What types of business structures are there?

Sep 26, 2024 | Publication

There are various types of business structures, each with their own legal, tax and operational considerations.  These include:

1                    Sole trader – a simple structure in which the individual runs the business in their own name.  Cheap to set up.  Full control over business decisions.  One downside is personally liable for debts and obligations.

2                    Partnership – two or more people running a business together.  Partners share profits, losses and responsibilities.  Each partner is liable for debts.  There are different types of partnerships including general partnerships and limited partnerships.

3                    Company – a separate legal entity from its owners being the shareholders of the company.  A company can be a private company (Pty Ltd) or a public company (Ltd).  There is limited liability for the shareholders.  A company is more complex to establish and has regulatory obligations.

4                    Trust – a trust can operate a business on behalf of beneficiaries.  Examples include a discretionary trust or a unit trust.  Profits can be distributed to beneficiaries.  Advantages including asset protection and tax benefits.

5                    Joint venture – an agreement between two or more parties to work together on a specific project.  Normally used for short term ventures or projects.  Profits, risks and responsibilities determined based on an agreement.

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