hurry or without having all your facts. If yours is a medium-sized enterprise, you may think about registering a private company.

For a business venture that has a number of shareholders/owners, with a potentially high annual turnover, a private company (Pty, Ltd) may be your best option. It must be legally registered, with a minimum of one shareholder (maximum 50) and have a Managing Director.

One of the most attractive features of a private company, is that the law sees it as its own legal entity, so shareholders can not be held personally liable for any debt the company might incur during the course of doing business, or should the business fail.

A private company has well-defined legal obligations to meet, and can be a complex and expensive structure to set up and run. This is why it's compulsory for registration to be done by an attorney with expertise in this field.

Along with registering for all the applicable taxes and trade licenses, a private company:

  • Must be registered with the Companies and Intellectual Property Commission (CIPC) - previously known as CIPRO in Pretoria
  • Must have strict laws governing the duties and responsibilities of the company's directors and officers
  • Must issue annual audited financial statements
  • Must hold an Annual General Meeting
  • Must avail themselves of financing to purchase members' shares when necessary
  • Must have a Memorandum of Agreement defining the company's nature and purpose
  • Must have registered Articles of Association
  • Must reserve and register the company name
  • Must have a registered physical and postal address

This is just a basic outline of what to expect if you intend to register a Private Company. It's important that you do your homework around this kind of company and get as much professional advice as possible.

Visit the CIPC website to find out more about registering a company, or other type of legal entity.

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